Chapter 7: Processes, Organizations, and Information Systems

Summary: This chapter explores processes and their supporting information systems within levels of an organization. There are three types of processes, each with its own scope of information systems. We’ll devil into the concept of process quality and how information systems can be used to increase it. The use of information systems at one level of an organization leads to information silos, which cause problems in the organization. Those problems can be solved by information systems at the next level of organization. There are 3 enterprise systems:  CRM, ERP, and EAI. Interenterprise IS can solve the problems of enterprise-level silos.

Topics covered and details
Q7-1: What at the basic types of processes?

Business process- a network of activities that generate value by transforming inputs into outputs. Activities are either human only processes, human processes with computer help, or computer only processes. A business process with a three-activity process: check inventory, check customer credit, and approve special terms.

Structured Process: formally defined, day-to-day operations involved in standardized processes: customer returns, order entry, purchasing, payroll, slow to change

Dynamic Process: flexible, informal, adaptive processes involving strategic and less structured managerial decisions and activities.

Levels of Organizational Scope

Workgroup: help a workgroup to fulfill the charter, purpose, and goals for a particular group or department. An example: accounts payable. 

Workgroup IS: used to support one or more IS processes in the workgroup

Enterprise: processes spanning the organization and supports activities in multiple departments.

Enterprise IS: support enterprise processes e.g ERP, CRM

Inter-enterprise processes: spans two or more independent orgs. ex: healthcare-prescription drugs.

Inter-enterprise IS: supports one or more inter-enterprise processes

Q7-2: How can information systems improve process quality?

Process efficiency: Ratio of outputs to inputs.

Process effectiveness: How well a process achieves organizational strategy

Processes can be improved by changing the process structure, changing the process resources or by changing both.

Information systems can improve process quality by performing an activity that is partially automated or completely automated, by augmenting human performing activity such as common reservation system, and by controlling data quality such as ensuring data is complete and correct before continuing process activities.

Q7-3: How do information systems eliminate the problems of information silos?

Information silo: when data is isolated in separated information systems.

The problem: data duplication and inconsistency (integrity), isolated data, disjointed processes, lack of integrated enterprise information, decisions made in isolation are inefficient, and cost increases

Solution: integrate that data into a single database and revise applications and business processes to use the singular database. If that isn’t possible, then the org. can allow the isolation but will have to monitor it to avoid the problems.

Q7-4: How do CRM. ERP, EAI support enterprise processes?

Business Process Reengineering (BPR): changing an org.’s processes to take advantage of its new capabilities. Integrated data, enterprise systems create stronger, faster, more effective linkages in value chains. However, it’s a difficult, slow, and exceedingly expensive process that requires high-level expensive skills and considerable time. The key personnel are interviewed so the analysists can determine how best to use new technology since they run the day-to-day operations.

Inherent processes: predesigned procedures for using the software products, save orgs. from expense, delays, and risks of BPR

Customer Relationship management (CRM): Suite of applications, a database, and a set of inherent processes that manage all interactions with customer through four phases of customer life cycle: Marketing, customer acquisition, relationship management, loss/churn. It supports customer-centric organizations.

Enterprise resource planning (ERP): a suite of applications a.k.a. modules, a database, and a set of inherent processes for consolidating business operations into a single, consistent, computing platform. It’s an IS based on ERP technology.

Enterprise Application Integration (EAI): a suite of software applications that integrates existing systems by providing layers of software that connect applications. It connects system “islands”, enables communicating and sharing data, provides integrated information, provides integrated layer on top of existing systems while leaving functional applications “as is”, and enables gradual move to ERP

Q7-5: What are the elements of an ERP system?

The elements: Hardware, ERP Application programs, ERP Databases. Business process procedures, Training and Consulting. A true ERP product must have: supply chain: procurement, sales order processing, inventory management, supplier management, and related activities; manufacturing: scheduling, capacity planning, quality control, bill of materials, and related activities; CRM: sales prospecting, customer management, marketing, customer support, call center support; human resources: payroll, time and attendance, HR management, commission calculations, benefits administration, and related activities; and accounting: general ledger, accounts receivable, accounts payable, cash management, fixed asset accounting

Trigger: computer program within database to keep database consistent when certain conditions arise. Stored Procedure: database program to enforce business rules.

Q7-6: What are the challenges of implementing and upgrading enterprise information systems?

Implementation itself is a challenge since it is difficult, expensive and risky due to it often taking a long time and going over budget. The five primary factors: collaborative management, requirements gaps, transition problems, employee resistance, and new technology

Q7-7: How do inter-enterprise IS solve the problems of enterprise silos?

Distributed systems: when the applications processing is distributed across multiple computing devices

Q7-8: 2026?

By 2026, ERP vendors and customers will have resolved problems of cloud-based ERP. The cloud is the lower cost option for companies; however, it cannot just jump into a cloud-based solution without causing considerable organizational issues.

Hybrid model: ERP customers store most of their data on cloud servers managed by cloud vendors and store sensitive data on their own servers.

There will be defined governmental, accounting, financial standards that can be used to monitoring organizations for appropriate compliance. There’s a delicate balance between risk of loss and improvement to processes.

Three takeaways from the chapter

1) Business Process Reengineering (BPR) takes a lot of time and resources to implement due to the complexity of the processes within the organization. It is a valuable process despite its difficulty and expense. It allows an organization to take advantage of its new capabilities. By integrating the data and processes, this enterprise system will create stronger, faster, and effective linkages in the organization’s value chains.

2) I did not know before that there were “true” ERPs. They must have a supply chain, manufacturing, customer relationship management, human resources, and accounting. When I think of the requirements, I feel a bit confused because I believe them to be normal requirements for any company. What type of organization would not be a true ERP?

3) I think it’s interesting that future users of ERP systems will not only include people but devices and machines as well. For example, machines will be able to schedule their own maintenance, which will save labor and time checking each machine periodically. There will also be more automation in factories such as inventory-picking robots, which improves the process quality.