Fall 2023

Chapter 7: Organizations and Information Systems

Sirine Taleb
Slides: From Pearson Book
9/26/23
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§ An information silo is the condition that
exists when data are isolated in separated
information systems. Silos come into existence
as entities at one organizational level create
information systems that meet only their
particular needs.

§ Sales, for example, will store contact data for

customers’ purchasing agents, while
Accounting will store contact data for
customers’ accounts payable personnel.

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WHAT ARE THE PROBLEMS OF INFORMATION SILOS?

because the accounts

receivable
application has
credited Ajax for a
Has a current balance of $17,800 Has a current balance of $12,300 return of $5,500.

IndyMac is known by the

name of the company that
acquired it, OneWest Bank

Duplicated data, disjointed systems, limited information, and

inefficiencies all mean higher costs.
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§ Data inconsistency: Changes to customer data made in the Sales and Marketing application may take days or weeks to
be made to the Accounting application’s database. During that period, shipments will reach the customer without delay,
but invoices will be sent to the wrong address. When an organization has inconsistent duplicated data, it is said to have
a data integrity problem.

§ Without integration, the left hand of the organization doesn’t know what the right hand is doing.

INFO 200 – AUB – Fall 2023 – Dr. Sirine Taleb 9/26/23 4

• Integrate data into
single database
• Revise applications
to use this database
• If not possible, then
allow isolation, but
manage to avoid
problems

The arrows show this resolution at two levels of organization.

First, isolated data created by workgroup information systems are integrated using enterprise-wide
applications.
Second, today, isolated data created by information systems at the enterprise level are integrated into inter-
enterprise systems using distributed applications (such as ARES).
The enterprise information system (solid red line) supports the discharge process (dashed red line).
To use new system, staff needs to transition from a paper-based system to computer-based one.
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§ Enterprise systems enabled the creation of stronger, faster, more effective linkages among value chains.
§ Enterprise systems enabled creation of more efficient or more effective processes
§ For example, when the hospital used a paper-based system, the kitchen would prepare meals for everyone
who was a patient at the hospital as of midnight the night before. It was not possible to obtain data about
discharges until the next midnight. Consequently, considerable food was wasted, at substantial cost.
§ To design its new enterprise system, the hospital needed to determine how best to change its processes to
take advantage of the new capability. Such projects came to be known as business process reengineering,
which is the activity of altering existing and designing new business processes to take advantage of
new information systems.

How can processes be improved?

– Change process structure
– Change process resources
– Change both

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§ Integrated data, enterprise systems create stronger, faster, more effective linkages in
value chains
§ Unfortunately, business process reengineering is difficult, slow, exceedingly expensive
§ Key personnel determine how best to use new technology
§ Requires high-level and expensive skills, and considerable time

§ Many early projects stalled when the enormity of the project became apparent. This left
some organizations with partially implemented systems that had disastrous
consequences. Personnel didn’t know if they were using the new system, the old system,
or some hacked-up version of both.

§ The stage was set for the emergence of the three major enterprise applications, which we
discuss next.
§ Customer relationship management (CRM)
§ Enterprise resource planning (ERP)
§ Enterprise application integration (EAI)

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 § When the need for business process reengineering
emerged, most organizations were still developing
their applications in-house. At the time,
organizations perceived their needs as being “too
unique” to be satisfied by off-the-shelf or altered
applications. However, as applications became more
and more complex, in-house development costs
became infeasible.

§ In the early 1990s, as the costs of business process

reengineering were coupled with the costs of in-
house development, organizations began to look
more favorably on the idea of licensing pre- existing
applications. “Maybe we’re not so unique, after all.”

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§ Some of the vendors who took advantage of this change in attitude were PeopleSoft, which licensed payroll and limited-
capability human resources systems; Siebel, which licensed a sales lead tracking and management system; and SAP,
which licensed something new, a system called enterprise resource management.

§ Inherent processes
– Predesigned procedures for using software products
– Saved organizations from expensive and time-consuming business process reengineering
– Based on “industry best practices”
§ Over time, three categories of enterprise applications have emerged:
§ Customer relationship management (CRM)
§ Enterprise resource planning (ERP)
§ Enterprise application integration (EAI)

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CUSTOMER RELATIONSHIP MANAGEMENT
(CRM)
• A customer relationship management (CRM) system is a suite of applications, a database, and a set of
inherent processes for managing all the interactions with the customer, from lead generation to customer
service.

• Every contact and transaction with the customer is recorded in the CRM database. Vendors of CRM software
claim using their products makes the organization customer-centric.

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CUSTOMER RELATIONSHIP MANAGEMENT
(CRM)
• Manage all interactions with customer through four phases of customer life cycle
1. Marketing
2. Customer acquisition
3. Relationship management
4. Loss/churn

• Supports customer-centric organization

Read more and watch video:

https://www.salesforce.com/ca/crm/what-is-crm/

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Copyright © 2017 Pearson Education, Inc.
 CRM APPLICATIONS
Figure illustrates the major
components of a CRM application.
Notice that components exist for
each stage of the customer life cycle.

