Systems Integration

LEARNING OBJECTIVES
• Understand the impact of organizational
structure on information systems.
• Find out about the types of functional silos
in organizations.
• Learn about the evolution of information
systems technology generations and
architectures and its influence on the silo
environment.
• Know what systems integration is and why it
is important for organizations.
• Understand the role of enterprise resource
planning (ERP) systems in systems integration.
Opening Case: Air Cargo’s e-Enterprise System

Air Cargo, Inc. (ACI) is a logistics

management company providing air cargo ground
services to 17+ shareholder airlines and 53
associates, including a road feeder service
that connects airports and cities in the
United States and Europe, pickup and delivery
of regular air cargo shipments, small package
air cargo pickup, and delivery of
flight specific, time-definite shipments. A
major system crash in the late 1990s caused
ACI’s revenue to drop from about $150 million
to about $145 million; this served as a wake-
up alarm for management and started their
systems integration effort with their e-
Enterprise system.
Opening Case: Air Cargo’s e-Enterprise System

PROBLEMS WITH FUNCTIONAL SILOS

ACI runs various business applications for dispatching,
invoicing, freight audits, and reconciliation. Before
converting to ERP, ACI’s accounting staff had to
export and import text files to communicate across
accounting and business applications. This took time
and made even the most recent report slightly dated.
ACI initially considered simply upgrading its existing
accounting system to a new release; however, Jack
Downing, ACI’s IT director decided this approach was
not feasible because they had developed numerous
custom procedures in their accounting and other
business applications. “An upgrade wouldn’t have been
economical,” he explained, “because we had made so
many custom changes to the old software.”
Opening Case: Air Cargo’s e-Enterprise System

e-ENTERPRISE SYSTEM
ACI therefore implemented four e-Enterprise
applications—its financial series, distribution series,
customization series, and integration series—and
integrated them with a database management system,
microsoft SQL Server, at the backend. In addition, ACI
used the Microsoft transformation services. The
immediate effect of this implementation was the
integration of the accounting system with the line-of-
business applications, thereby eliminating manual data
reentry. This occurred because Microsoft SQL Server and
the Data Transformation Services (DTS) software
connected to ACI’s line-of-business applications and
delivered transaction data to the ACI e-Enterprise
system. DTS software is an extract, transform, and load
(ETL) tool which consolidates data from disparate
sources to single or multiple destinations.
Opening Case: Air Cargo’s e-Enterprise System

e-ENTERPRISE SYSTEM
These data were used to update the financial records.
Note that DTS runs in the background on a regular
basis without requiring manual intervention. As a
result, the accounting department no longer needs to
export and import line-of-business records manually
to generate its reports. The key advantage of the e-
Enterprise system is that it links contracts managed
in the line of-business applications to financial
records. “Once we agree on rates, terms, and hours of
operation with a contractor, they are entered into
our contracts administration system,” says Sally
Hartmann, ACI’s CFO. “In the past, we had to reenter
that information into the finan cial system manually
and hope that we remembered to adjust it if there
were changes in the contract.
Opening Case: Air Cargo’s e-Enterprise System

e-ENTERPRISE SYSTEM
But now, we automatically move this information
from the accounting system to the contract
management system. And we have the ability to
move that information in the other direction as
well, which we didn’t have in the past.” The
key benefit here is that if a contractor stops
paying its bills, the warehouse system will
immediately alert the dispatch people. Hartmann
adds: “We are also completing a direct link
from our human resources to our accounting
system. This will eliminate another area of
manual data entry and reduce the potential for
errors.”
Opening Case: Air Cargo’s e-Enterprise System

e-ENTERPRISE SYSTEM
Hartman ultimately sees three other advantages
accruing to ACI from this ERP conversion. These
are as follows:
• “Based on what I have seen so far, I am etimating
that we will reduce our adminis trative workload
by about 10 percent, primarily by reducing manual
data entry.”
• “With the ERP system, we will provide more
accurate, complete, and timely informa tion to
decision makers.”
• “We are moving heavily into e-commerce, and e-
Enterprise provides the building blocks
• that enable two-way information flow between e-
business and financial systems.”
Opening Case: Air Cargo’s e-Enterprise System

