Transcript Hospitality Systems

Chapter 3
Organizational Information
Systems and Their Impact
Vocabulary and concepts to categorize
different Information Systems
© Gabriele Piccoli
Course Roadmap
• Part I: Foundations
– Chapter 1: Introduction
– Chapter 2: Information Systems Defined
– Chapter 3: Organizational Information Systems and
Their Impact
• Part II: Competing in the Internet Age
• Part III: The Strategic use of Information Systems
• Part IV: Getting IT Done
© Gabriele Piccoli
Learning Objectives
1.
How to categorize systems according to the hierarchical, functional, and process perspectives. You will
also learn the rationale for each perspective and its limitations.
2. The definition, underlying principles, and applications of business process reengineering (BPR), as well
as the advantages and disadvantages of BPR.
3. The concept of integration and its role in the modern firm. We will also discuss business and systems
integration trends and the relationship between the two.
4. The genesis of the enterprise systems (ES) trend and why so many companies are employing or
introducing them. You will also learn to articulate the principal benefits and risks associated with these
systems.
5. The definition of the term supply chain management and the role that supply chain management
applications play in modern organizations.
6. The definition of the term best-of-breed and how to describe the benefits and drawbacks of this approach
to systems integration. You will also learn to draw comparisons between the best-of-breed and enterprise
systems approaches.
7. The definition of knowledge management, how to categorize different types of knowledge commonly
found in organizations and why organizations feel the need to employ knowledge management
applications.
8. The definition of the terms business intelligence (BI) and BI infrastructure.
9. The definition of the term customer relationship management (CRM) and how to articulate both its
benefits and limitations.
10. The relationship between the CRM and BI trends.
© Gabriele Piccoli
Introduction
• Successful managers understanding Information
Systems classifications
• The introduction of new IT and the implementation
of information systems often represent the catalyst
for organizational change
• It is therefore paramount that you have a solid
understanding of what classes of software
programs underpin information systems in modern
organizations.
© Gabriele Piccoli
Categorizing Systems
• The Hierarchical Perspective
• The Functional Perspective
• The Process Perspective
© Gabriele Piccoli
What is the Hierarchical
Perspective?
• Decision making and activities in
organizations occur at different levels.
• Individuals
– have different responsibilities
– make different types of decisions
– carry out different types of activities
• Having the correct information is important
© Gabriele Piccoli
Hierarchical Perspective
Activity
Timeline
Hierarchical level
Characteristics
Strategic
Long term
General management
Functional management
 Externally focused
 Ad-hoc
 Highly unstructured
Tactical
Mid term
Middle management
 Repeatable
 Semi-structured
 Recurrent
Front line employees
 Low discretion
 Highly structured
 Transaction focused
Operational Short term
© Gabriele Piccoli
Operational Activities
• Concerned with short-term activities,
typically those that occur in during the
course of day-to-day business
• Operational personnel are focused on
performing the day-to-day activities that
deliver the firm’s value proposition
• Decision making at the operational level is
typically highly structured by means of
detailed procedures
© Gabriele Piccoli
Operation Examples
Atomicity
Transactions are atomic. If one part of the transaction fails, the system must cancel the
transaction. For example, if while withdrawing money at the ATM the cash dispenser
jams, your balance should not be debited.
Consistency Transactions are consistent. In other words, only valid data is committed to long term
memory and stored in the system. For example, if the airline seat assignment system
requires only letters in the first name field, no transaction with numbers in the field is
accepted.
Isolation
Transactions are non-concurrent. If the system has yet to store the results of a transaction
while writing the results of a second transaction, its database may end up holding invalid
data. For example, if you are withdrawing money from and ATM while your sister at home
is moving money electronically, the resulting balance may be invalid unless the system
maintains isolation of the two transactions.
Durability
Transactions are durable when they can be recovered in the face of system failure. In
other words, once the system has successfully processed the transaction, it will no longer
lose it. For example, once the agent has changed your seat, the change is recorded in a
transaction log. If anything were to go wrong with the database, the current state could
be re-created by reprocessing the transactions from the log.
© Gabriele Piccoli
Tactical Activities
• The activities tend to be semi-structured,
having both well-known components and
some degree of uncertainty
• Decision making at this level is typically semistructured, but characterized by repeatable
patterns and established methods
• The objective is to improve the effectiveness
of the organization, or one of its functions,
within the broad strategic guidelines set by
the executive team
© Gabriele Piccoli
Strategic Activities
• Decision making at this level is highly
unstructured
• Reliant on internal as well as external data
sources
• Focused on making decisions by
evaluating trends
• Little structure and formal methodologies
exist for activities at this level.
