Enterprise/Information

Systems: Strategic roles of

Information Systems

Chapter Three
Learning Objectives

• Explore relevant business information

systems
• Understand how these systems help to
achieve operational and strategic
objectives
• Learn the need for more integrated
corporate level systems
 Information systems (use of IT) in
organizations

Management level based systems

Transaction Processing System (TPS)
Management Support Systems/ Management Information
Systems (MIS)
Decisions and Executive Support Systems (DSS/ESS)
Group Support Systems

Function Based Systems

Human resources system
Financial system
Etc…
Transaction Processing System (TPS)
A system that supports the routine, day-to-day
activities that occur in the normal course of business
and captures data
TPS
Capture and process data that describes
fundamental business transactions
Update databases
Produce a variety of reports
Transaction processing cycle: the process of data
collection, data editing, data correction, data
manipulation, data storage, and document
production
To be considered a transaction processing system
the computer system must pass the ACID test
((atomicity, consistency, isolation, durability) .
• It is a set of properties that guarantee
database transactions are processed
reliably.

Atomicity requires that database modifications

must follow an "all or nothing" rule. Each transaction
is said to be atomic. If one part of the transaction
fails, the entire transaction fails and the database
state is left unchanged
The consistency property ensures that any
transaction will bring the database from one valid
state to another.
 Any data written to the database must be
valid according to all defined rules, including
but not limited to constraints, cascades,
triggers, and any combination thereof
Isolation refers to the requirement that no
transaction should be able to interfere with
another transaction.
 No transactions that affect the same rows
can run concurrently, since their sequence,
and hence the outcome, would be
unpredictable.
Durability means that once a transaction has
been committed, it will remain so, even in the event
of power loss, crashes, or errors.
 In a relational database, for instance, once a
group of SQL statements execute, the results
need to be stored permanently.
 If the database crashes immediately
thereafter, it should be possible to restore the
database to the state after the last transaction
committed
 Management Support Systems/MIS

Management Information Systems in Perspective

A management information system (MIS) provides managers with
information that supports effective decision making and provides
feedback on daily operations

The use of MISs spans all levels of management

Inputs to a Management Information System

Internal data sources
TPSs and ERP systems and related databases; data
warehouses and data marts; specific functional areas
throughout the firm
External data sources
Customers, suppliers, competitors, and stockholders, whose data
is not already captured by the TPS; the Internet; extranets
 Outputs of a Management Information
System

Scheduled report: produced periodically, or on a

schedule
Key-indicator report: summary of the previous
day’s critical activities
Demand report: developed to give certain
information at someone’s request
Exception report: automatically produced when a
situation is unusual or requires management action
Drill-down report: provides increasingly detailed
data about a situation
Decisions and Executive support systems
A DSS is an organized collection of people,
procedures, software, databases, and devices used
to support problem-specific decision making and
problem solving
The focus of a DSS is on decision-making
effectiveness when faced with unstructured or semi
structured business problems
Capabilities of a Decision Support System
• Support all problem-solving phases
• Support different decision frequencies
• Support different problem structures
• Support various decision-making levels
 Components of a Decision Support
System

Model base: provides decision makers access to

a variety of models and assists them in decision
making
Database
External database access
Access to the Internet and corporate intranet,
networks, and other computer systems
Dialogue manager: allows decision makers to
easily access and manipulate the DSS and to use
common business terms and phrases
 Executive Support Systems
Specialized DSS that includes all hardware, software, data,
procedures, and people used to assist senior-level executives
within the organization
Executive Support Systems in Perspective
Tailored to individual executives
Easy to use
Drill-down capable
Support the need for external data
Can help when uncertainty is high
Future-oriented
Linked to value-added processes
Capabilities of Executive
Support Systems

Support for defining an overall vision

Support for strategic planning
Support for strategic organizing and staffing
Support for strategic control
Support for crisis management
 Function based Systems

Major types of systems in the organization are

expected to support different interests, specialties,
and levels in an organization. No single system can
provide all the information an organization needs.

Strategic

Middle Management
Functional
Areas
Operational Level

MKG FIN &Ac Comm. HRM R&D

• Operational level: systems track elementary
activities and transactions such as sales, receipts,
cash deposits, payroll flow of materials etc

• Management level systems expected to perform

monitoring, controlling, decision making, and
administrative activities.
"Are things working well?“

• Strategic level systems designed to tackle and

address strategic issues and long term trends.
Financial Information Systems
• Financial IS: provides financial information to all
financial managers within an organization
Profit/loss and cost systems
• Auditing, Uses and management of funds
Manufacturing Information
Systems
The manufacturing MIS subsystems and outputs
monitor and control the flow of materials,
products, and services through the organization
Design and engineering
Production scheduling
Inventory control
Process control
Quality control
Marketing Information Systems

Marketing IS: supports

managerial activities in
product development,
distribution, pricing
decisions, promotional
effectiveness, and sales
forecasting
Marketing research
Product development
Promotion and
advertising
Product pricing
Human Resource Information
Systems
Human resource IS: concerned with
activities related to employees and
potential employees of an organization
Needs and planning assessments
Recruiting
Training and skills development
Scheduling and assignment
Employee benefits
Outplacement
Finally - The Enterprise Resource
Planning Systems
ERP integrates key aspects of organizational
information systems
Implementation of an enterprise resource
planning (ERP) system enables a company to
achieve many benefits by creating a highly
integrated set of systems.
Enterprise resource planning (ERP) systems are
used in large, midsized, and small companies
Real-time monitoring of business functions
Timely analysis of key issues, such as quality,
availability, customer satisfaction, performance,
and profitability
 The Changing Roles and Strategic
Information Systems in an organization
 Information systems and organizations influence one
another
Management must understand:
Information systems can markedly alter life in the
organization
New Information system cannot be designed without
understanding the organization
What system will be built?, what they do?, how
they will be implemented?

