1. Processes, Organizations, and Information Systems
Chapter 7
Processes, Organizations,
and Information Systems
This chapter explores structured processes and information systems within an organization. It extends discussions of business process (Chapter 3) to investigate three types of processes and scope of information systems they use.

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GOALS
Provide a setting for students “to assess, evaluate, and apply emerging information technology to business.”
Connect applications of IS to the fundamentals presented in Chapters 1–6.
Show a realistic application of mobile + cloud technology.
Demonstrate the need for, creation of, and some of the issues involving an inter-organizational IS.
A cardiac surgeon, Dr. Romero Flores, is developing a prototype of health care and patient portion of the PRIDE system. He focused on a prototype to learn whether patients will achieve expected benefits. Once they have answers to those questions, they will determine how to proceed to an operational system that involves other organizations shown in this figure.
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Study Questions
Q1: What are the basic types of processes? Q2: How can information systems improve process quality? Q3: How do information systems eliminate the problem of information silos? Q4: How do CRM, ERP, and EAI support enterprise processes? Q5: What are the elements of an ERP system? Q6: What are the challenges of implementing new enterprise information systems? Q7: How do inter-enterprise IS solve the problems of enterprise silos? Q8: 2023?
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4. Q1: What Are the Basic Types of Processes?
Business Process with Three
Activities
This is a simplified view of a three-activity process for approving customer orders. Each activity is a sub-process, e.g., check for inventory, check customer credit, send order data to Customer and to Order Fulfillment Process. Customers can check status of their order while it is being processed.
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5. How Do Processes Vary by Organizational Scope?
Structured processes: Formally defined, standardized processes involve day-to-day operations: accepting a return, placing an order, purchasing raw materials, and so forth.
Dynamic processes: Flexible, informal and adaptive processes often involve collaborative decisions and activities.
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6. Common Workgroup Processes
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7. How Do Structured Processes Vary by Scope?
Characteristics of departmental information systems are summarized in top row. Often, procedures are formalized in documentation, and users frequently receive formal training in use of those procedures.
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8. Q2: How Can Information Systems Improve Process Quality?
Process efficiency: Ratio of process outputs to inputs
Process effectiveness: How well a process achieves organizational strategy
How Can Processes Be Improved?
Change process structure
Change process resources
Change both
Processes are means people use to organize an activity to achieve organization’s goals.
Two dimensions of process quality are efficiency and effectiveness.
Process efficiency – a measure of the ratio of process outputs to inputs
Process effectiveness – a measure of how well a process achieves organizational strategy
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9. Information Systems Can Be Used to Improve Process Quality By:
Performing an activity
Partially automated, completely automated
Augmenting human performing activity
Common reservation system
Controlling process flow
Order approval process
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Q3: How Do Enterprise Systems Eliminate the Problem of Information Silos?
How Do Information System Silos Arise?
Data isolated in islands of automation
Different department goals
Different personal and workgroup needs
Duplicate data as organization grows
An information silo exists when data are isolated in separated information systems.
Information system silos arise when:
IS supports departmental processes rather than enterprise-level processes.
Personal and workgroup support applications are created over time.
Organizations grow, especially by merger and acquisitions.
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11. Problems Created by Information Silos
This table summarizes problems of information silos.
Duplicated and inconsistent data
Separated supporting applications; difficult for two activities to reconcile their data, getting approvals will be slow and possibly erroneous
Lack of integrated enterprise data as a consequence of disjointed systems
Inefficiency results from making decisions in isolation
Information silos increase costs — duplicated data, disjointed systems, limited information, and inefficiencies all mean higher costs
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12. Information Silos as Drivers
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13. Example Enterprise Process and Information System
Hospital uses an enterprise-wide information system to support this process. IS provides data entry forms, reports, and notifications to human actors in this process. It also controls the flow of process activity as shown by dotted red arrow.
To use new system, staff needs to transition from a paper-based system to computer-based one.
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14. Ethics Guide: Dialing for Dollars
Assume you are a salesperson.