© Gabriele Piccoli
Hierarchical Perspective
© Gabriele Piccoli
Today’s Hierarchy
• Adoption of flatter hierarchies between
front-line operations and strategic
decision-making
– Empowerment
• Limitation:
– Difficult to neatly separate information
systems in clear cut categories
© Gabriele Piccoli
Functional Perspective
• Systems support the specific needs of
individuals in the same functional area
• Based on the idea that information
processing needs are unique and
homogeneous within a functional area
• Optimal systems are tailored to those highly
specific needs
• They use a language that is familiar to the
professionals in the functional area
© Gabriele Piccoli
Functional Perspective
© Gabriele Piccoli
Process Perspective
• The functional and hierarchical
perspectives are limited by:
– Lack of integration of separate systems
– Leading to:
• Redundancy
• Inefficiency
• Business Process Reengineering offers
a potential solution
© Gabriele Piccoli
Business Process Reengineering
• Business processes are inherently
cross-functional
• BPR is a managerial approach
that employs a process view of
organizational activities
• BPR seeks to break down
“information silos” in organizations
• BPR achieves internal business
integration and increases
performance
© Gabriele Piccoli
Photo used with permission
from George Kashou
Business Process
• Series of steps that a firm performs in
order to complete an economic activity
– Inputs
– Steps / Activities
– Outputs
© Gabriele Piccoli
BPR Risks
• BPR requires radical 3rd order change
• Significant downsizing and layoffs follow
BPR initiatives
• Because of the degree of change it
engenders, BPR can be very expensive
to implement
© Gabriele Piccoli
Integration
• The history of lack of integration
– Coordination costs
– Mergers and acquisition
Integration: The process of
unifying, or joining together,
some tangible or intangible
assets
© Gabriele Piccoli
The Dimensions of Integration
© Gabriele Piccoli
Object & Locus of Integration
• Locus:
– Internal
– External
• Object:
– The assets the organization seeks to
combine
© Gabriele Piccoli
Business Integration
• The introduction of cohesive, streamlined
business processes that encompass
previously separate activities
• Objective:
– Presenting “one face” to the customer
– Providing coordinated solutions
– Achieving global inventory visibility
© Gabriele Piccoli
Systems Integration
• Unification or tight linkage of IT-enabled
information systems and databases
• Primary focus:
– Technological component of the IS
• Types of systems integration:
– Internal
– External
© Gabriele Piccoli
The Integration Trade-offs
• Benefits
–
–
–
–
Reduction of duplication and redundancy
Access to information
Speed
Response time
• Drawbacks
– Increased coordination costs
– Reduced local flexibility
© Gabriele Piccoli
Enterprise Systems
• Class of standardized
software applications
that would enable and
support integrated
business processes
• Firms typically live
and die by their
enterprise systems
ERP vendors market share
ERP Modules & Functionality
Financials
Accounts receivable and payable
Asset accounting
Cash management and forecasting
Financial consolidation
General ledger
Product-cost accounting
Profit-center accounting
Human Resources
Payroll
Personnel planning
Travel expenses
Operations and Logistics
Inventory management
Material requirements planning
Materials management
Plant maintenance
Production planning
Routing management
Shipping
Sales and Marketing
Order management
Pricing
Sales management
Sales planning
© Gabriele Piccoli
ERP Pros & Cons
Advantages
• Efficiency
• Responsiveness
• Knowledge infusion
• Adaptability
© Gabriele Piccoli
Disadvantages
• Standardization and
flexibility
• Is the best practice
embedded in the
enterprise system really
the best?
• Strategic clash
• High costs and Risks
ERP Failures
Year
2010
ERP Vendor
JDA Software (i2)
ERP Customer
Dillard's, Inc.
2010
SAP and Deloitte
Consulting
Capgemini and
SAP
Marin County,
California
Dorset County in the
UK
2009
Epicor Software
Corporation
SAP and Axon
Ferazzoli Imports of
New England
City of San Diego
2009
Lawson Software
2008
SAP
Public Health
Foundation Enterprises
Levi Strauss
2008
Oracle
Overstock.com
2008
SAP
City of Portland
2004
PeopleSoft
Cleveland State
University
2003
EDS
2001
Oracle Corporation
and KPMG
SAP (R/3) and
Accenture
J.D. Edwards and
IBM
British Sky
Broadcasting
University of
Cambridge
FoxMeyer Corp.
2010
2009
2001
2000
© Gabriele Piccoli
Evans Industries Inc.
Reason for ERP Failure and/or Lawsuit
Dillard's had alleged i2 failed to meet obligations regarding two softwarelicense agreements for which the department-store operator had paid $8
million.
The lawsuit alleges that Deloitte committed fraud and “misrepresented its
skills and experience.”
A job which previously only took a minute is now alleged to take an hour.
The system has to shut down a few days each month to allow data to be
processed.
Epicor's system never worked as intended or promised. Initial budget:
$184,443, Cost to date: $224,656.
The city of San Diego, CA terminated its software implementation contract
with services provider, Axon. The project was $11 million over budget.
Failed ERP implementation.
The company was forced to take shipping systems at its three massive US
distribution centers off line for a full week with ensuing loss of business.
ERP implementation problems blamed for losses during the 2005
Christmas season and extending into 2006.
Portland’s SAP project, budgeted at $31 million in 2006 for a 2007 go-live
date, is now estimated to be nearly $50 million.
A faulty installation of the company's ERP applications. The lawsuit
charges PeopleSoft with breach of contract and negligent
misrepresentation.
