BUS 516

Computer Information Systems

Enterprise Applications
Different Perspectives to Categorize
Organizational Information Systems

Hierarchical Perspective

Functional Perspective

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 Hierarchical Perspective
The hierarchical perspective recognizes that decision making and
activities in organizations occur at different levels. At each level, the
individuals involved have different responsibilities, make different
types of decisions, and carry out different types of activities.

Operational Level

Managerial Level

Executive Level

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Hierarchical Perspective

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Hierarchical Systems

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 Evolution of Hierarchical
Perspective
Hierarchical perspective has been very useful over the years.
But that scenario is changing because of the pressure to
flatten the organization design.

It is also becoming hard to isolate information systems that

clearly supports only one hierarchical level. Software programs
that support many modern TPSs provide extensive reporting
capabilities, increasingly giving these systems traits and
functionalities that characterize DSSs.

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 Functional Perspective

During the post WWII era, the organizations started to grow

large. As a result, there had been a pressure to decentralize
operations to be able to manage the bigger organizations
resulting in different functional departments or even
separate business units.

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Functional Perspective

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Functional Systems

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Limitations of Hierarchical and
Functional Perspectives
Lack of integration among separate systems and introduction
of considerable redundancy

This redundancy often created inefficiency, with duplication of

similar efforts in separate business units, and substandard
service, with customers often being referred to different
representatives of the same organization for support. Example:
Johnson & Johnson

From a technology viewpoint, functional perspective created

silo applications. These application would serve a functional
(vertical) need very well but made it difficult to communicate
across different functional areas.

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Limitations of Hierarchical and
Functional Perspectives

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 Process Perspective
Business Process Reengineering

Business process reengineering (BPR) emerged in the early

1990s as a way to break down organizational silos in
recognition of the fact that business processes are inherently
cross functional

A business process in defined as the series of steps that a firm

performs in order to complete an economic activity.

Most successful Reengineering Effort: Progressive Insurance

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 Process Perspective

Proponents of BPR suggest that it is this process focus that enables

the firm to eliminate the redundancy and inefficiency associated with
the multiple handoffs of tasks from one area to another.

The firm should therefore recognize its work in a series of processes

designed around the intended outcome. In charge of each process is
a process champion, who oversees things from start to finish.

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 Process Perspective
Such redesign should be driven by a process focus defined as a way
of organizing work that centers on the steps necessary to create
value for customers (e.g. speed of claim processing without regard for
what functional areas would traditionally be responsible for the
process steps.

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 Process Perspective

Dark sides:
Significant resistance from employees

Operations and processes are not very exciting and executives may
not rally behind those because of perceived low glamour

Bad reputation because of complexity and low success rate after

initial hype

BPR is very expensive because it often requires firms to retire its

legacy systems and develop a costly integrated technology structure.
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 The integration Imperative
The emergence of the process perspective and the promise it
held for streamlining business operations and thereby creating
substantial efficiencies and effectiveness improvements, was
at the heart of the impetus behind integration efforts during the
previous two decades.

It was during that time that we saw the popularization of the

term enterprise systems and the proliferation of large-scale
integrated applications designed to answer the call for
business process integration.

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 What is Integration?
Integration is the process that an organization, or a number of
organizations goes through in order to unify, or join together,
some of its tangible or intangible assets.

The term assets here represents physical possessions, such

as computer networks and applications, or intangible
resources, such as data, knowledge, or business processes.

The overarching goal of integration is to organize, streamline,

and simplify a process or an application. Think about a car
rental and speeding situation leading to an inter-organizational
integration.

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 Types of Integration
Business Integration

Business integration refers to the unification or the creation of

tight linkages among the diverse, but connected, business
activities carried out by individuals, groups, and departments
within an organization.

1. To present one face to the customers . Physical and online

bookstore and return policy, J&J
2. To provide solutions, not an array of products or services.
Complete travel solutions, not just hotels
3. To achieve global inventory visibility. Dell

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 Types of Integration
System Integration

Without information systems and technology infrastructure to support

them, business integration strategies cannot be feasibly implemented.

