Introduction to IS part 2:
Information Systems Roles and Functions
1-1
Learning Objectives
1.
2.
3.
4.
5.
6.
Systems from a Constituency Perspective
Relationship of Systems to One Another
Systems from a Functional Perspective
Systems that span the Enterprise
The Role of Information Systems
Enabling Organizational Strategy through
Information Systems
1. Constituency Perspective
SYSTEMS IN THE CONTEXT OF
ORGANIZATIONAL HIERARCHY
1-3
Organizational dimension of information
systems
Levels in a Firm
Business organizations are
hierarchies consisting of three
principal levels:
•
Strategic
•
Tactical
•
Operational
Information systems serve each of
these levels. Scientists and
knowledge workers often work with
middle management.
Types of Systems: Levels of the Firm
Executive
Information
Systems
Management
Information Systems
Decision Support
Systems
Transaction Processing Systems
Strategic
Level
Tactical
Level
Operational
Level
1-5
Types of Systems: Major Roles
e.g. head office uses system to
look at sales trends across
stores to identify ways to gain
competitive advantage over
other retailers
e.g. in store managers use
system to decide what
lines to add or discontinue
e.g. retail information
system to record
customer purchases,
track inventory, pay
employees
Support
Competitive
Advantage &
Decision making
Support
Business Decision
Making
Support of Business Processes and Operations
Strategic
Level
Tactical
Level
Operational
Level
Type of System
Information
Inputs
Information
Outputs
Users
Executive
Support
Systems (ESS)
Aggregate data;
external, internal
Projections;
responses to
queries
Senior managers
Decision
Support
Systems (DSS)
Low-volume data
or massive
databases
optimized for data
analysis, analytic
models and data
analysis tools.
Interactive;
simulations;
analysis
Professionals,
staff managers
Management
Information
Systems (MIS)
Summary
transaction data;
high-volume data;
simple models
Summary and
exception reports
Middle managers
Transaction
Processing
Systems (TPS)
Transactions;
events
Detailed reports;
lists; summaries
Operations
personnel;
supervisors
3. Relationships
RELATIONSHIP OF SYSTEMS TO ONE
ANOTHER
1-8
Types of Business Information Systems
• Relationship of systems to one another
– TPS: Major source of data for other systems
– ESS: Recipient of data from lower-level
systems
– Data may be exchanged between systems
– In reality, most businesses’ systems only
loosely integrated
Types of Business Information Systems
Interrelationships Among Systems
The various types of systems in the organization have interdependencies. TPS are major
producers of information that is required by many other systems in the firm, which, in turn,
produce information for other systems. These different types of systems have been
loosely coupled in most organizations.
2. Functional Perspective
SYSTEMS IN THE CONTEXT OF
FUNCTIONAL SPECIALTIES
1-11
Business Processes and Information Systems
• Business processes:
• Workflows of material, information, knowledge
• Sets of activities, steps
• May be tied to functional area or be crossfunctional
• Businesses: Can be seen as collection of business
processes
• Business processes may be assets or liabilities
Business Processes and Information Systems
A business is a formal organization that makes products or
provides a service in order to make a profit.
Organizing a Business: Basic Business Functions
• Four basic business functions: manufacturing and
production (operations), sales and marketing, finance and
accounting, and human resources
• Five basic business entities: suppliers, customers,
employees, invoices/payments, and products and services
Components of a Business
The Order Fulfillment Process
Fulfilling a customer order involves a complex set of steps that requires the
close coordination of the sales, accounting, and manufacturing functions.
Business Processes and Information Systems
• Information technology enhances business
processes in two main ways:
• Increasing efficiency of existing processes
• Automating steps that were manual
• Enabling entirely new processes that are capable
of transforming the businesses
• Change flow of information
• Replace sequential steps with parallel steps
• Eliminate delays in decision making
Organizational Functional Areas
2-16
Examples of the different types of information systems
Functional Area
Business Process
Sales and Marketing
Identifying customers
Making customers aware of the product
Selling the product
Manufacturing and Production
Assembling the product
Checking for quality
Producing bills of materials
Finance and Accounting
Paying creditors
Creating financial statements
Managing cash accounts
Human Resources
Hiring employees
Evaluating employees’ job performance
Enrolling employees in benefits plans
Business Process Supported by Functional Area IS
2-18
Production/Operations Information Systems
• Assist firms in
planning,
monitoring, &
controlling
inventories,
purchases, & the
flow of goods and
services
Examples:
• Manufacturing resource planning:
–
–
–
–
–
–
•
Forecasting
Scheduling
Materials requirements
Capacity planning
Production cost control
Quality control
Engineering Systems
– Computer Aided Design
– Computer Aided Engineering
•
Service Management Systems
– recruitment System
– airline reservation system
– equipment rental management system
Accounting Information Systems
• Record and report
business
transactions and
other economic
events.