As shown, all applications process a common customer database. This design eliminates
duplicated customer data and removes the possibility of inconsistent data. It also means that
each department knows what has been happening with the customer at other departments.
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§ Enterprise resource planning (ERP) is a suite of applications, a database, and a set of inherent processes for
consolidating business operations into a single, consistent computing platform.

§ ERP systems are used to forecast sales and to create manufacturing plans and schedules to meet those
forecasts. Manufacturing schedules include the use of material, equipment, and personnel and thus need to
incorporate inventory and human resources applications. Because ERP includes accounting, all of these
activities are automatically posted in the general ledger and other accounting applications.

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 Primary
purpose
integration

As shown in Figure, ERP includes the functions of CRM

but also incorporates accounting, manufacturing,
inventory, and human resources application. Copyright © 2017 Pearson Education, Inc.
§ SAP is the worldwide leader of ERP vendors. In addition to its base ERP offering, SAP offers industry-
specific packages that customize its product for particular uses. There is an SAP package for automobile
manufacturing, for example, and for many other specialty industries as well.
§ ERP originated in manufacturing and has a definite manufacturing flavor. However, it has been adapted for
use in service organizations such as hospitals as well as many other organizations.

INFO 200 – AUB – Fall 2023 – Sirine Taleb 9/26/23 17

§ Suite of applications, database, and inherent processes
§ Consolidates business operations into a single, consistent computing platform
§ CRM plus accounting, manufacturing, inventory, and human resources applications
§ SAP offers industry-specific customize packages

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ENTERPRISE APPLICATION INTEGRATION
(EAI)
• ERP systems are not for every organization.
• For example, some nonmanufacturing companies find the manufacturing orientation of ERP inappropriate.
• Even for manufacturing companies, some find the process of converting from their current system to an
ERP system too daunting.
• Others are quite satisfied with their manufacturing application systems and do not wish to change them.

• Companies for which ERP is inappropriate still have the problems of information silos, however,
and some choose to use enterprise application integration (EAI) to solve those problems.

• EAI is a suite of software applications that integrates existing systems by providing layers of
software that connect applications together.

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ENTERPRISE APPLICATION INTEGRATION
(EAI)
• ERP is a system that connects different functions of the organization. Whereas, an EAI connects
the applications which are run by the system and enables a communication path for them to share
information.
• ERP replaces the whole system while EAI can still use existing systems.

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ENTERPRISE APPLICATION INTEGRATION
(EAI)
• Connects system “islands”
• Enables communicating and sharing data in existing systems
• Provides integrated information
• Provides integration layer on top of existing systems while leaving functional applications “as is”
• Enables less expensive, gradual move to ERP

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 Sometimes
offered:
Virtual
Integrated
Database

When the CRM applications send data to the manufacturing application system,
for example, the CRM system sends its data to an EAI software program. That EAI
program makes the conversion and then sends the converted data to the ERP
system. The reverse action is taken to send data back from the ERP to the CRM.
Implementing new enterprise systems is challenging, difficult, expensive, and risky.
It is not unusual for enterprise systems projects to be well over budget and a year or
more late in delivery.

In addition to new ERP implementations, numerous organizations implemented ERP

15 or 20 years ago and now need to upgrade their ERP installation to meet new
requirements.

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Whether from a new implementation or an upgrade, expense and risks arise from
five primary factors:

§ Collaborative management
§ Requirements gaps
§ Transition problems
§ Employee resistance
§ New technology

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• Collaborative management
§ No clear boss
§ Examine the discharge process; there is no manager of discharge. The discharge process is a
collaborative effort among many departments (and customers).
§ With no single manager, who resolves the disputes that inevitably arise? All of these departments
ultimately report to the CEO, so there is a single boss over all of them, but employees can’t go to
the CEO with a problem about, say, coordinating discharge activities between nursing and
housekeeping. The CEO would throw them out of his or her office.
§ Usually this means that the enterprise develops committees and steering groups for providing
enterprise process management.

• Requirements gaps
§ Almost always there are gaps between the requirements of the organization and the capabilities of
the licensed application.
§ Features and functions of complex, not easy to identify
§ Hence, the first challenge is identifying the gaps.
§ The second challenge is deciding what to do with gaps once they are identified.
§ What to do? Adapt or alter?

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• Transition problems
§ The organization must somehow change from using isolated departmental systems to using the new enterprise
system, while continuing to run the business. It’s like having heart surgery while running a 100-yard dash.
§ Careful planning, substantial training, senior management involvement

• Employee resistance
§ Change requires effort and engenders fear
§ Threat to self-efficacies: which is a person’s belief that he or she can be successful at his or her job.
§ Extra inducements needed to employees because the primary benefits of a new ERP system accrue to the accounting and finance
departments and to senior management. Many of the employees who are asked to change their activities to implement ERP will
not receive any direct benefit from it.

• New technology
§ The Cloud, mobile technology
§ Pose risks and potential outside control of organization resources
§ ERP data is a juicy target for crime. These factors don’t mean organizations cannot use new technology with enterprise systems,
but they do add challenges.

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