7-1 chapter 7 enterprise-wide information systems

7-1

Chapter 7

Enterprise-Wide Information

Systems

www.prenhall.com/jessup

7-2Information Systems Today (©2006 Prentice Hall)

Learning Objectives

1. Explain how organizations support business activities by using information technologies

2. Describe what enterprise systems are how they have evolved

3. Explain the difference between internally and externally focused software applications

4. Understand and utilize the keys to successfully implementing enterprise systems.


System Categories

Enterprise-wide Systems aka Enterprise Systems, are systems that allow companies to integrate information across operations on a company-wide basis

Interorganizational Systems (IOS)Systems that communicate across organizational boundaries who’s goal is to streamline information flow from one company to another


Enterprise Systems – Within the Organization

Example – Order Process and Information Flow


Interorganizational Systems – Across Organizations

Example – Order Process and Information Flow


The Value Chain –Internally Focused

Used to identify the flow of information through a set of business activities. It identifies two types of activities, primary and support


The Value Chain - Primary Activities

Functional areas within an organization that process inputs and produce outputs. These activities may vary widely based on the unique requirements of a company’s industry

Functional areas within an organization that process inputs and produce outputs. These activities may vary widely based on the unique requirements of a company’s industry

Primary Activities include:• Inbound Logistics – receiving and stocking raw

materials, parts, products• Operations/Manufacturing – processing orders and

raw materials into finished product• Outbound Logistics – distribution of the finished

product to customers • Marketing and Sales – creating demand for the product

(pre-sales activities)• Customer Service – providing support for the product

or customer (post-sales activities)

Primary Activities include:• Inbound Logistics – receiving and stocking raw

materials, parts, products• Operations/Manufacturing – processing orders and

raw materials into finished product• Outbound Logistics – distribution of the finished

product to customers • Marketing and Sales – creating demand for the product

(pre-sales activities)• Customer Service – providing support for the product

or customer (post-sales activities)


The Value Chain - Support Activities

Support activities are business activities that enable Primary Activities These activities can be unique by industry but are generally more typical across industries

Support activities are business activities that enable Primary Activities These activities can be unique by industry but are generally more typical across industries

Support Activities include:• Infrastructure – hardware and software that must be

implemented to support applications for primary activities

• Human Resources – employee management activities: hiring, interview scheduling, and benefits management

• Technology Development – the design and development of applications that support the organization

• Procurement – purchase of goods or services that are required as inputs to primary activities

Support Activities include:• Infrastructure – hardware and software that must be

implemented to support applications for primary activities

• Human Resources – employee management activities: hiring, interview scheduling, and benefits management

• Technology Development – the design and development of applications that support the organization

• Procurement – purchase of goods or services that are required as inputs to primary activities


A Value System – Externally Focused

• A connection of value chains across organizations• Allows the flow of information between organizations to support business activities

• Upstream flow is information received from another organization (i.e. from company A to Company B above)

• Downstream Flow is information sent to another organization (i.e. from Company B to Company C above)


Options for Enterprise Systems – Packaged vs. Custom

Packaged Applications “Off the Shelf” computer applications purchased from a vendor or the company that created the system (i.e. Quicken or MS Money for financial applications)

Packaged Applications “Off the Shelf” computer applications purchased from a vendor or the company that created the system (i.e. Quicken or MS Money for financial applications)

Packaged Key Characteristics• Best Use - standardized, repetitive tasks• Cost Effectiveness – lower cost because vendors can create once and then sell many copies to others

• Organizational Fit – may not be well suited for tasks that are unique to a particular business or industry

• Maintenance – the vendor makes the changes and then sends the updates to its customer on a periodic basis. The customer does not control this schedule

Packaged Key Characteristics• Best Use - standardized, repetitive tasks• Cost Effectiveness – lower cost because vendors can create once and then sell many copies to others

• Organizational Fit – may not be well suited for tasks that are unique to a particular business or industry

• Maintenance – the vendor makes the changes and then sends the updates to its customer on a periodic basis. The customer does not control this schedule


Options for Enterprise Systems – Packaged vs. Custom

Custom Applications

“Custom-built” computer applications created by the organization or a third party (e.g. a consulting organization)

Custom Applications

“Custom-built” computer applications created by the organization or a third party (e.g. a consulting organization)

Custom Key Characteristics

• Best Use - unique business process to an organization

• Cost Effectiveness – much higher cost due to the one-time creation of the applications

• Organizational Fit – excellent as they are designed to fit a specific business process

