Business and IS Performance
(IS 6010)
MBS BIS 2010 / 2011
4th November 2010
Fergal Carton (f.carton@ucc.ie)
Accounting Finance and Information Systems
Last week
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Latency
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Tuning of databases for performance
Previous Apple exam questions
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Focus this year on management information model rather than process
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Confidentiality of Apple processes
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Apple process flows
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Types of data
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ESB maintenance culture change led by cost goals
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GSK yield data impacted by humidity
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Production planning
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How do managers do their work
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Virtualisation
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Nobo pen example
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Zuboff, S. (1984), In the Age of the Smart Machine, Basic Books
Apple process mapping
• Should have assumptions documented
– Eg. What is the presumed role of Distributors?
• Show information flows for Gift card numbers
• How are gift card revenue for Cork reported for Apple?
• Think about revenue models for other soclal networks eg. Facebook
– Use this as a case study?
– Go and see Social Network?
– How does a useful idea turn into a revenue generating model?
• What kind of performance measures would Apple have in place for
gift cards
Apple iTunes process
• Not sold in Apple stores
• Sent out from central distribution point (as with all Apple material)
• No reporting from ATMac to Apple on sales
– Sales reports used locally for accounting
– No customer data passed on to Apple
– Small inventory kept locally (3 machines of each spec)
– Delivery from central distribution point within 24 hours of order
• Possibly larger US Apple stores connect directly
HMV iTunes sales
• HMV Patrick St. Selling cards for last 12 months
• Barcode on back of card identifies denomination (eg. €15 card)
• Scanned at HMV till, connected to central HMV system (UK)
• Sales are aggregated overnight from all HMV stores
• All product sales (inlcuding cards) visible next day to stores
• Replenishment of individual stores done centrally by HMV
Notes on process mapping
• Assumptions should deal with overall objective:
– how Apple reports revenues for global gift cards sales
• What is the role of distributors in the process?
• Show information flows
– Card sales information (customer, product, quantity, price, date, ...)
– Gift card numbers: inlcude the end customer creating an iTunes account
• Any link between two processes?
– Apple sale of gift cards to distributors
– Redemption of gift cards by customers
• How might Apple sychronise with HMV sales, or do they need to?
This week
• Virtualisation
• Demamd uncertainty
• Decoupling point
• Integration framework
• “One version of the truth”
• Integration benefits and downsides
• Change of date for lecture week of 15th Nov
– Monday 15th at ? instead of Thurs 18th, at Lab 3.15
• Assessment date
– 2nd Dec in-class assessment
– Case study to be distributed Mon 15th Nov at the latest
Virtualisation
• Person physical
– Vs.
• Profile facebook (Virtual)
Zuboff’s observations
• Distress caused by virtualisation of work:
– “floating in space”, or
– “lost behind the screens”
– “What does that number actually mean”
• Computer system designer on data integrity:
– “The pressure is to get everything that is sensed and convert it to
a symbol ... You must be able to trust your symbols ...
Confidence in the symbols of operations is worth it, even if it
takes brute-force measures like giving someone the job of
maintaining one sensor.”
• Evolution of “technostructure” into IS dept
Usefulness of information
“most managers suffer not from a lack of
relevant information, but rather from an overabundance of irrelevant information .”
Ackoff
(1967)
“Information generated by computer based
systems does not include much of the
information that is most important to
management - especially, important
qualitative information.”
Virtualisation distress
• Zuboff: Work is perceived to be
– “floating in space”, or
– “lost behind the screens”
Mason and Swanson, 1979
• Real world
– Objects, events, states, situations
• Theory of signs (Zuboff’s symbols)
• Virtualisation = gathering data to
describe the properties of the real world
• A good measure is not just an accurate
one
– Must take into account it’s use or influence
• Accuracy and precision
What does integration mean?
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Dearden 72
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As computer use expands, control is vital
Single group of experts design a completely integrated
supersystem = absurd
Specialist expertise is functional by nature
Finance, logistics, sales = different expertise
Centralisation of control of systems = dangerous
Examine the interfaces
Vizard 06
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Data used to be in disparate databases
Data now in databases, file systems, applications, …
“One truth” concerning the state of a business process
Interdependent business processes (eg. sales & service)
Meta-data structures
Enterprise Application Integration vs. BI tools
Who benefits?
