CHAPTER 2
SYSTEMS
INTEGRATION
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Learning Objectives
• Understand the impact of organizational structure on
information systems.
• Find out about the types of functional silos in
organizations.
• Learn about the evolution of information systems
technology generations and architectures and its
influence on silo environment.
• Know what systems integration is and why it is important
for organizations.
• Understand the role of Enterprise Resource Planning
(ERP) systems in systems integration.
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Preview
• Systems integration means that you allow a
heterogeneous (hodgepodge) IS to communicate or
integrate and share information (or data) seamlessly with
one another.
• The keyword here is seamlessly, because the challenge is
that Information Systems have shared information with each
other for a long time, however, they relied on a human link,
which takes much longer time, errors and inaccurate and
• Without system integration, Information sharing can not
happen in real time between the various organization
stakeholders. E.g. warehouse employee dose not know
the status of shipped product.
• Systems integration is a key issue for an organization for its
growth; therefore, management needs to pay close
attention to this issue.
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Functional Silos
Typically organizations are structured into division and department based on functionality of
each division and department. Each division or department performs its own specific function
and determines its own competency. This includes hiring people who are expert in doing that
specific function. Therefore, this organization structure tends to create ‘Silo Thinking’, each
department stands alone with less or no interaction with other department within the same
organization.
Business processes, on the other hand, cut across these functional silos. Where different
activities in a process require different skills, the process is likely to involve a number of
people and departments. An example is the selling process to customer, it will involve several
departments (as seen below), namely Sales, Distribution, and Finance department and also
involve people in those departments.
Source: http://processdriven.livejournal.com/923.html
Business Processes and Information Systems
• Business process is a group of activities or tasks that are coordinated
for achieving a business goal (e.g. ordering supplies, targeting customer,
designing new products, etc.).
• Business processes refer to the manner in which
• Work is organized, coordinated, and focused to produce a valuable
product or service
• Is a concrete workflows of material, information and knowledge (set
of activities).
• Ways in which organizations coordinate work, information and
knowledge and the ways in which management chooses to coordinate
work.
• Every business can be seen as a collection of business processes.
• Many business processes are tied to a specific functional area. For
example sales and marketing area function would be responsible for
identifying customers, and human resources function would be responsible
for hiring employees.
Business Processes and Information Systems
Other business processes cross many different functional areas and require
coordination across departments. For example fulfilling customer order: First
sales department would receive a sales order. The order will pass first to
accounting to ensure the customer can pay for the order. Then, production
department pull the product from inventory and finally product needs to be
shipped.
Can you provide other example
Fulfilling a customer order involves a complex set of steps that requires the close
coordination of the sales, accounting, and manufacturing functions.
Functional Silos
• Silos (tower of protecting products) are basically compartmentalized
operating units isolated from their environment.
• Why have Information System and organizations evolved into
functional silos? To understand the reason, we first need to look at
the horizontal evolution of modern organizations and the system
supporting their Information requirements.
Horizontal Silos
• The functional model POSDCORB (Planning, Organizing, Staffing,
Directing, Coordinating, Reporting and Budgeting) categorization
proposed by Luther Gulick led to a set of formal organization
functions such as control, management, supervision, and
administration starting in late 1930s.
• Classification of organizations into departments like Accounting and
Human Resources, reflects the breaking of complex tasks into
smaller manageable tasks that could be assigned to a group of
people who could then be held responsible.
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Functional Model of Organization (POSDCORB)
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Functional Silos (Cont’d)
Vertical Silos
• Organizations also divided roles in hierarchical
(vertical) layers from strategic planning to management
control and operation control.
• CEOs and Presidents plan long-term strategy, midlevel
management (e.g. VP, general managers) focuses on
tactical issues and on the execution of organizational
policy whereas the lower-level management task (e.g.
supervisors) is to focus on the day-to-day operations of
the company.
• As organizations get big and complex they tend to break
functions into smaller units and assign staff the
responsibility for these activities allowing them to manage
complexity as well as specialize in activities that
enhance productivity and efficiency.
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Hierarchical Model of Organization
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Business Process and Silos
• The problem of functional silos gave birth to business process reengineering (BPR).
• Organizations are re-oriented their management towards improving the
efficiency and effectiveness by focusing on business processes such as
selling products, product development, order processing, etc.
• Business process provides an alternative view of grouping people and
resources focusing on an organization’s activity, which involves
interactions between sales , warehousing and accounting functional
areas, as the work progresses from initial sales order to collection of
payment from the client.
• The cross-functional business process can involve people and
resources from various functional departments working together, sharing
information at any level of the organization.
• Business process has moved management thinking away from a
functional department to business process.
• This organizational evolution from functional silos to business
processes and to even customer centric approaches has had a
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big impact on the evolution of information
systems.