• Maintenance – all changes are created and implemented by the organization using the application

Custom Key Characteristics

• Best Use - unique business process to an organization

• Cost Effectiveness – much higher cost due to the one-time creation of the applications

• Organizational Fit – excellent as they are designed to fit a specific business process

• Maintenance – all changes are created and implemented by the organization using the application


Enterprise System Evolution

System TypesSystem Evolution

Standalone Systems

Integrated Systems(Intraorganizational)

Integrated Systems(Interorganizational)


Enterprise Systems – Stand-alone or Legacy

Stand Alone (Legacy) SystemsA single system or groups of systems, designed to each support one or a few business functions (e.g. accounting system or a manufacturing system, etc.)

Stand Alone (Legacy) SystemsA single system or groups of systems, designed to each support one or a few business functions (e.g. accounting system or a manufacturing system, etc.)

Stand Alone (Legacy) Systems• Little or no integration with other organizational systems. If integration exists, it is usually in batch (i.e. the accounting system gets updates from manufacturing system once a day or week

• Organizational fit may be better than integrated packages due to the focus on one function and that they have been highly modified over time

• Customization and the age of these systems make them difficult to support due to the complexity, use of older or obscure languages, etc.

Stand Alone (Legacy) Systems• Little or no integration with other organizational systems. If integration exists, it is usually in batch (i.e. the accounting system gets updates from manufacturing system once a day or week

• Organizational fit may be better than integrated packages due to the focus on one function and that they have been highly modified over time

• Customization and the age of these systems make them difficult to support due to the complexity, use of older or obscure languages, etc.


Enterprise Systems - Legacy System Example

Legacy (stand-alone) Systems – information is not readily shared between systems (i.e. Inbound Logistics inventory information shared with Operations)


Enterprise Resource Planning

Integrated Packages (Enterprise Resource Planning)Richly functional systems designed to support many organizational functions (e.g. accounting and finance)

Integrated Packages (Enterprise Resource Planning)Richly functional systems designed to support many organizational functions (e.g. accounting and finance)

ERP Key Characteristics• Internally focused systems designed to support the internal

operations of the organization• Highly integrated systems sharing a common data

warehouse for information sharing across functions, using real-time updates

• Organizational fit may be less for individual departments but the integrated sharing of information usually outweighs these issues

• Usually packaged applications supported by the vendor utilizing a common user interface

• Customization is discouraged but these systems have the flexibility to support other outside applications using the common data repository and interfaces

ERP Key Characteristics• Internally focused systems designed to support the internal

operations of the organization• Highly integrated systems sharing a common data

warehouse for information sharing across functions, using real-time updates

• Organizational fit may be less for individual departments but the integrated sharing of information usually outweighs these issues

• Usually packaged applications supported by the vendor utilizing a common user interface

• Customization is discouraged but these systems have the flexibility to support other outside applications using the common data repository and interfaces


Enterprise Systems – Integrated System Example

Integrated Systems – Information is stored in a single data repository and can be accessed and updated by all functional systems (e.g. Operations)


Choosing an ERP System - Issues

ERP Systems are:

• Supplied by multiple vendors including SAP, Baan, Oracle, etc., with each having their own unique features and structures

• Packaged systems that are following a one size-fits all strategy which means they may not support all functions as well as a custom system

• Similar but are also different. They should be selected based on factors including control, business requirements, and best practices

ERP Systems are:

• Supplied by multiple vendors including SAP, Baan, Oracle, etc., with each having their own unique features and structures

• Packaged systems that are following a one size-fits all strategy which means they may not support all functions as well as a custom system

• Similar but are also different. They should be selected based on factors including control, business requirements, and best practices


Choosing an ERP System – Selection Factors

Control refers to where the power lies related to computing and decision support systems (centralized vs. decentralized) in selecting systems, developing policies and procedures, etc. (who will decide?)

Control refers to where the power lies related to computing and decision support systems (centralized vs. decentralized) in selecting systems, developing policies and procedures, etc. (who will decide?)

Business Requirements refers to the system’s capabilities and how they meet organizational needs through the use of software modules or groups of business functionality (what do you need?)

Business Requirements refers to the system’s capabilities and how they meet organizational needs through the use of software modules or groups of business functionality (what do you need?)

Best Practices refers to the degree to which the software incorporates industry standard methods for doing business which can cause a need for significant business processes reengineering (how much change is required?)