Been a bad quarter. VP of sales authorized a 20% discount on new orders if customers take delivery prior to end of quarter so order can be booked for this quarter.
VP says “Start dialing for dollars, and get what you can. Be creative.”
You identify your top customers to offer discount deal.
Goals
Understand how business pressures motivate people to act unethically and sometimes illegally.
Discuss ethical principles among three different aggressive sales techniques.
Illustrate how deception in the use of an interdepartmental information system may cause unintended consequences.
Software industry has used all three techniques in this guide, especially during the 1990s and early 2000s. These techniques, when applied to distributor customers, are often referred to as “stuffing the channel.” It’s a risky strategy because the company is pushing this quarter’s problem into next quarter. Unless there is a substantial increase in sales demand, problem will grow worse.
Managers do it to delay stock price slaughter for at least one quarter. The techniques presented are all unethical. First and third violate SEC rules and regulations, while second is criminally fraudulent.
1. Side letter
2. Delayed discount
3. Fictitious account
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15. Q4: How Do CRM, ERP, and EAI Support Enterprise Processes?
Business Process Reengineering
Integrated data, enterprise systems create stronger, faster, more effective linkages in value chains
Difficult, slow, and exceedingly expensive
Key personnel determine how best to use new technology
Requires high-level and expensive skills and considerable time
Hospital needed to determine how best to change its processes to take advantage of new capability.
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16. Emergence of Enterprise Application Solutions
Inherent processes
Predesigned procedures for using software products
Based on “industry best practices”
Customer relationship management (CRM)
Enterprise resource planning (ERP)
Enterprise application integration (EAI)
Organizations can license software and obtain prebuilt procedures. Over time, three categories of enterprise applications emerged: customer relationship management, enterprise resource planning and enterprise application integration.
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17. Customer Relationship Management (CRM)
Suite of applications, a database, and a set of inherent processes
Manage all interactions with customer through four phases of customer life cycle:
Marketing, customer acquisition, relationship management, loss/churn
Intended to support customer-centric organization
CRM is a suite of applications, a database, and a set of inherent processes for managing all interactions with a customer from lead generation to customer service. Every contact and transaction with customer is recorded in CRM database.
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Customer Life Cycle
Marketing sends messages to target market to attract customer prospects. When prospects order, they become customers who need to be supported. Additionally, relationship management processes increase the value of existing customers by selling them more products.
Over time, organization loses some customers. When this occurs, win-back processes categorize customers according to their value and attempt to win back and turn them into high-value customers.
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CRM Applications
CRM components exist for each stage of the customer life cycle. As shown, all applications process a common customer database. This design eliminates duplicated customer data and removes the possibility of inconsistent data. It also means that each department knows what has been happening with the customer at other departments.
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ERP Applications
ERP is a suite of applications (modules), a database and a set of inherent processes for consolidating business operations into a single, consistent, computing platform. ERP systems are an IS based on ERP technology.
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21. Pre-ERP Information System: Bicycle Manufacturer
This diagram represents processes used by a bicycle manufacturer. There are five non-integrated databases. Assume company has a separate accounting system (not shown) that is not integrated. With such a pre-ERP system, financial statements are always outdated and weeks late.
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22. ERP Information Systems
All activity processed by ERP applications and consolidated data are stored in a centralized ERP database.
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23. ERP Enabled Sales Dashboard
With integration, ERP systems can display current status of critical business factors to managers and executives.
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24. Enterprise Application Integration (EAI)
Connects system “islands.”
Enables communicating and sharing data.
Provides integrated information.
Provides integrated layer over the top of existing systems while leaving functional applications “as is.”
Enables a gradual move to ERP.
EAI is a suite of software applications that integrates existing systems by providing layers of software that connect applications.
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25. Design and Implementation for the Five Components
“Virtual Integrated Database”
EAI enables organizations to use existing silo applications while eliminating many serious problems of isolated systems.