• Finance gain greater visibility
• Manufacturing?
– Demand may be too unstable for MRP
– Production planning needs more “nuance”
– ERP is too literal
– Much planning still done on Spreadsheets
• Sales: need of integration
Integration downsides
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Response times
Vulnerability: single point of failure
Limitations on expansion
Dependence on single vendor
Flexibility to change system
…
…
Access to basic information is
complicated
Living with demand uncertainty
• Good business is about
– satisfying customer demand
– within given cost constraints
• Good processes should ensure consistency
• However
– most businesses are seasonal
– most customers will change their requirements
• Being flexible means
– dealing with late changes
– without blowing the resource budget
“Stretch” performance targets
• When planning, organisations set goals that are
optimistic
• Shareholder confidence sought
• Performance targets rarely reduce over time
• So target data is considered to be “soft”
• Managers given visibility of actual data
MRP model doesn’t always fit
• So, for example, we might load MRP today and
look for something in 5 weeks time, even though
it’s got maybe a 10 week lead time. So, if you
were using what you called a closed loop MRP
system, it would say, well there’s no point in
loading that, here, load it in 10 weeks time. We
say load it and we’ll make it happen. So we
might pay premiums, we might go visit vendors,
we might beat ‘em up or flex our muscle or pay
for more overtime shifts, or whatever.
Virtualisation introduces
constraints on reporting
• Technical latency (accumulation of processing,
querying and displaying times)
• Gap between virtual and physical
– Customisation of application (eg. Shipping)
– Data integrity at point of capture (eg. Sales order)
• Complexity of standard reports
• Forecasting and reporting tools not integrated
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ERP integration drives greater manual
manipulation of data
Decoupling point
• Decisions were made “intellectually”, “in the
brain”, “on the fly”, “off-line” or “by the seat of the
pants”.
• Such managerial observations represented the
“decoupling point” where the physical and the
virtual diverged.
• Information that was structured in a system was
no longer adequate to support decision making.
Decoupling point
• Inability of planners to deal with demand uncertainty, so
responsibility for make or break performance decisions
was pushed downwards to operations managers
• Instead of the planning role protecting operations from
fluctuations in demand, managers had to take personal
risks in operational decision making (Planning, Buying,
Making and Delivering)
• In so doing, managers were obliged to take control of the
means of decision making, including the implementation
and use of appropriate decision support tools.
• Hence the predominance of the “soft” vocabularly
Control objectives of integration undermined
Control
Centralisation
Co-ordination
More analysis potential
Integration
Granularity
Accuracy / consistency
Inflexibility
Deteriorating data integrity
Technical skills required for reporting
Latency
Manual
Integration framework
Virtual
Measure
Plan
Plan
Plan
Resource
visibility
Physical
Execute
Schedule
Supply
Demand
Performance control
Mason and Swanson, 1979 II
• Managers require information about
resources and their relative
effectiveness for achieving the
organisation’s purpose
• Resources = people, materias, plant
and equipment, money and information
• Managerial accounting systems
– Resources and costs
– Relationship between costs and
performance
Finance: eyes on the road
ahead and on the rear-view
mirror
• Control of costs and
revenues
• Report on results to directors
and shareholders
• Plan expenditure (budgets)
• Pay suppliers (including
employees!)
• Collect cash from customers
• Manage cash flow and
currency exposure
• Plan for financing
requirements (eg.
acquisitions)
Mason and Swanson, 1979 IV
• Managers queries and alternatives
which govern the precision of the
measure
• Precision of measure only to
“discriminate between critical
magnitudes”
• Use recruitment process to differentiate
between primary and secondary data
Mason and Swanson, 1979 V
• What problems shall I look into
(attention)?
• What course of action is better
(solution)?
• How well am i doing (scorecard)?
• IS view of information accuracy (data
intgegrity) obscures role of information
as influential
Accuracy versus precision
• Accuracy is tellling the truth
• Precision is telling the same story over
and over again
• Granularity is the level of detail required
Accuracy versus precision
• Accuracy: closeness of agreement
between the result of measurement and
the true value of the measurand
• Precision: closeness of agreement
between independen t measurements
Precision
Accuracy
Accuracy with precision
Reading
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Mason, 1969
Child, 1973
Mason and Swanson, 1979
Galbraith, 1983
Zuboff, 1984
Elmes et al., 2005