Best Practices refers to the degree to which the software incorporates industry standard methods for doing business which can cause a need for significant business processes reengineering (how much change is required?)


ERP Capabilities – SAP Example


ERP and Business Process Reengineering

Hammer and Champy, (“Reenginerring the Corporation”)

“The radical redesign of an organization was sometimes necessary in order to lower costs and increase quality and that the information technology was the key enabler for that radical change”

Hammer and Champy, (“Reenginerring the Corporation”)

“The radical redesign of an organization was sometimes necessary in order to lower costs and increase quality and that the information technology was the key enabler for that radical change”

Business Process Reengineering

A systematic, structured improvement approach by all or part of an organization whereby people critically examine, rethink, and redesign business processes in order to achieve dramatic improvements in one or more performance measures (e.g. quality, cycle time, cost)


A systematic, structured improvement approach by all or part of an organization whereby people critically examine, rethink, and redesign business processes in order to achieve dramatic improvements in one or more performance measures (e.g. quality, cycle time, cost)



Steps in Business Process Reengineering

• Develop a vision for the organization that specifies business objectives (e.g. reduced costs, shortend time to market, improved quality, etc.)

• Identify critical processes that are to be redesigned

• Understand and measure the existing processes as a baseline for future improvements

• Identify ways that information technology can be used to improve processes

• Design and implement a prototype of the new process(es)

Steps in Business Process Reengineering

• Develop a vision for the organization that specifies business objectives (e.g. reduced costs, shortend time to market, improved quality, etc.)

• Identify critical processes that are to be redesigned

• Understand and measure the existing processes as a baseline for future improvements

• Identify ways that information technology can be used to improve processes

• Design and implement a prototype of the new process(es)


BPR Today – Observations and Research

Many large failures exist in large scale Business Process Reengineering implementations. To be successful and organizations must have:

• Senior management support• A shared organizational vision• Realistic expectations of outcomes• Participants empowered to reengineer• The right people participating• Sound management practices• Appropriate funding

BPR failures can be tracked back to the lack of one or more of these factors in implementation!

Many large failures exist in large scale Business Process Reengineering implementations. To be successful and organizations must have:

• Senior management support• A shared organizational vision• Realistic expectations of outcomes• Participants empowered to reengineer• The right people participating• Sound management practices• Appropriate funding

BPR failures can be tracked back to the lack of one or more of these factors in implementation!


BPR Today – Observations and Research

Large bodies of research are available on the role of BRP and BPR implementations. Some of this research has come to the following conclusions:

• Reengineering and related organizational issues are as important as the technical implementation issues (Kumar and Van Hellersberg, 2000; Markus and Tanis, 2000)

• Managers in many cases must choose between making the ERP system fit the organization or the organization fit the ERP system (Soh, Sia, Tay-Yoh, 2000)

• For an ERP system to help transform the organization and gain new competitive capabilities, a full organizational and operational change is required (Willcocks and Sykes, 2000)

• In order to be successful, manager must first transform the organization and then implement the ERP system

Large bodies of research are available on the role of BRP and BPR implementations. Some of this research has come to the following conclusions:

• Reengineering and related organizational issues are as important as the technical implementation issues (Kumar and Van Hellersberg, 2000; Markus and Tanis, 2000)

• Managers in many cases must choose between making the ERP system fit the organization or the organization fit the ERP system (Soh, Sia, Tay-Yoh, 2000)

• For an ERP system to help transform the organization and gain new competitive capabilities, a full organizational and operational change is required (Willcocks and Sykes, 2000)

• In order to be successful, manager must first transform the organization and then implement the ERP system


Enterprise Systems – Integrated (Interorganizational)

Integrated PackagesRichly functional systems designed to support externally focused functions (Upstream – Supply Chain Management and Downstream – Customer Relationship Management)

Integrated PackagesRichly functional systems designed to support externally focused functions (Upstream – Supply Chain Management and Downstream – Customer Relationship Management)

Integrated Packages• Highly integrated with internal systems (ERP) through the use of interfaces and specialty software

• Organizational fit for these systems is very high as they are highly specific to the function they support

• These are usually packaged applications that are supplied and supported by the ERP vendor or other third party system integrators

• Customization or modifications are also discouraged to minimize support cost but the applications are highly tailorable with configuration options

Integrated Packages• Highly integrated with internal systems (ERP) through the use of interfaces and specialty software

• Organizational fit for these systems is very high as they are highly specific to the function they support

• These are usually packaged applications that are supplied and supported by the ERP vendor or other third party system integrators