The term system integration refers to the unification or the tight linkage
of IT enabled information systems and databases. The primary focus of
systems integration is the technological component of the information
systems underpinning business integration strategies.

The outcome of system integration is a collection of compatible systems

that regularly exchange information or the development of integrated
applications that replace the former discrete ones.

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 Types of Integration
System Integration

When the systems integration effort seeks to enable

communication among separate software programs, we speak of
application integration.

When the systems integration effort seeks to enable the merging

of data repositories and databases, we speak of data integration.

Internal integration pertains to the unification or linkage of intra-

organizational systems, while external integration pertains to
inter-organizational ones.

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 Enterprise Systems
An enterprise system is a modular, integrated software
application that spans all organizational functions and relies on
one database at the core.

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 Principal Characteristics of
Enterprise Systems

Characteristics Description

Modularity Enterprise systems are modular in nature, thus enabling

the organization that purchases one to decide which
functionalities to enable and which ones not to use. For
example, PeopleSoft (now owned by Oracle) has
historically been known for the strength of its human
resource module, while SAP’s ERP is known for the
strength of its Manufacturing module.

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Sample ES Modules and
Functionalities

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 Principal Characteristics of
Enterprise Systems

Characteristics Description

Application and With application integration, an event that occurs in one of

data integration the modules of the application automatically triggers an
event in one or more of the other separate modules.
ESs rely on one logical database at the core – that is while
there may be multiple physical data stores and locations
where information resides, they will be treated as one, thus
ensuring data integration.

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 Principal Characteristics of
Enterprise Systems
Characteristics Description

Configurable Enterprise systems are parameterized. ESs come with

configuration tables that enable the adopting firm to choose
among a predefined set of options during the
implementation of the application. For example, one firm
may prefer LIFO for inventory management whereas
another firm that purchased the same ES may use the FIFO
method.

ES also allow the firm to extent the capabilities of the

standard application by creating ‘bolt-on modules’ that are
typically written in a programming language that is native to
the ES. These capabilities to have these add-ons are quite
common occurrences.
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 Enterprise Software
Enterprise software is built around thousands of predefined business
processes that reflect best practices

Companies implementing this software would have to first select the

functions of the system they wished to use and then map their business
processes to the predefined business processes in the software.

If the enterprise software does not support the way the organization does
business, companies can rewrite some of the software to support the way
their business processes work.

However, enterprise software is unusually complex, and extensive

customization may degrade system performance, compromising the
information and process integration that are the main benefits of the
system. If companies want to reap the maximum benefits from enterprise
software, they must change the way they work to conform to the business
processes defined by the software.
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Business Processes Supported by
Enterprise Software

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 Advantages of Enterprise Systems

Advantages Description

Efficiency By reducing the direct costs of entering the same data in

multiple applications, by reducing the indirect costs by
streamlining business processes and operations.
Responsiveness Immediate response to customers and stakeholders.

Knowledge Acquisition of best practices in the industry because vendors

infusion code those in the ES
Adaptability ES offers a certain degree of customizability though not at
the level of tailor made applications.

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 Limitations of Enterprise Systems

Disadvantages Description

Standardization Achieving a balance between standardization and flexibility

and flexibility required by a firm is often difficult to achieve. The ‘vanilla’
enterprise systems implementation helps when updating the
software and integrating the data.
Best practice? Is the best practice embedded in the ES always best?

Strategic clash What to do with a good practice in the organization that may
give the firm a competitive advantage but which is not coded
in the software? Like shuffling the delivery queue to
accommodate the rush order of the firm’s best customer..
High costs and Costly, resistance from employees
risks

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 Supply Chain Management
Systems
Supply chain management (SCM) is the set of logistical and
financial processes associated with the planning, executing, and
monitoring of supply chain operations.