Valid response for these questions is important

The figure below portrays the level of interaction
and the degree of influence.

Mediating Factors
Environment
Culture Information
Organization Structure Technology
Standard operating
procedure
Business process policies
Management directions
The introduction of IT based information
system in the organization is supposed to bring
about the following changes:
Change in the structure: the shape of organizations tend to be
flatten as information systems implemented efficiently.
Because professional workers are supposed to be:
Self managing and Decision making become more decentralized
Information technology encourages virtual taskforce and virtual
(networked) organization
Avoid geographic barriers: Businesses start operating as
virtual organizations.
Virtual organizations use networks to link people and to distribute
products and services without being limited to traditional organizational
boundaries or physical locations.

Lower transaction costs and enhancing accessibility. The

Internet increases accessibility, storage, and distribution of
information
Information systems help managers to make decisions
through provisions of timely information
 Strategic Information Systems
Focus on building competitive advantages.
Features of strategic information systems
Strategic information systems are expected to have the
following key features:
Computer systems at any level of the organization that
change goals, operations, products, services, or
environmental relationship to help the organization gain
a competitive advantage is regarded as strategic
Strategic information system profoundly alters the way
a firm conduct its business or the very business itself.
For example, a business firm called Cardinal Health
transformed its core business from distributing
pharmaceuticals to hosting information system for
hospital pharmacies.
2-32
Where Is The IT Organization Headed?

• The Escalating Benefits of Information Technology

– Kenneth Primozic, Edward Primozic, and Joe Leben
introduce the notion of “Waves of Innovation” which
they define as how IT is used by industries and
enterprises.
• There are five Waves of Innovation (Figure 2-1):
5. Reaching the consumer
4. Enhancing executive decision making
3. Enhancing products and services
……………………………………………………………………………………
2. Leveraging investments
1. Reducing cost
2-33
Escalating Benefits of IT
2-34 Waves of Innovation
- Below the line (Saving $)

Wave 1: Reducing costs

Began in the ’60s
Focused on increasing the productivity of individuals
and business areas by e.g. automating manual
processes
Wave 2: Leveraging Investments
Began in the ’70s
Concentrated on more effective use of corporate
assets
Systems justified on ROI, cash flow etc.
2-35 Waves of Innovation
- Above the line (Making $)

Wave 3: Enhancing Products & Services

Began in the ’80s
Attention shifted to using IT to produce revenue by
gaining strategic advantage or creating entirely new
businesses
Wave 4: Enhancing Executive Decision Making
Began in the late ’80s
Changed fundamental structure of organizations
Created real-time business management systems
Waves 1 & 2 = could be done at ‘any time’ (and are still
being done!)
Waves 3 & 4 = must be implemented once an industry
leader has set a precedent (pattern or Model)
Companies that don’t do = cease to be competitive
2-36 Waves of Innovation
- Above the line (Making $) cont.

Wave 5: Reaching the Consumer

Began in the ’90s
Uses IT to communicate directly with consumers
leading to new:
Marketing, Distribution, and Service strategies
Changes the rules of competition
Management must be involved in guiding IT use once you
‘cross the line’
Management must steer the company in the new
(evolved) business environment
Not the ‘techies’
2-37 The SABRE system (American Airlines)
Case example: ‘Waves of Innovation’

• Waves 1 and 2
– SABRE built a system to reduce costs of
making airline seat reservations
• Wave 3
– System expanded so it could be used directly
by travel agents
• Wave 4
– System expanded to include hotels and rental
cars through alliances with these suppliers
2-38
The SABRE system (American Airlines)
Case example: ‘Waves of Innovation’ cont.

• Wave 5
American extended their reach to the consumer:
– Introduced EAASY SABRE that enabled consumers
direct access from their PCs
– Advantage – possibility to easily implement frequent
flyer program
– Enhanced their Wave 5 connections to consumers via
the Web (and mobiles)
– Targeted its most profitable customers = Frequent
Flyers
• Note: this example also illustrates that as the benefits of
IT increase, the importance of executive guidance also
increases
2-39
Exercise

Form a group of 3-4

Illustrate “ five waves of innovation” based on
hypothetical scenario of use of IT in educational
institutions like ILI in relation to students management.
Report to the class
2-40

Sample solution
Wave 1 and 2 ( reducing costs and effective asset management)
Setting up a student record system to keep record of
students.
Wave 3 (enhancing services and products)
Letting students to view their grade and other information
from the registrar system site with in the Uni. network
Wave 4 (enhancing executive decision making)
Integrating all services like library, dormitory etc with
student record system
Wave 5 (reaching customers)
Creating a possibility for students and parents to access the
students record system from any where using mobile devises.
Discussion Questions

How do you explain the changing role of IS/IT

in organizations?
What type of information systems are common
in less matured organizations in terms of use
of IT.
List at least five different types of function
based information systems