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Enterprise Applications
Information Systems for Business

Amit Das, IFMR GSB

[email protected]

What are Business Processes?

• Business processes
• Flows of material, information, knowledge
• Logically related set of tasks that define how
specific business tasks are performed
• May be tied to functional area or cut across
functions
• Businesses: Can be seen as collection of business
processes
• Business processes may be assets or liabilities

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Business Processes within functions

• Manufacturing and production - FUNCTION
• Assembling the product - PROCESS
• Sales and marketing
• Identifying customers
• Finance and accounting
• Creating financial statements
• Human resources
• Hiring employees

Cross-functional business processes:

Order Fulfillment

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How Information Technology

Improves Business Processes
• Increasing efficiency of existing processes
• Automating steps that were manual
• Enabling entirely new processes
• Changing flow of information
• Replacing sequential steps with parallel steps
• Eliminating delays in decision making
• Supporting new business models

Organizational levels and decision-making

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unstructuredness

Executive Support Systems

Decision Support Systems
Management Information Systems

Transaction Processing Systems

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Systems for Different Levels

of the Organization
• Transaction processing systems
• Serve operational managers and staff
• Perform and record daily routine transactions
necessary to conduct business
• Examples: sales order entry, payroll, shipping
• Allow managers to monitor status of operations
and relations with external environment
• Serve predefined, structured goals and decision
making

Figure 2.2 A Payroll TPS

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Systems for Different Levels … 2

• Systems for business intelligence
• Data and software tools for organizing and
analyzing data
• Used to help managers and users make improved
decisions
• Management information systems
• Decision support systems
• Executive support systems

Management Information Systems

• Serve middle management

• Provide reports on firm’s current performance, based
on data from TPS
• Provide answers to routine questions with predefined
procedure for answering them
• Typically have little analytic capability

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Figure 2.3 MIS Obtain Their Data

from the Organization’s TPS

Figure 2.4 Sample MIS Report

Consolidated Consumer Products Corporation Sales by Product
and Sales Region: 2019
Product Product Sales Region Actual Sales Planned Actual Versus
Code Description Planned

4469 Carpet Cleaner Northeast 4,066,700 4,800,000 0.85

South 3,778,112 3,750,000 1.01
Midwest 4,867,001 4,600,000 1.06
West 4,003,440 4,400,000 0.91
Blank Total Blank 16,715,253 17,550,000 0.95
5674 Room Freshener Northeast 3,676,700 3,900,000 0.94
South 5,608,112 4,700,000 1.19
Midwest 4,711,001 4,200,000 1.12
West 4,563,440 4,900,000 0.93
Blank Total Blank 18,559,253 17,700,000 1.05

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Decision Support Systems

• Serve middle management
• Support non-routine decision making
• Example: What is the impact on production
schedule if December sales doubled?
• May use external information as well TPS / MIS data
• Model driven DSS
• Voyage-estimating systems
• Data driven DSS
• Intrawest’s marketing analysis systems

Figure 2.5 Voyage-Estimating DSS

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Executive Support Systems

• Support senior management
• Address non-routine decisions
• Requiring judgment, evaluation, and insight
• Incorporate data about external events (e.g., new tax
laws or competitors) as well as summarized
information from internal MIS and DSS
• Example: Digital dashboard with real-time view of
firm’s financial performance

Systems for Different Levels: Summary

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Enterprise Applications
• Systems for linking the enterprise
• Span functional areas
• Execute business processes across the firm
• Include all levels of management
• Four major applications
• Enterprise systems
• Supply chain management systems
• Customer relationship management systems
• Knowledge management systems

Figure 2.6 Enterprise Application Architecture

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Enterprise Systems
• Also called enterprise resource planning (ERP) systems
• Integrate data from key business processes into single
system.
• Speed communication of information throughout firm.
• Enable greater flexibility in responding to customer
requests, greater accuracy in order fulfillment.
• Enable managers to assemble overall view of
operations.

What is an Enterprise Resource Planning system?

Enterprise systems feature a set of

integrated software modules and
a central database that enables
data to be shared by many
different business processes and
functional areas throughout the
enterprise.

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Evolution of ERP systems

• 1960s/70s: MRP information systems helped managers determine the
quantity and timing of raw materials purchases; ran on mainframes
• production scheduling
• bill of materials
• inventory control
• 1970s/80s: Its successor, MRP II, was concerned with the integration of all
aspects of the manufacturing process, including materials, finance and
human resources; also ran on mainframes
• labor resource management
• standard costing
• working capital management
• ERP adoption benefited from Y2K crisis affecting legacy systems

ERP Implementation
• Software to support standardized (“best practice”) business processes
• Provided by SAP, Oracle, Microsoft
• earlier Baan, PeopleSoft, JD Edwards …
• Often implemented using client/server computing model
• Might not match the processes of the adopting organization
• EITHER change the software
• Engage consulting firm
• OR change the organization’s processes,
• Engage consulting firm
• USUALLY BOTH
• Total cost of ERP = software acquisition cost + implementation cost
• For example, $ 10m + $ 40m = $ 50m

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Systems benefits of ERP

• Integration of data and applications across functional areas
• data can be entered once and used by all applications; thus improving
accuracy and quality of the data
• Improvements in maintenance and support as IT staff is centralized
• Consistency of the user interface across various applications means
less need for employee training, better productivity, and easier cross-
functional job movement
• Security of data and applications is enhanced due to better controls
and centralization of hardware and software

Systems challenges for ERP

• Complexity of IT (installing, configuring, and maintaining the system)
increases, demanding specialized IT staff, powerful hardware, and
network connectivity
• Consolidation of IT hardware, software, and people resources can be
cumbersome and difficult to attain
• Data conversion and transformation from an old system to a new one
can be a tedious and complex process
• Retraining of IT staff and end users of the new system can draw
resistance and reduce productivity

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Business benefits of ERP

• Information sharing helps collaboration between units
• Increasing agility of the organization to respond to environmental changes
• Improvement in decision-making
• Efficiency of business processes enhanced due to re-engineering
• Rationalization of “legacy” processes
• Dissemination of “best practices” across organizations
"ERP, when successfully implemented, links financial, manufacturing, human resources,
distribution, and order management systems into a tightly integrated single system with
shared data and visibility across the business. Potential benefits can include breakthrough
reductions in working capital, huge bounties of information about customer wants and
needs, and - perhaps most important - the ability to view and manage the extended
enterprise of suppliers, alliances, and customers as an integrated whole." (page 2, HBS
Technology Note on Enterprise Resource Planning by Austin, Cotteleer & Escalle, 2003)

Business challenges for ERP

• High cost of adoption
"Implementation of ERP is more costly (by a factor of three to ten, depending on the target company)
than the product itself." (page 3)
"Total implementation cost (including software, hardware, consulting, and internal personnel) can run
as high as two or three percent of a company's revenues (e.g. $100 million for a $5 billion
company)." (page 2)
• Change of business roles and department boundaries (to change
business processes) can create disruption and loss of productivity
"Surveys reveal that despite planning for these high investments, many implementing companies
experience cost and schedule overruns, and underachieve relative to their expectations on benefits."
(page 3)
• Can standardized software bring competitive advantage?

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Current directions in ERP

• Extension of scope beyond enterprise boundaries
• Supply chain management
• Customer relationship management
• Away from monolithic systems towards mix-and-match (loosely
coupled) components from multiple vendors
• Deployment via cloud hosting (rather than on-premise installation)
• Pioneered by Salesforce.com
• Superior built-in analytics / visualization capabilities
• Traditionally data exported to Excel / statistical software for analysis

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