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 Problems in Managing Supply
Chains – Excess Safety Stock
In a supply chain, uncertainties arise because many events cannot be
foreseen—uncertain product demand, late shipments from suppliers,
defective parts or raw materials, or production process breakdowns.

To satisfy customers, manufacturers often deal with such uncertainties

and unforeseen events by keeping more material or products in inventory
than what they think they may actually need.

The safety stock acts as a buffer for the lack of flexibility in the supply
chain.

Although excess inventory is expensive, low fill rates are also costly
because business may be lost from canceled orders.

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 Problems in Managing Supply
Chains – Bullwhip Effect
One recurring problem in supply chain management is the bullwhip effect, in
which information about the demand for a product gets distorted as it
passes from one entity to the next across the supply chain.

A slight rise in demand for an item might cause different members in the
supply chain—distributors, manufacturers, suppliers, secondary suppliers
(suppliers’ suppliers), and tertiary suppliers (suppliers’ suppliers’ suppliers)—
to stockpile inventory so each

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Problems in Managing Supply
Chains – Bullwhip Effect

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 Supply Chain Management
Software
Supply chain software is classified as either software to help
businesses plan their supply chains (supply chain planning) or
software to help them execute the supply chain steps (supply chain
execution).

Supply chain planning Systems enable the firm to model its existing
supply chain, generate demand forecasts for products, and develop
optimal sourcing and manufacturing plans.

Such systems help companies make better decisions such as

determining how much of a specific product to manufacture in a given
time period; establishing inventory levels for raw materials,
intermediate products, and finished goods; determining where to store
finished goods; and identifying the transportation mode to use for
product delivery.

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 Supply Chain Management
Software
Supply chain 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.

They track the physical status of goods, the management of

materials, warehouse and transportation operations, and
financial information involving all parties

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 Demand-Driven Supply Chains:
From Push to Pull
Manufacturing and Efficient Customer Response
Earlier supply chain management systems were driven by a push-based
model (also known as build-to-stock). In a push-based model, production
master schedules are based on forecasts or best guesses of demand for
products, and products are “pushed” to customers.

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 Demand-Driven Supply Chains:
From Push to Pull
Manufacturing and Efficient Customer Response
In
In aa pull-based
pull-based model,
model, also
also known
known asas aa demand-driven
demand-driven or
or build-to-order
build-to-order
model,
model, actual
actual customer
customer orders
orders or
or purchases
purchases trigger
trigger events
events in
in the
the supply
supply chain.
chain.

With new flows of information made possible by Web-based tools, supply chain
management more easily follows a pull-based model.

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Emerging Internet – Driven Supply
Chain

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Emerging Internet – Driven Supply
Chain
The Internet and Internet technology make it possible to move from
sequential supply chains, where information and materials flow sequentially
from company to company, to concurrent supply chains, where information
flows in many directions simultaneously among members of a supply chain
network.

Complex supply networks of manufacturers, logistics suppliers, outsourced

manufacturers, retailers, and distributors are able to adjust immediately to
changes in schedules or orders.

Ultimately, the Internet could create a “ digital logistics nervous system”

throughout the supply chain

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Business Value of Supply Chain
By implementing a networked and integrated supply chain management
system, companies match supply to demand, reduce inventory levels,
improve delivery service, speed product time to market, and use assets
more effectively.

Total supply chain costs represent the majority of operating expenses for
many businesses and in some industries approach 75 percent of the total
operating budget. Reducing supply chain costs has a major impact on
firm profitability.

In addition to reducing costs, supply chain management systems help

increase sales. If a product is not available when a customer wants it,
customers often try to purchase it from someone else. More precise
control of the supply chain enhances the firm’s ability to have the right
product available for customer purchases at the right time.

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 Customer Relationship
Management Systems
Customer relationship management (CRM) is a strategic orientation that
calls for iterative processes designed to turn customer data into
customer relationships through active use of, and learning from, the
information collected.

