Chapter 7
Enterprise-Wide
Information
Systems
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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.
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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
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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
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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
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)
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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 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
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Interorganizational Systems – Across Organizations
Example – Order Process and Information Flow
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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)
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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. SAP or
Ms Dynamics)
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
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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 Key Characteristics
• Best Use - unique business process to an organization
• Cost Effectiveness – much higher cost due to the onetime 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
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Enterprise System Evolution
System Types
System Evolution
Standalone Systems
Integrated Systems
(Intraorganizational)
Integrated Systems
(Interorganizational)
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Enterprise Systems – Stand-alone or Legacy
Stand Alone (Legacy) Systems
A 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.
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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)
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Enterprise Resource Planning
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
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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)
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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 sizefits 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
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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?)
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?)
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ERP Capabilities – SAP Example
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Enterprise Systems – Integrated (Interorganizational)
Integrated Packages
Richly 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
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Customer Relationship Management
Objective
Applications that help organizations attract new business
and attract and encourage repeat business
Functions
There 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)
Sources
There are two primary sources of CRM systems:
• CRM Software Vendors – Siebel, FirePond, Onyx, E.Piphany
• ERP Vendors – SAP, Baan, Oracle, etc.
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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
Sources
There 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
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SCM – Example of a Supply Network
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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)
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SCM – Example of SAP SCM Offering
SAP is the ERP market leader. They also offer SCM
applications whose capabilities including the following:
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Recommendations for Enterprise System Implementation Success
Secure Executive Sponsorship
The highest level support is required to obtain resources
and make and support difficult reengineering decisions
Get Help from Outside Experts
Implementation success is enabled by deep application
experience and access to supporting tools and methods
Thoroughly Train Users
Training in organization, business process, and application
functions is critical to success and must be reinforced
Take a Multidisciplinary Approach to Implementations
Enterprise systems span the entire organization and as
such require input and participation from all functions
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Recommendations for Enterprise System Implementation Success (Contd.)
Several ERP implementation failures have been reported.
To be successful and organizations must also have:
• A shared organizational vision
• Participants empowered to reengineer
• Sound management practices
• A project champion
• An understanding of BPR and accept minimum
customization
• Monitoring and evaluation of performance
ERP failures can be tracked back to the lack of one
or more of these factors in implementation!
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