Examples:
•
Order processing
– Captures & process customer orders
– Produces data needed for sales analysis and
inventory control
•
Inventory control
– Track changes in inventory
– Minimize inventory
•
Accounts receivable
– Track amounts owed by customers
•
Accounts payable
– Amounts owed to suppliers
•
Payroll
– Receives and maintains data from employee
time cards and other work records
Human Resource Information Systems
• Support Human
Resource
Management in
the key areas of
staffing, training &
development,
compensation
administration
Examples:
•
Staffing
–
–
–
–
•
Training and developing employees
–
–
–
–
•
Manpower planning
Labour cost analysis and budgeting
Turnover analysis
Staff recruitment & selection
Competency database
Career matching
Online training
Performance appraisals
Compensation Administration
– Contract costing
– Employee benefits analysis
– Payroll control
Marketing Information Systems
• Assist in planning,
promotion, and sale
of existing products
in existing markets
& development of
new products and
new markets to
better serve present
and potential
customers
Examples:
•
Market research
– Analyse internal/external data
•
Targeted Marketing
– Community
– Online behaviour
– Demographic/phychographic
•
Sales Force Automation
–
–
–
–
–
–
Managing leads
Product catalogues
Pricing information
Proposals
Order entry
Sales commissions
4. Systems that span the Enterprise
ENTERPRISE SYSTEMS –> CROSSFUNCTIONAL
1-23
Systems That Spans the Enterprise
Enterprise Applications
• Enterprise applications are systems that span functional
areas and automate processes for multiple business
functions and organizational areas; they include:
• Enterprise systems
• Supply chain management systems
• Customer relationship management systems
• Knowledge management systems
Roles of IS
THE ROLE OF IS IN BUSINESS
1-25
The Role of Information Systems in
Business Today
•
How information systems are transforming business
•
•
•
•
Increase in wireless technology use, Web sites
Shifts in media and advertising
New federal security and accounting laws
Globalization opportunities
•
•
Internet has drastically reduced costs of operating on global scale
Presents both challenges and opportunities
The Role of Information Systems in
Business Today
• In the emerging, fully digital firm
– Significant business relationships are digitally enabled and mediated
– Core business processes are accomplished through digital networks
– Key corporate assets are managed digitally
• Digital firms offer greater flexibility in organization
and management
– Time shifting, space shifting
The Role of Information Systems in
Business Today
The
In
Interdependence Between Organizations and Information Technology
contemporary systems there is a growing interdependence between a
firm’s information systems and its business capabilities.
Changes in strategy, rules, and business processes increasingly require
changes in hardware, software, databases, and telecommunications.
Often, what the organization would like to do depends on what its
systems will permit it to do.