CRM is a strategic initiative, not a technology. IT is an essential enabler

if all but the smallest CRM initiatives,

CRM relies on customer personal and transactional data and is

designed to help the firm learn about customers.

The ultimate objective of a CRM initiative is to help the firm use

customer data to make inferences about customer behaviors, needs,
and value to the firm so as to increase its profitability.

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 Aspects of CRM
Operational CRM

A CRM strategy needs to encompass front-office functionalities i.e.

operational CRM – which determine how the firm interacts with
customers to create and maintain the relationship through multiple
customer touchpoints such as firm’s website, stores, call center, etc.

Modern firms are increasingly expected to be able to provide

consistency across these proliferating touchpoints and
communication channels.

A priority for today’s organizations is the integration of the

transactional databases that have historically supported the different
channels into one operational data store.

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 Aspects of CRM
Analytical CRM

A CRM strategy requires that the organization be able to actively manage

and strengthen its relationships with profitable customers while achieving
efficiencies with (and sometimes firing!) less profitable ones.

This level of precision and granularity of interactions with customers

requires substantial data analysis – analytical CRM.

It should be clear at this point why it is nonsensical to be talking about a

CRM system as a technology product that, once installed allegedly enables
the firm to maintain relationships with customers. CRM is a strategic
initiative that will differ dramatically between companies.

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 Aspects of CRM
Analytical CRM

Another important output of analytical CRM is the customer’s lifetime

value to the firm.

Customer lifetime value (CLTV)is based on the relationship between

the revenue produced by a specific customer, the expenses incurred
in acquiring and servicing that customer, and the expected life of the
relationship between the customer and the company.

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Aspects of CRM

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 Customer Relationship
Management Software
Commercial CRM software packages range from niche tools that perform
limited functions, such as personalizing Web sites for specific customers, to
large-scale enterprise applications that capture myriad interactions with
customers, analyze them with sophisticated reporting tools, and link to
other major enterprise applications, such as supply chain management and
enterprise systems.

The more comprehensive CRM packages contain modules for partner

relationship management (PRM) and employee relationship management
(ERM).

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 Customer Relationship
Management Software
PRM uses many of the same data, tools, and systems as customer
relationship management to enhance collaboration between a company and
its selling partners.

ERM software deals with employee issues that are closely related to CRM,
such as setting objectives, employee performance management,
performance-based compensation, and employee training.

Major CRM application software vendors include Oracle, SAP,

Salesforce.com, and Microsoft Dynamics CRM.

Customer relationship management systems typically provide software and

online tools for sales, customer service, and marketing.

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 CRM Capabilities
Capabilities Description

Sales Force - Sales force automation modules help sales staff increase their productivity
Automation by focusing sales efforts on the most profitable customers.

- Provide sales prospect and contact information, product information,

product configuration capabilities, and sales quote generation capabilities.

- Can assemble information about a particular customer’s past purchases

to help the salesperson make personalized recommendations.

- Enables sales, marketing, and delivery departments to easily share

customer and prospect information.

- It increases each salesperson’s efficiency in reducing the cost per sale as

well as the cost of acquiring new customers and retaining old ones.

- CRM software also has capabilities for sales forecasting, territory

management, and team selling.

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 CRM Capabilities
Capabilities Description

Customer - Customer service modules in CRM systems provide

Service information and tools to increase the efficiency of call
centers, help desks, and customer support staff. They have
capabilities for assigning and managing customer service
requests.

- One such capability is an appointment or advice telephone

line

- CRM systems may also include Web-based self-service

capabilities

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 CRM Capabilities
Capabilities Description

Marketing - CRM systems support direct-marketing campaigns by providing

capabilities for capturing prospect and customer data, for providing
product and service information, for qualifying leads for targeted
marketing, and for scheduling and tracking direct-marketing mailings or e-
mail.

- Marketing modules also include tools for analyzing marketing and

customer data, identifying profitable and unprofitable customers,
designing products and services to satisfy specific customer needs and
interests, and identifying opportunities for cross-selling.