Matrix Structure of Organization
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Evolution of Information Systems in Organizations
• As business changes and expands, the results is sometimes
lead to a wide variety of Information Systems and computer
architectures creating heterogeneous independent nonintegrated
systems (silos).
• These systems lack control and configurations, so they
become breeding ground for inconsistency, inaccurate and
incompatible data and ultimately lead to mismanagement.
• A silo information system is inefficient, inaccurate, and
expensive. These systems can not share data therefore require
users to access multiple systems to integrate the data
manually.
• Silos systems focus on individual tasks or functions or both,
rather than on process or team. This make it very difficult for
organization to be customer-centric because data can not be
assimilated from different functional areas to address customer
needs.
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Evolution of Information Systems in Organizations
• Organizations have been designed around functions for long
time (e.g., sales, manufacturing, and HR). These functions are
important as they provide a structure by which an organization
functions runs smoothly.
– The system creates bottlenecks for everyone and information is not
available in real-time.
• The evolution of IS suggests that its role has generally been to
support evolving information needs of the organization.
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Functional Silos in Organization
• Silo environment is inefficient,
inaccurate and expensive.
• Information is captured and reentered several times and is not
available in real time.
• Silo environments hamper
enterprise decision making,
because key information never
makes it out of the different
pockets of the organization in
time for decision maker.
• In Silo environment, only
selective employees from that
department have access to
information, customers, partners,
and suppliers are dependent on
there employees to provide them
with answers.
• Example: UPS package
tracking system.
Information Systems Evolution Chart
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Information Systems Architectures
• Three major types of information
systems architecture have been
commonly used in organizations:
Centralized, Decentralized and
Distributed systems architecture.
• Centralized approach utilizing the
mainframe computer (the central
computer) to host all application
system and data resources of the
organizations.
• With decentralized approach,
each user had a personal
computer.
• Distributed architecture allows
sharing of applications and data
resources between the end user
and the server
computers(centralized)
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IS Functionalization
• In addition to serving the different management levels, IS
also supports major business functions, such as
manufacturing, marketing, accounting, finance, and HR.
• Each functional area has different information needs and
report requirements.
• Each functional area in an organization also has multiple
levels of management, each requiring different levels of
analysis and details of information.
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IS as Categorized by Functional and Hierarchical Models
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IS as Categorized by Functional and Hierarchical Models
Above system infrastructure (e.g. operating systems, databases and
networking) the lowest level of IS pyramid which consists of:
• Office Automation System (OAS): support the activities of employees
• Transaction Processing System (TPS): record detailed information in all
the major functional areas.
They support the organization's operations and record every transaction,
whether it is a sale, a purchase, or a payment. They are often categorized by
the functional areas in the organization (sales, purchasing, shipping, etc.)
• Management Information System (MIS): reporting systems that
categorize and organize information as required by the midlevel
managers. These report can be sales by product for a quarterly period.
• Decision Support Systems (DSS): are analytical systems that use
mathematical equations to process data from TPS to assistant managers in
conducting what-if analysis, identifying trends and in generally assisting
in making data driven decisions. (e.g. go-seeking, pivot tables, etc using
spreadsheet or more sophisticated such as OLAP software).
• Expert System also assist managers in their decision making using
qualitative analysis that captures problem solving to identify solutions.
• Executive Support System (ESS): provide visual dashboard of strategic
information to top level management in real time (snapshot of the
organization performance). These system are categorized for each functional area of the organization.
visual dashboard of strategic information
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Integrated systems allow companies to accomplish something that has provide
most to date: the linking of demand and supply side functions in a way
that enables a quick and flexible response to changes.
Logical (human level) intergartion
• Develop information systems that allow organizations to share data with all
of its stakeholders based on need and authorization. It means allowing
access to a shared data resources by people from different functional
areas of the organization.
• Management needs to change organizational structures, processes, and
employee roles and responsibilities.
Physical (technical level) integration
• Provide seamless connectivity between heterogeneous systems.
• Business process reengineering involves changing the mindset of the
employees in the organization, encouraging and enabling them to do their
tasks in a new way.
• Shifting the focus of employees from achieving the departmental goals to
organizational goals is an essential task for management.
• It also requires a changes in traditional hierarchical management structures
that are purely functionally oriented.
• Teamwork is an essential component if organizations want to break
functional silos and have workers from all levels of management collaborate
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on solving organizational problems.
Steps in Integrating Systems
Silos Functional
organizations
Organizational structure
and business processes
Step 1
Resource
categorization
Take an inventory of the various hardware and
software resources focusing on vendors,
operating systems platforms, IS architectures used
in these resources.
Step 2
Compliance and
standards
Check whether the database and other
technologies used in various applications are such
supporting standards as JDBC/ODBC compliance
for database.
Step 3
Legacy systems
support
Develop a policy in support of older legacy
applications.
Step 4
Middleware tools
Middleware tools are essential for integration in
the short term if existing applications must be
used by the organization.