• Customization or modifications are also discouraged to minimize support cost but the applications are highly tailorable with configuration options


Customer Relationship Management

Objective Applications that help organizations attract new business and attract and encourage repeat business

Objective Applications that help organizations attract new business and attract and encourage repeat business

FunctionsThere are two primary functions in CRM systems:

• Sales – tools designed to assist in presales activities such as marketing and prospecting (e.g. Sales Force Automation)

• Service – tools that help with the post-sales aspects of the business (e.g. call center technology, analytics)

FunctionsThere are two primary functions in CRM systems:

• Sales – tools designed to assist in presales activities such as marketing and prospecting (e.g. Sales Force Automation)

• Service – tools that help with the post-sales aspects of the business (e.g. call center technology, analytics)

SourcesThere are two primary sources of CRM systems:

• CRM Software Vendors – Siebel, FirePond, Onyx, E.Piphany• ERP Vendors – SAP, Baan, Oracle, etc.

SourcesThere are two primary sources of CRM systems:

• CRM Software Vendors – Siebel, FirePond, Onyx, E.Piphany• ERP Vendors – SAP, Baan, Oracle, etc.


Sales Support – Sales Force Automation (SFA)

Sales Force Automation provides salespeople and sales managers with computerized support tools to assist in daily routinesExample: Siebel SFA displays multiple functions including: sales, quota & forecast by sales person; messages; appointments

Sales Force Automation provides salespeople and sales managers with computerized support tools to assist in daily routinesExample: Siebel SFA displays multiple functions including: sales, quota & forecast by sales person; messages; appointments


Supply Chain Management

Objective Applications that accelerate product development and reduce cost associated with procuring raw materials, components, and services from its suppliers

• Supply Chain – the suppliers that an organization purchases from directly

• Supply Network – the suppliers that an organization purchases from directly and its suppliers

Objective Applications that accelerate product development and reduce cost associated with procuring raw materials, components, and services from its suppliers

• Supply Chain – the suppliers that an organization purchases from directly

• Supply Network – the suppliers that an organization purchases from directly and its suppliers

SourcesThere are two primary sources of SCM systems. These systems are built to tightly integrate with ERP systems

• SCM Software Vendors – Agile, Ariba, I2, Manugistics, Commerce One, etc.

• ERP Vendors – SAP, Baan, Oracle, etc

SourcesThere are two primary sources of SCM systems. These systems are built to tightly integrate with ERP systems

• SCM Software Vendors – Agile, Ariba, I2, Manugistics, Commerce One, etc.

• ERP Vendors – SAP, Baan, Oracle, etc


SCM – Example of a Supply Network


SCM Application Functions


SCM Application Functions 2nd Half


Supply Chain Management Benefits

Supply Chain Management applications can help organizations to gain competitive advantage and provide substantial payback in several ways by:

• Streamlining workflow and increasing employee productivity (i.e. efficiently managing business travel, time, and expenses by collaborating with suppliers in realtime)

• Accelerating product development (i.e. enabled by the ability of organizations to swiftly react to market conditions)

• Streamlining cost and creating efficiencies across the supply network (i.e., supporting contract negotiation and measuring effectiveness of those agreements)

Supply Chain Management applications can help organizations to gain competitive advantage and provide substantial payback in several ways by:

• Streamlining workflow and increasing employee productivity (i.e. efficiently managing business travel, time, and expenses by collaborating with suppliers in realtime)

• Accelerating product development (i.e. enabled by the ability of organizations to swiftly react to market conditions)

• Streamlining cost and creating efficiencies across the supply network (i.e., supporting contract negotiation and measuring effectiveness of those agreements)


SCM – Example of SAP SCM Offering

SAP is the ERP market leader. They also offer SCM applications whose capabilities including the following:

SAP is the ERP market leader. They also offer SCM applications whose capabilities including the following:


Recommendations for Enterprise System Success

Get Help from Outside ExpertsImplementation success is enabled by deep application experience and access to supporting tools and methods

Take a Multidisciplinary Approach to ImplementationsEnterprise systems span the entire organization and as such require input and participation from all functions

Thoroughly Train UsersTraining in organization, business process, and application functions is critical to success and must be reinforced

Secure Executive SponsorshipThe highest level support is required to obtain resources and make and support difficult reengineering decisions

7-1 chapter 7 enterprise-wide information systems

Documents

enterprise systems

types of activities

flow of information

industries support activities

information flow slide

support slide

set of business activities

information technologies