-Cross-selling is the marketing of complementary products to customers.

(For example, in financial services, a customer with a checking account
might be sold a money market account or a home improvement loan.)

- CRM tools also help firms manage and execute marketing campaigns at
all stages, from planning to determining the rate of success for each
campaign.

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Customer Loyalty Management
Process Map

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Business Value of CRM Systems
Increased customer satisfaction, reduced direct-marketing costs, more
effective marketing, and lower costs for customer acquisition and
retention.

Information from CRM systems increases sales revenue by identifying

the most profitable customers and segments for focused marketing and
cross-selling.

Customer churn is reduced as sales, service, and marketing better

respond to customer needs. The churn rate measures the number of
customers who stop using or purchasing products or services from a
company. It is an important indicator of the growth or decline of a firm’s
customer base.

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Enterprise Applications: Challenges
Enterprise applications involve complex pieces of software that are
very expensive to purchase and implement.

Enterprise applications require not only deep-seated technological

changes but also fundamental changes in the way the business
operates. Companies must make sweeping changes to their business
processes to work with the software.

Employees must accept new job functions and responsibilities. They

must learn how to perform a new set of work activities and understand
how the information they enter into the system can affect other parts of
the company. This requires new organizational learning.

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Enterprise Applications: Challenges
Supply chain management systems require multiple organizations to
share information and business processes. Each participant in the system
may have to change some of its processes and the way it uses information
to create a system that best serves the supply chain as a whole.

Some firms experienced enormous operating problems and losses when

they first implemented enterprise applications because they didn’t
understand how much organizational change was required.

Enterprise applications also introduce “switching costs.” Once you adopt

an enterprise application from a single vendor, such as SAP, Oracle, or
others, it is very costly to switch vendors, and your firm becomes
dependent on the vendor to upgrade its product and maintain your
installation.

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 Next-Generation Enterprise
Applications
Stand-alone enterprise systems, customer relationship management
systems, and supply chain management systems are becoming a
thing of the past.

The major enterprise software vendors have created what they call
enterprise solutions, enterprise suites, or e-business suites to make
their customer relationship management, supply chain management,
and enterprise systems work closely with each other, and link to
systems of customers and suppliers.

SAP’s next-generation enterprise applications incorporate (service

oriented structure (SOA) standards and are able to link SAP’s own
applications and Web services developed by independent software
vendors.

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 Next-Generation Enterprise
Applications
Next-generation enterprise applications also include open source and
on-demand solutions, as well as more functionality available on mobile
platforms.

Open source products such as Compiere, Apache Open for Business

(OFBiz), and Openbravo lack the functionality and support provided by
commercial enterprise application software, but are attractive to
companies such as small manufacturers because there are no software
licensing charges and fees are based on usage

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Next-Generation Enterprise Applications:
Social CRM
CRM software vendors are enhancing their products to take advantage of
social networking technologies. These social enhancements help firms
identify new ideas more rapidly, improve team productivity, and deepen
interactions with customers.

For example, Salesforce Idea Exchange enables subscribers to harness

the “wisdom of crowds” by allowing their customers to submit and discuss
new ideas.

Dell Computer deployed this technology to encourage its customers to

suggest and vote on new concepts and feature changes in Dell products.

Social CRM tools enable a business to connect customer conversations

and relationships from social networking sites to CRM processes. The
leading CRM vendors now offer such tools to link data from social
networks into their CRM software.

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 Next-Generation Enterprise Applications:
Business Intelligence Tools

Enterprise application vendors have added business intelligence features

to help managers obtain more meaningful information from the massive
amounts of data generated by these systems.

Included are tools for flexible reporting, ad hoc analysis, interactive

dashboards, what-if scenario analysis, and data visualization.

Rather than requiring users to leave an application and launch separate

reporting and analytics tools, the vendors are starting to embed analytics
within the context of the application itself.

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