The Role of Information Systems in
Business Today
•
Growing interdependence between ability to use
information technology and ability to implement corporate
strategies and achieve corporate goals
•
Business firms invest heavily in information systems to
achieve six strategic business objectives:
–
–
–
–
–
–
Operational excellence
New products, services, and business models
Customer and supplier intimacy
Improved decision making
Competitive advantage
Survival
The Role of Information Systems in
Business
Operational Excellence:
• Improved efficiency results in higher profitability
• Information systems and technologies help to improve
higher levels of efficiency and productivity
• Wal-Mart is the most efficient store in the world as a
result of digital links between its suppliers and stores
The Role of Information Systems in
Business
New products, services, and business models:
• Information systems and technologies enable firms to create
new products, services, and business models
• A business model includes how a company produces,
delivers, and sells its products and services
• The music industry has seen drastic changes in business
models in recent years
• Apple has been very successful at introducing new products
and adopting a new business model
The Role of Information Systems in
Business
Improved decision making:
• A company’s bottom line can be hurt by managers being
swamped with data that are neither timely nor helpful,
forcing them to use guesswork
• Real-time data have improved the ability of managers to
make decisions
• Web-based digital dashboard exist to update managers with
real-time data on customer complaints, network
performance, and line outages
The Role of Information Systems in
Business
Competitive advantage:
• Achieving the previously mentioned business objectives
often leads to competitive advantage
• Advantages over competitors include charging less for
superior products, better performance, and better response
to suppliers and customers
• Dell Computer is one of the best examples of establishing
competitive advantage as the company has continued to be
profitable during a time when PC prices have been falling
steadily
The Role of Information Systems in
Business
Survival:
• Businesses may need to invest in information systems out of
necessity
• Necessity arises from keeping up with competitors
• Necessity also arises from federal and state regulations, such
as the Toxic Substances Control Act and the Sarbanes-Oxley
Act
• Rules and Regulations
The Dual Nature of IS
• IS can make you or break you
• London Heathrow—The failure
– Baggage handling system: original cost of $500 million
– Disaster on opening day, costing $ 50 million due to
over 28,000 bags being misrouted
• FedEx—The success
– $ 38 billion family of companies—largest express
transportation company
– “Information hub for business where managing
information is the business”
1-35
IS for Competitive Advantage
• Both FedEx and London Heathrow were
developing strategic information systems
• Only strategic information systems can help
sustain competitive advantage
Discuss how information systems can be used for automation,
organizational learning, and strategic advantage.
ENABLING ORGANIZATIONAL
STRATEGY THROUGH
INFORMATION SYSTEMS
Information Systems for Automating:
Doing Things Faster
Primary Activities
of Loan Processing
Manual Loan
Process
TechnologySupported
Fully Automated
Complete and submit Completed at
application
home (1.5 days)
Completed at home Completed online
(1.5 days)
(15 minutes)
Check application
for errors
Done in batches
(2.5 days)
Done in batches
(2.5 days)
Computerized
(3.5 sec)
Input data into the
information system
NA some paper
handling (1 hr)
Done in batches
(2.5 days)
NA (already done)
Assess loan apps
under $250K
Done by hand
(15 days)
Computer assisted
(1 hr)
Computer
processed (1 sec)
Committee decides if
loan over $250k
(15 days)
(15 days)
(15 days)
Applicant notified
Batches (5 days)
(1 day)
E-mail (3.5 sec)
Total time
25 to 40 days
5 to 20 days
15 min to 15 days
Information Systems for Organizational
Learning: Doing Things Better
• Information systems can track and identify trends
and seasonality
• Managers can use this to plan staffing levels and
cross-training
Information Systems for Supporting
Strategy: Doing Things Smarter
• Firms have a competitive strategy
• Information Systems should be implemented
that support that strategy
– Low cost strategy implies information systems to
minimize expenses
– High quality strategy implies information systems
to support ensuring excellent quality and minimal
defects
Sources of Competitive Advantage
Identifying Where to Compete:
Analyzing Competitive Forces
Using IS to Combat Competitive
Forces
Table 2.2
Competitive Force
Implication for Firm
Potential Use of Information
Systems
Rivals within your
industry
Competition in price, product
distribution, and service
Reduce costs, use the Internet
to increase service
New entrants
Reduced prices and market
share
Inventory control to manage
excess capacity, Internet to
differentiate products
Customers’
bargaining power
Reduced prices, demand for
better quality and service
CRM to improve service,
CAD/CAM
Suppliers’
bargaining power
Increased costs and reduced
quality
Use internet to work with new
distant suppliers
Threat of substitute
products
Decreased market share,
customer loss
Better assess customer needs,
use CAD to design better
products
Using IS to Combat Competitive
Forces
Table 2.2
Competitive Force
Implication for Firm
Potential Use of Information
Systems
Rivals within your
industry
Competition in price, product
distribution, and service
Reduce costs, use the Internet
to increase service
New entrants
Reduced prices and market
share
Inventory control to manage
excess capacity, Internet to
differentiate products
Customers’
bargaining power
Reduced prices, demand for
better quality and service
CRM to improve service,
CAD/CAM
Suppliers’
bargaining power
Increased costs and reduced
quality
Use internet to work with new
distant suppliers
Threat of substitute
products
Decreased market share,
customer loss
Better assess customer needs,
use CAD to design better
products
Identifying How to Compete:
Analyzing the Value Chain
The Technology/Strategy Fit
• There are never enough resources to
implement every possible IS improvement
• There are usually never enough resources to
implement every financially beneficial IS
improvement
• Companies that focus on the improvements
and business process changes that help their
value creation strategy the most will see the
greatest competitive benefit
Assessing Value for the IS
Infrastructure
• Economic Value
– Direct financial impact
• Architectural Value
– Extending business capabilities today and in the
future
• Operational Value
– Enhancing ability to meet business requirements
• Regulatory and Compliance Value
– Complying with regulatory requirements
Putting It All Together: Developing
a Successful Business Model
• A business model reflects the following:
1. What does a company do?
2. How does a company uniquely do it?
3. In what way (or ways) does the company get
paid for doing it?
4. What are the key resources and activities
needed?
5. What are the costs involved?
END OF CHAPTER CONTENT
Managing in the Digital World: The
Business of Merging “Groups” and
“Coupons”
• Groupon created a new business model
– Heavily discounted deals for grouped buyers
– Advertising value for sellers
• Groupon’s business model is easily duplicated,
and has been, repeatedly
– Groupon does have a first mover head start
– Groupon has purchased many competitors
– However, Groupon has no sustainable competitive
advantage as currently positioned
Brief Case: For Sale By Owner: Your
Company’s Name.com
• Domain names can be purchased by anyone,
whether they own the trademark for that name
or not
– Businesses have had to pay premium prices for their
own trademarked names
– Legislation to prevent Domain Squatting has stalled in
congress
– Some names are rented to businesses for lucrative
amounts
– Common misspellings now lead to advertising sites
When things go wrong: The Pains
of Miscalculating Groupon
• Groupon sales are heavily discounted, and can
cost companies more then they bring in
– Groupon takes 40% of the discounted sale
– Groupon sales unprofitable unless they grow the
repeat business customer base
– Some sales are one-time (eye laser surgery)
– Businesses forget to cap the number of sales
– A large number of unprofitable sales can lead to
large losses for small companies
Who’s Going Mobile:
Mobile Operating Systems
• Market share battle
• Rapid growth in cell
phone operating
systems
• Market share can
change rapidly
• Some Operating
Systems are proprietary,
but Google took an
open approach with
Android
Coming Attractions:
Google’s Project Glass: A Pair of Glasses
• Project Glass: an embedded display in
eyeglasses
• Augments reality
– Displays time/space relevant information
•
•
•
•
Current schedule
Directions
Weather forecasts
Information about what is being looked at
• Still under development / research
Key Players:
The Global Elite
Largest Non-US Based Technology Companies
Rank
World
Rank
Company
2011 Sales
(US$ m)
HQ
Founded
Primary Markets
1
1
Samsung
133,780
South
Korea
1969
Electronics, IT
2
3
NTT
124,330
Japan
1985
Telecomm
3
5
Hitachi
112,400
Japan
1910
IT, Telecomm, Other
4
9
Panasonic
104,880
Japan
1918
Electronics
5
10
Siemens
96,590
Germany 1847
Electronics,
Engineering
6
11
Sony
86,640
Japan
1946
Electronics
7
12
Deutsche
Telekom
82,650
Germany 1996
Telecomm
8
13
Telefónica
80,830(2010)
Spain
Telecomm
1924
Ethical Dilemma:
Underground Gaming Economy
• Virtual worlds have virtual economies with goods
and currency (often virtual gold)
– Players are now buying and selling virtual goods with
real money
– Some companies hire people to ‘farm gold’ which they
sell
• Estimated 400,000 gold farmers world wide
• 90% in China, often work 12 hour days
– Buying assets in a game creates advantages over
players who can’t or won’t, changing the game
– Some companies ban gold farmers for life to protect
the integrity of the game for other players
Industry Analysis:
Banking Industry
• With 1970s banking deregulation, banks can
operate across state lines and internationally
• Online banking is now the norm
• Mobile banking is rapidly growing
• Industry in a state of transition
• Security concerns remain