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Steps in Integrating Systems (Cont’d)
Step 5
Authentication and
authorization
policies
Single sign-on policy for application and data
access because all employees and external
partners will need access to an integrated system
from anywhere, anytime.
Step 6
Centralized IT
services and
support
The IT staff needs to be able to support all
applications and platforms with a centralized IT help
desk support.
Step 7
Back-up, recovery,
and security
A good back-up and recovery system is essential
if there is a system failure or a major disaster.
Step 8
Hardware and
software
standardization
Develop organization standards and policy on
acquisition of new hardware and software which is
aligned with organization IT strategy.
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Benefits and Limitations of Systems Integration
Benefits
Limitations
Increased Revenue and Growth
High Initial Set-up Costs
Leveling the Competitive Environment
Power and Interdepartmental Conflicts
(due to the sharing of information)
Enhanced Information Visibility
Long-term and Intangible ROI (Usually
several years)
Increased Standardization
Creativity Limitations (Restricts
Creativity and Independence)
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ERP and Systems Integration
• Enterprise Resource Planning (ERP) systems: are integrated,
multi-module application software packages designed to
serve and support several business functions across an
organization.
• ERP system is a strategic tool that helps the organization
improve its organization and management by integrating
business processes and helping to optimize the allocation of
available resources
• ERP systems are typically commercial software packages that
facilitate collection and integration of information related to
various areas of an organization including finance, accounting,
HR, customer services, etc.
• ERP systems enable the organization to standardize and
improve its business processes to implement best practices
for its industry.
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ERP’s Role in Logical Integration
• ERP systems require organizations to focus on business
process rather than on functions.
• ERP systems come with built-in processes for a wide
variety of common business functions.
• An ERP system implements best practices via specific builtin steps for processing a customer order in terms of:
– order entry.
– routing through departments.
– communication of output to various parties.
• Example: Dell computers: Receive an order – divide the order by major
components and transmit to various units, partners and/or suppliers-
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ERP’s Role in Physical Integration
• Before installing the ERP system, an organization may have
to upgrade or install middleware or get rid of their legacy
system’s hardware and software.
• Integration is also required at the Data level (one
database), Client level (standardizing on all client
platforms), and at the Application level (common user
interface design, back end access and back-up recovery
plan).
• A good ERP implementation improves operational efficiency
with better business processes that focuses on
organizational goals rather than on individual departmental
goals.
• Improved efficiency with a paperless flow and electronic
data interchange (EDI) or business-to-business (B2B)
commerce environment with partners.
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Implications for Management
• Silos do not work.
– Most organizations lose out in the long-term when information is not
shared in real time across the functional boundaries within the
company.
– In today’s globally competitive environment, organizations have to
compete both on lower cost, and by providing better customer
services through alliances and partnerships with competitions.
• System integration has many hidden benefits.
– Allows decision making to be cascaded to all departments
– Allows employees at lower-levels to make better decisions while
interacting with clients or partners.
• System integration has many challenges.
– Replacing old hardware and software
– Working with IT consultants in developing middleware
– Human challenges, such as impact on IT staff, department heads
losing control of data, and rumors29of layoffs
Implications for Management (Cont’d)
• Systems integration raises many new ethical issues.
– Possibility of some employees exploiting information for personal
advantage and illegal access of information.
• Remedies can consist of:
– Develop policies on ethical usage of information.
– Install proper security software and hardware (like firewalls).
– Allocate resources for training and education on accessing
information.
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Summary
• Functional silos categorize an organization’s tasks and
activities into groups to improve efficiency and
responsibility of work in the organization.
• Silos can improve productivity, but they often lead
employees to achieve departmental goals rather than
overall organizational goals.
• IS over the years have been divided horizontally by
functions and vertically by hierarchical levels.
• IS architecture has evolved from centralized mainframe
architecture to personal computers with distributed or
client–server architecture.
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Summary (Cont’d)
• In order for systems integration to be successful,
organizations have to focus both on the human or
logical level and on the physical or systems level.
• ERP systems thus make the process of systems
integration easier, but they are expensive and often
require organizations to start from scratch.
• System integration involves the whole organization,
requiring top-management support and resources for a
long-term period. Management must be ready to face
the human and ethical challenges in a systems
integration project.
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Review Questions
1. What are functional silos and how did they evolve in
organizations?
2. What is the relationship between organizational
functional silos and IS functional silos?
3. Compare and contrast centralized, decentralized, and
distributed IT architectures. Which do you think is most
appropriate for ERP and why?
4. List the horizontal and vertical levels of systems that
exist in organizations.
5. What is logical integration and how is it different from
physical integration?
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Review Questions (Cont’d)
6. Describe at least five steps involved in system
integration.
7. What are the key benefits and limitations of system
integration?
8. What is the role of ERP systems in system integration?
9. Summarize the role of management in systems
integration.
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