Late delivery of the project and lost benefits that amount to estimated
£709m.
ERP project considered “faulty” after spending $13 million in the
implementation.
The company claimed that a botched SAP R/3 implementation in the mid1990s ruined them, driving them to bankruptcy.
The suit alleged that OneWorld was "defective and failed to operate and
function as promised by the defendants."
Source: adapted from backbonemag.com/Blackblog/erp-failures-and-lawsuits-its-not-just-for-the-tier-i-erp-vendors.aspx
Supply Chain Management
• Logistical and
financial
processes
• Associated with
the
– Planning
– Executing
– monitoring of
supply chain
operations.
© Gabriele Piccoli
Knowledge Management (KM)
• Activities and
processes used to
–
–
–
–
Create
Codify
Gather
Disseminate
knowledge within the
organization
© Gabriele Piccoli
• Create: generation of new
information, novel solutions
to handle existing problems,
new explanations for
recurrent events.
• Capturing and Storing:
codification of new
knowledge and maintenance
of an organizational memory
• Disseminating:
Transmission and access of
knowledge within the
organization
Business Intelligence
• Ability to gather and make sense of
information about your business
• Encompasses a set of techniques,
processes and technologies.
• Designed to enable managers to gain
superior business insight and
understanding
• Designed to enable better decisions
© Gabriele Piccoli
The Information Systems Cycle
• Models the
progression of data
– From its inception in
transaction processing
systems
– To its safekeeping in
data repositories
– To its use in analytical
applications
© Gabriele Piccoli
Components of BI
• Data Warehouse
– Data repository
– Collects and consolidates data from multiple source
systems
– Enables analysis
• Data Mart
– Scaled-down version of a data warehouse
– Focused on the needs of a specific audience
• Online Analytical Processing (OLAP)
– Enable a knowledge worker to easily and selectively
extract and view data from an analytical database
• Data Mining
– Process of automatically discovering non-obvious
relationships in large databases
© Gabriele Piccoli
Customer Relationship
Management (CRM)
• CRM is:
– A strategic approach
– Not a technology
– IT is an essential enabler of all but the smallest CRM
initiatives
• That:
– Relies on customer, personal, and transactional data
– To enable the firm to learn about them
• To help the firm draw inferences about:
– Customer behaviors
– Needs
– Value
• So as to increase its profitability
© Gabriele Piccoli
CRM Infrastructure
Source: Goodhue, D.L., Wixom, B.H. and Watson, H.J. (2002). “Realizing business benefits
through CRM: Hitting the right target in the right way,” MIS Quarterly Executive, pp. 79-94
© Gabriele Piccoli
Limitations of CRM
• CRM Is Firm Centric
– A firm only relies on transactional and
behavioral customer data it owns
• CRM Has Limited Predictive Ability
– Some events are unforeseeable and only the
customer knows about their occurrence or
future plans about them
© Gabriele Piccoli
Enterprise Application
Integration (EAI)
© Gabriele Piccoli
The Recap
• Organizational information systems can be
characterized through a
– hierarchical
– functional or
– process perspective
• BPR is as a managerial approach calling for a
process view of organizational activities
• Enterprise systems are modular, integrated
software applications that span (all) organizational
functions and rely on one database at the core
• Enterprise systems have traditionally focused on
internal organizational processes
© Gabriele Piccoli
The Recap
• Knowledge management is the set of activities
and processes that an organization enacts to
manage the wealth of knowledge it possesses.
• Business intelligence encompasses the set of
techniques, processes and technologies designed
to enable managers to gain superior business
insight.
• Customer relationship management is a strategic
orientation that calls for iterative processes
designed to turn customer data into customer
relationships.
© Gabriele Piccoli
What We Learned
1.
2.
3.
4.
5.
6.
7.
8.
9.
How to categorize systems according to the hierarchical, functional, and process perspectives.
You also learned the rationale for each perspective and its limitations.
The definition, underlying principles, and applications of business process reengineering (BPR),
as well as the advantages and disadvantages of BPR.
The definition of integration and its role in the modern firm. We explored the current trend toward
integration and the challenges integration creates. We also discussed business and systems
integration trends and the relationship between the two.
The genesis of the enterprise systems (ES) trend and why so many companies are employing or
introducing them. You also learned to articulate the principal benefits and risks associated with
these systems.
The definition of the term supply chain management and how to explain the role that supply chain
management applications play in modern organizations.
The definition of the term best-of-breed and how to describe the benefits and drawbacks of this
approach to systems integration. You also learned to draw comparisons between the best-ofbreed and enterprise systems approaches.
How to describe what is meant by knowledge management, how to categorize the different types
of knowledge commonly found in organizations and how to explain why organizations feel the
need to employ knowledge management applications.
The definition of the terms business intelligence (BI) and BI infrastructure. You also learned how
to identify and describe the role of the technologies that comprise a modern BI infrastructure.
The definition of the term customer relationship management (CRM) and how to articulate both its
benefits and limitations. You also learned how the CRM and BI trends relate to one another.
© Gabriele Piccoli