The ACI case highlights some of the

problems with heterogeneous systems and how
they can affect the various departments
within the company from Accounting to
Warehousing. The systems integration at ACI
has introduced some benefits and drawbacks.
The question remains whether their benefits
outweigh the drawbacks. What do you think?
FUNCTIONAL SILOS

vSilos are an airtight pit or tower for

preserving products.
FUNCTIONAL SILOS

vHorizontal Silos
vVertical Silos

Horizontal Silos
Management theorists Huber and McDaniel2 in
their research study found that the complexity
and turbulence in the organization’s
environment forces it to break complex tasks
into smaller manageable units.
FUNCTIONAL SILOS

Horizontal Silos
ØIn the early 1900s, a management philosopher
named Henry Fayol3 was the first person to
divide functionalized organization into five
basic areas: planning, organizing,
coordinating, commanding, and controlling.
ØLuther Gulick4 into the functional model of
POSDCORB (planning, organizing, staffing,
directing, coordinating, reporting, and
budgeting)
FUNCTIONAL SILOS

Horizontal Silos
FUNCTIONAL SILOS

vHorizontal Silos
vVertical Silos

Vertical Silos
In the late 1960s, Robert Anthony,6 an
organiza tional researcher, at Harvard
University, found that organizations also
divided responsibility in hierarchical layers
from strategic planning to management control
and operation control.
FUNCTIONAL SILOS
Vertical Silo
ØThis vertical categorization, even though not
discrete organizational functions, does involve a
distinctive set of activities. The functional
silos typically follow the scientific model for
business and usually have hierarchical or
multilayered reporting structures, formal
leadership, management positions, or both with
final authority on decision making.
ØIn this traditional functional (or silo)
organization, maintaining command and control is
usually critical for the overall functioning of
the business organization.
FUNCTIONAL SILOS

Vertical Silos
EVOLUTION OF IS IN ORGANIZATIONS

§ As business changes and expands, systems

need to change to keep pace.
§ The result is sometimes a wide variety
of information systems and computer
architecture configurations creating
heterogeneous or independent
nonintegrated systems.
§ Silo systems focus on individual tasks
or functions, or both, rather than on a
process and team.
EVOLUTION OF IS IN ORGANIZATIONS

§ Functional Silos in Organization

EVOLUTION OF IS IN ORGANIZATIONS

IS Architectures
• IS can be configured using a wide range of
system architectures depending on the
infor mation needs of the organization.

Today’s Web-based systems, using a

distributed architecture allows sharing
of applications and data resources
between the client and the server
computers. It combines features
from the centralized and decentralized
architectures.
EVOLUTION OF IS IN ORGANIZATIONS

IS Functionalization
• IS supports such major business functions
as manufacturing, marketing, accounting,
finance, and HR.
• Each functional area similarly has
different information needs and report
requirements.
EVOLUTION OF IS IN ORGANIZATIONS

IS Functionalization
EVOLUTION OF IS IN ORGANIZATIONS

IS Functionalization
EVOLUTION OF IS IN ORGANIZATIONS

IS pyramid consists of:

1.Office automation systems (OAS), which
support the activities of employees.
2. Transaction processing systems (TPS), which are
used to record detailed information in all the
major functional areas and to create new
information.
• TPS support the organization’s operations and
record every transaction, whether it is a sale, a
purchase, or a payment.
EVOLUTION OF IS IN ORGANIZATIONS

IS pyramid consists of:

1.Office automation systems (OAS), which
support the activities of employees.
2. Transaction processing systems (TPS), which are
used to record detailed information in all the
major functional areas and to create new
information.
• TPS support the organization’s operations and
record every transaction, whether it is a sale, a
purchase, or a payment.
• Functional areas: Sales, purchasing, and shipping
and receiving.
EVOLUTION OF IS IN ORGANIZATIONS

IS pyramid consists of:

3.Management information systems (MIS) are
reporting systems that categorize and
organize information as required by the
midlevel managers.
4.Decision support systems (DSS) are analytical
systems that use mathematical equations to
process data from TPS to assistant managers
in conducting what-if analyses, in
identifying trends, and in generally
assisting in making data-driven decisions.
EVOLUTION OF IS IN ORGANIZATIONS

IS pyramid consists of:

5.Executive support systems (ESS) provide a
visual dashboard of strategic information to
top-level management in real time (e.g., a
snapshot of the organizational performance).
These systems are typically customized for
each functional area of the organization.
 QUESTIONS?
•Systems Integration:
Logical Vs. Physical SI
•ERP and Systems Integration
•Implications for Management