IT in Business

Critical Application in Information Technology Lecture – 05

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Information System in Enterprise Value Addition

 The key reason anyone is in business is because they add value to a product or service.

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Business Function

 All businesses have functions.

 An organization is defined as a set of people working together in a coordinated system to achieve a set of goals.

 Some functions of business include marketing, finance, human resources, accounting, IT, sales, public relations, administration etc.

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Management Challenges

 Businesses need different types of information systems to support decision making and work activities for various organizational levels and functions.

 Implementing information systems usually creates some problems, just as they solve some problems. These problems may be categorized as:

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Challenges

  Integration – These are systems that allow the sharing of information across different departments. The problem with these is that they are pretty costly and difficult, because they are technologically complicated.

Enlargement – Most managers are designed to think on a micro level, however, enterprise level systems require managers to take a much larger view of their own behavior and performance.

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Major Types of Information Systems in Organizations

  There are different interests, specialties and levels in organizations, one organization may need many different types of systems.

These can be categorized as: – – – – Operational level systems. Information systems that monitor the elementary activities and transactions of the organization Knowledge level systems. Information systems that support knowledge workers Management level systems. Information systems that support the monitoring, controlling, decision making, and administrative activities of middle managers Strategic level systems. These support the long range planning activities of senior management

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Six Major Types of Systems

 Transaction Processing Systems  Office Systems  Knowledge Work Systems  Decision Support Systems  Management Information Systems  Executive Support Systems

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Transaction Processing Systems

 Computerized systems that perform and record the daily routine transactions necessary to conduct the business; they serve the organization’s operational level  Examples – – Accounting information systems TCS, DHL, all have systems that are TPS

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Office Systems

 Information Systems that aid knowledge workers in the creation and integrations of new knowledge in the organization.

 Examples – Used by professionals such as engineers, doctors, accountants, MBAs etc – Word processors, desktop publishing, document imaging, communications, scheduling etc

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Decision Support Systems

  IS at the organization's management level that combine data and sophisticated analytical models or data analysis tools to support semi structured and unstructured decision making Examples – – May take data from both internal sources (TPS, MIS) but also from external sources (Stock prices or product prices of competitors) Shipping companies use voyage-estimating systems that take various shipping information into account and give advice on costs, freight rates for various types of cargo and port expenses etc

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Management Information Systems

  These are at the management level of an organization that serve the functions of planning, controlling and decision making by providing routine summary and exception reports Examples – Systems that provide managers with reports and online real-time access to company performance and historical records.

– – Mostly these are limited to internal events They provide information, they don’t analyze anything

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Executive Support Systems

  Information Systems at the organizations strategic level designed to address unstructured decision making through advanced graphics and communications Examples – – Incorporate data about external events such as tax laws or competitors, but also draw summarized information from internal MIS and DSS.

Filter, compress and track critical data, emphasizing the reduction of time and effort required to obtain information useful to executives.

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Executive Support Systems

(Continued)

– A good ESS would tell the board of directors:  What business should we be in?

 What are our competitors doing?

 What new acquisitions would protect us from routine business problems?

 Which units should we sell to raise cash for acquisitions?

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System From a Functional Perspective

Information Systems can also be classified by various organizational functions they serve as well as by organizational level (which we just did)     Sales and Marketing Systems Manufacturing and Production Systems Finance and Accounting Systems Human Resource Systems

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Sales and Marketing Systems

 Systems that help the firm identify customers for the firm’s products or services, develop products and services to meet customer’s needs, promote these products and services, sell the products and services and provide ongoing customer support.

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Manufacturing and Production Systems

 Systems that deal with the planning, development and production of goods and services, and with controlling the flow of production.

 Include inventory systems

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Finance and Accounting Systems

 Systems that keep track of the firms financial assets and fund flows.

 Include accounting systems, payroll systems, stock price management, treasury systems etc.

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Human Resource Systems

 Systems that maintain employee records, track employee skills, job performance, and training, and support planning for employee compensation and career development.

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Enterprise Applications

 Systems that can coordinate activities, decisions and knowledge across many different functions, levels and business units in a firm.

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Enterprise Applications

(Continued)

 Why are they necessary?

– Electronic Commerce, electronic business and intensifying global competition are forcing firms to focus on speed to market, improving customer service and more efficient execution.

– – – A firm needs to work like a well oiled machine.

Information needed to support decision making was often stuck in specialized systems.

Operating a ‘global’ firm was becoming almost impossible due to restricted information flow

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Enterprise Applications

(Continued)

 Enterprise applications include: – Enterprise systems – – – Supply chain management systems Customer relationship management systems Knowledge management systems  Each of these integrates a related set of functions and business processes to enhance the performance of organization as a whole

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Integrating Functions and Business Processes

 Business processes refer to the manner in which work is organized, coordinated, and focused to produce a valuable product or service.

 These are basically sets of activities needed to be done in order to run the business.

 These can become a source of competitive advantage if the company can innovate better or to execute better than its rivals

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(Continued)

 Some business functions support major functional areas of a business, whereas others are cross functional  The problem with cross functional business processes is that they need to group employees from different business functions and make them work on the same business process together

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Enterprise Systems

 Enterprise Systems can integrate the key business processes of an entire firm into a single software system that allows information to flow seamlessly throughout the organization. These systems focus primarily on internal processes but may include transactions with customers and vendors

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Supply chain management systems

 Supply chain management is the close linkage and coordination of activities involved in buying, making, and moving of a product.

 A supply chain is a network of organizations and business processes for procuring materials, transforming raw materials into intermediate and finished products, and distributing the finished products to customers

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Supply chain management systems

(Continued)

 SC Planning Systems enable the firm to generate demand forecasts for a product and to develop sourcing and manufacturing plans for that product.

 SC Execution Systems manage the flow of products through distribution centers and warehouses to ensure that products are delivered to the right locations in the most efficient manner.

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Customer relationship management systems

 Instead of treating customers as exploitable sources of income, businesses are now viewing them as long term assets to be nurtured through CRM  CRM focuses on managing all the ways a firm deals with its existing customers and potential new customers.

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Good CRM Systems

  Good CRM systems consolidate data from various sources and provide analytical tools for answering questions such as: – – What is the value of a particular customer over his or her lifetime?

Who are our most loyal customers? According to research, it costs six times more to sell to new customers than to sell to existing customers.

– – Who are our most profitable customers? Typically, 80 to 90 percent of profit comes from 10 to 20 percent of customers.

What do these profitable customers want to buy?

Firms that can answer these questions acquire new customers, provide better service and support,

customize their offerings more precisely to customer preferences

, and provide ongoing value to retain profitable customers

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Knowledge management systems

 The value of a firms products and services is based not only on its physical resources but also on intangible knowledge assets.

 Knowledge management systems collect all relevant knowledge and experience in the firm and make it available whenever and wherever it is needed to support business processes and management decisions.

The End

Thank You

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