SI-507 ENTERPRISE SYSTEM System Integration

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OPENING CASE: AIR CARGO'S E-ENTERPRISE SYSTEM
Air Cargo, Inc. (ACI) is a logistics management eENTERPRISE SYSTEM
company providing air-cargo ground services to ACI therefore implemented four eEnterprise applications:
17+ shareholder airlines and 53 associates,
including road feeder service that connects its financial series, distribution series, customization and
airports and cities in the United States and integration series, and the Microsoft SQL Server.
Europe, pick-up and delivery of regular air cargo
shipments, small package air cargo pickup, and BENEFITS
delivery of flight-specific, time-definite shipments. The key advantage of the eEnterprise system is that it
A major system crash in the late 1990s caused links contracts managed i n the line-of-business
ACI's revenue to drop from about $ 150 million to applications to financial records.
about $145 million when they started their
systems integration effort with their eEnterprise
system.
PROBLEMS WITH FUNCTIONAL SILOS
 Before converting to ERP, ACl ‘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.

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 FUNCTIONAL SILOS
HORIZONTAL SILOS
In the early 1900s, a management
philosopher named Henry Fayol was the
first person to divide functionalized
organization into five basic areas:
planning, organizing, coordinating,
commanding, and controlling.
(1930s by Luther Gulick ) POSDCORB
(Planning, Organizing, Staffing, Directing, Functional Model of Organization (POSDCORB)
Coordinating, Reporting, and Budgeting).
The POSDCORB categorization became
very popular and led to a set of formal
organization functions such as control, Adapted from: Barnard, c., The Functions of the
management, supervision, and Executive, Cambridge: Harvard University Press, 1938
administration starting in late 1930s.

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VERTICAL SILOS
Divided responsibility in hierarchical layers
from strategic planning to management
control and operation control (In the late
1960s, Robert Anthony, an organizational
researcher, at Harvard University).
 For example, most organizations have their top-
level management like CEOs and presidents to
plan the long-term strategy of organizations,
whereas midlevel management (e.g., vice
presidents or general managers) focuses on
tactical issues and on the execution of
organizational policy to ensure that the company Anthony, R . , Planning and Control System: A
is accomplishing its strategic objectives. Framework for Analysis, Boston: Harvard University
Graduate School of Business Press, 1965.
 The lower-level management (e.g., supervisors)
task is to focus on the day-to-day operations of
the company

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 BUSINESS PROCESS AND SILOS
The functional silo problem was felt by
many organizations in the late 1980s and
early 1990s, which gave birth to business
process reengineering (BPR).
 The business process provides an alternative view
of grouping people and resources focusing on an
organization’s activity, even if it means cutting
across the traditional functional areas (e.g.,order
processing), which involves interactions between • Drucker Peter, Managing in a time of great change, New York:
sales, warehousing, and accounting functional areas Truman Talley Books/Dutton, 1995.
as the work progresses from initial sales order to • Hammer, M. & Champy, 1. Reengineering the Corporation,
collection of payment from the client. New York: Harper Business Press, 1993
 The cross-functional business process can involve
people and resources from various functional
departments working together, sharing information,
if necessary, at any level of the organization.

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EVOLUTION OF IS IN ORGANIZATIONS
The role of information systems has been
and always will be one of supporting
business activities and enhancing the
workers efficiency.
As business changes and expands, systems
need to change to keep pace.
Sometimes a wide variety of information
systems and computer architecture
configurations creating heterogeneous or
independent nonintegrated systems
(bottlenecks and interfere with
productivity).
 These systems lack control and coordination.
 They become the breeding ground for inconsistent,
inaccurate, and incompatible data and ultimately
lead to mismanagement

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FUNCTIONAL SILOS IN ORGANIZATION

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INFORMATION SYSTEM GENERATIONS

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INFORMATION SYSTEM ARCHITECTURES

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IS FUNCTIONALIZATION

IS as categorized by Functional and Hierarchical Models

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SYSTEMS INTEGRATION
LOGICAL VERSUS PHYSICAL SI
 At the logical or human level, systems
integration means developing information
systems that allow organizations to share data
with all of its stakeholders based on their need
and authorization.
 At the physical or technical level, systems
integration means providing seamless
connectivity between heterogeneous systems.

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STEPS IN INTEGRATING SYSTEMS
✓Step 1 Resource categorization
✓Step 2 Compliance and standards
✓Step 3 Legacy systems support
✓Step 4 Middleware tools
✓Step 5 Authentication and authorization policies
✓Step 6 Centralized IT services and help desk
support
✓Step 7 Back-up, recovery, and security policies
✓Step 8 Hardware and software standardization
policies

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BENEFITS OF SYSTEM INTEGRATION
Increased Revenue and Growth
 Reduction in inventory and personnel costs due to integrated
systems.

Leveling the Competitive Environment

 Systems integration can make a small company behave like a big
player because, with the help of integrated business-to-business
software, many of them can now compete with big companies to
get orders from giant retailers like Wal-Mart, Target, and others
because they can provide the same level of service with enterprise
systems

Enhanced Information Visibility

 The increased availability of information enables managers and
employees to make informed decisions in a timely manner

Increased Standardization
 A side benefit of integration is that it forces organizations to
standardize on their hardware, software, and the organization's IT
policy.

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BENEFITS OF SYSTEM INTEGRATION -2-

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 ERP AND SYSTEM INTEGRATION
ERP’S ROLE IN LOGICAL INTEGRATION
 At the logical level, ERP systems require organizations to
focus on business process rather than on functions.
 ERP systems come with built-in processes for a wide variety
of common business functions.
ERP’S ROLE IN PHYSICAL INTEGRATION
 ERP systems have therefore become a platform application
for organizations to achieve the flexibility and fluidity to
survive in the globally competitive world.
 A good ERP implementation improves operational efficiency
with better business processes focusing on organizational
goals rather than on individual departmental goals.
 Efficiency is also improved with a paperless flow within the
organization and electronic data interchange (EDI) or
business-to-business (B2B) commerce environment with its
external partners.

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 IMPLICATION FOR MANAGEMENT
Silos do not work.
 Most organizations lose out in the long-term when
information is not shared in real time across the functional
boundaries within the company.
 In today's globally competitive environment, organizations
have to compete both on lower cost and by providing better
customer service, through alliances and partnerships with
competition, and from taking other agile strategies to
survive.
• Systems integration raises many new
ethical issues.
• illegal access of information.
• Security software and hardware (like
firewalls) to prevent, track, and monitor
information access and usage

System integration has many hidden benefits.

 Management needs to understand the tangible and the
intangible benefits of integrated systems.
 There is considerable challenge and cost in integrating
heterogeneous systems, including replacing old hardware
and software with newer systems, working with IT consultants
in developing middleware to facilitate seamless integration,
or bottlenecks in data integration.

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ANY QUESTIONS?

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