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26. Using MIS InClass 7: Improving the Process of Making Paper Airplanes
Purpose of this exercise is to demonstrate process concepts. Create one or more groups with four students in a group. Each student will perform one work center (WC) activity. Assembly line processes transform raw material (a stack of plain paper) into folded paper airplanes as finished goods. See Figure 7-15 (p. 231) for details for the work center tasks.
See textbook for exercise instructions.
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27. Q5: What Are the Elements of an ERP System?
Applications programs, databases, procedures, training and consulting that integrate:
Supply chain
Manufacturing
CRM
Human
Accounting
To be considered a true ERP, it must include applications that integrate the listed functions.
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28. ERP Application Programs
Set configuration parameters
ERP databases
Initial database design included
Trigger program code
Stored procedure code
ERP process blueprints
ERP consulting and training
An ERP solution consists of application programs, databases, business process procedures, training and consulting.
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29. SAP Ordering Business Process
ERP vendors provide starter kits called industry-specific solutions. These solutions contain program and database configuration files, and process blueprints that apply to ERP implementations in specific industries. SAP and other ERP vendors created dozens of starter kits for manufacturing, sales and distribution, health care, and other major industries.
Diagram continued on next slide.
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30. Inherent Processes: SAP Ordering Business Process (cont’d)
This is the bottom part of the process diagram starting with “Goods received procedure with PO reference for stock material.”
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31. What Companies Are the Major ERP Vendors?
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Q6: What Are the Challenges of Implementing New Enterprise Information Systems?
With no single department manager in charge, implementation is a collaborative effort with committees and steering groups. Organization must identify gaps and decide what to do with them. It must change from using isolated departmental systems to using new enterprise system, while continuing to run the business.
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33. Q7: How Do Inter-enterprise IS Solve the Problems of Enterprise Silos?
Information silos that exist among health care providers, health clubs, and PRIDE users.
Information Silos Without PRIDE
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34. Inter-enterprise PRIDE System
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Q8: 2023?
Expect many acquisitions by the major players such as Oracle and SAP.
Storing of data in various places in the cloud, while other versions of data stored in corporate data in SAP can cause data update and integrity problems.
Allowing access via mobile devices is potentially serious security threat.
Companies want to move to lower costs of the cloud, but cannot plunge into new cloud-based solutions without causing considerable organizational turmoil, if not failure.
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One-Stop Shopping
Data integration can make organizations more vulnerable to fraudsters.
Centralizing data enables organization to focus security measures.
Sharing data has privacy and security issues for PRIDE.
Example underlines some of management problems of inter-enterprise IS.
Viewing competitor’s? How secure is the cloud vendor?
GOALS
Understand potential security problems of integrating data into a single database, whether in enterprise or inter-enterprise systems.
Realize security and privacy issues when inter-organizational systems integrate competitors (as PRIDE must do to accomplish its purpose).
Underline some of the management challenges inherent in inter-enterprise systems.
Introduce caution about cloud security.
Remind students of need for using strong passwords.
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37. Guide: ERP and the Standard, Standard Blueprints
Organization adapts its processes to standard blueprints
If all firms in an industry use same business processes, how can a firm gain competitive advantage?
How will innovation occur?
Does “commoditized” standard blueprint prevent sustaining a competitive advantage?
GOALS
Reinforce importance of inherent processes in ERP, and other licensed software, and expense and challenges of variances from those processes.
Introduce possible longer-range consequences of adapting to vendors’ inherent processes.
Demonstrate an example of long-range thinking.
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Active Review
Q1: What are the basic types of processes? Q2: How can information systems improve process quality? Q3: How do information systems eliminate the problem of information silos? Q4: How do CRM, ERP, and EAI support enterprise processes? Q5: What are the elements of an ERP system? Q6: What are the challenges of implementing new enterprise information systems? Q7: How do inter-enterprise IS solve the problems of enterprise silos? Q8: 2023?
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39. Case Study 7: Using the PRIDE Database
Goal
Students to create a process diagram similar to Figure 7-27
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40. Defining the Workout Table with SQL
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41. PRIDE, Person, Workout, and Performance Tables
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42. Tables Relating to Exercise Prescriptions
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PRIDE Database Tables
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