IT in Business

Critical Application in
Information Technology
Lecture – 05
 Information System in Enterprise
Value Addition

 The key reason anyone is in business is

because they add value to a product or
service.

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 Business Function

 All businesses have functions.

 An organization is defined as a set of people
working together in a coordinated system to
achieve a set of goals.
 Some functions of business include
marketing, finance, human resources,
accounting, IT, sales, public relations,
administration etc.
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 Management Challenges

 Businesses need different types of

information systems to support decision
making and work activities for various
organizational levels and functions.
 Implementing information systems usually
creates some problems, just as they solve
some problems. These problems may be
categorized as:

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 Challenges

 Integration
– These are systems that allow the sharing of
information across different departments. The problem
with these is that they are pretty costly and difficult,
because they are technologically complicated.
 Enlargement
– Most managers are designed to think on a micro level,
however, enterprise level systems require managers
to take a much larger view of their own behavior and
performance.

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 Major Types of Information Systems
in Organizations

 There are different interests, specialties and levels in

organizations, one organization may need many different types of
systems.
 These can be categorized as:
– Operational level systems. Information systems that monitor the
elementary activities and transactions of the organization
– Knowledge level systems. Information systems that support
knowledge workers
– Management level systems. Information systems that support the
monitoring, controlling, decision making, and administrative
activities of middle managers
– Strategic level systems. These support the long range planning
activities of senior management

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 Six Major Types of Systems

 Transaction Processing Systems

 Office Systems
 Knowledge Work Systems
 Decision Support Systems
 Management Information Systems
 Executive Support Systems

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 Transaction Processing Systems

 Computerized systems that perform and

record the daily routine transactions
necessary to conduct the business; they
serve the organization’s operational level
 Examples
– Accounting information systems
– TCS, DHL, all have systems that are TPS

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 Office Systems

 Information Systems that aid knowledge

workers in the creation and integrations of
new knowledge in the organization.
 Examples
– Used by professionals such as engineers,
doctors, accountants, MBAs etc
– Word processors, desktop publishing, document
imaging, communications, scheduling etc

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 Decision Support Systems
 IS at the organization's management level that
combine data and sophisticated analytical models or
data analysis tools to support semi structured and
unstructured decision making
 Examples
– May take data from both internal sources (TPS, MIS) but
also from external sources (Stock prices or product prices
of competitors)
– Shipping companies use voyage-estimating systems that
take various shipping information into account and give
advice on costs, freight rates for various types of cargo and
port expenses etc

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 Management Information Systems

 These are at the management level of an

organization that serve the functions of planning,
controlling and decision making by providing
routine summary and exception reports
 Examples
– Systems that provide managers with reports and
online real-time access to company performance and
historical records.
– Mostly these are limited to internal events
– They provide information, they don’t analyze anything

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 Executive Support Systems

 Information Systems at the organizations

strategic level designed to address unstructured
decision making through advanced graphics and
communications
 Examples
– Incorporate data about external events such as tax
laws or competitors, but also draw summarized
information from internal MIS and DSS.
– Filter, compress and track critical data, emphasizing
the reduction of time and effort required to obtain
information useful to executives.

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 Executive Support Systems
(Continued)

– A good ESS would tell the board of

directors:
 What business should we be in?
 What are our competitors doing?
 What new acquisitions would protect us from
routine business problems?
 Which units should we sell to raise cash for
acquisitions?

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 System From a Functional Perspective

Information Systems can also be classified by

various organizational functions they serve as well
as by organizational level (which we just did)

 Sales and Marketing Systems

 Manufacturing and Production Systems
 Finance and Accounting Systems
 Human Resource Systems

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 Sales and Marketing Systems

 Systems that help the firm identify customers

for the firm’s products or services, develop
products and services to meet customer’s
needs, promote these products and services,
sell the products and services and provide
ongoing customer support.

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 Manufacturing and Production
Systems

 Systems that deal with the planning,

development and production of goods and
services, and with controlling the flow of
production.
 Include inventory systems

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 Finance and Accounting Systems

 Systems that keep track of the firms financial

assets and fund flows.
 Include accounting systems, payroll systems,
stock price management, treasury systems
etc.

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 Human Resource Systems

 Systems that maintain employee records,

track employee skills, job performance, and
training, and support planning for employee
compensation and career development.

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 Enterprise Applications

 Systems that can coordinate activities,

decisions and knowledge across many
different functions, levels and business units
in a firm.

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 Enterprise Applications
(Continued)

 Why are they necessary?

– Electronic Commerce, electronic business and
intensifying global competition are forcing firms to
focus on speed to market, improving customer
service and more efficient execution.
– A firm needs to work like a well oiled machine.
– Information needed to support decision making
was often stuck in specialized systems.
– Operating a ‘global’ firm was becoming almost
impossible due to restricted information flow

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 Enterprise Applications
(Continued)

 Enterprise applications include:

– Enterprise systems
– Supply chain management systems
– Customer relationship management systems
– Knowledge management systems
 Each of these integrates a related set of
functions and business processes to
enhance the performance of organization as
a whole
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 Integrating Functions and Business
Processes

 Business processes refer to the manner in

which work is organized, coordinated, and
focused to produce a valuable product or
service.
 These are basically sets of activities needed
to be done in order to run the business.
 These can become a source of competitive
advantage if the company can innovate
better or to execute better than its rivals
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 Integrating Functions and Business Processes
(Continued)

 Some business functions support major

functional areas of a business, whereas
others are cross functional
 The problem with cross functional business
processes is that they need to group
employees from different business functions
and make them work on the same business
process together

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 Enterprise Systems

 Enterprise Systems can integrate the key

business processes of an entire firm into a
single software system that allows
information to flow seamlessly throughout the
organization. These systems focus primarily
on internal processes but may include
transactions with customers and vendors

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 Supply chain management systems

 Supply chain management is the close

linkage and coordination of activities involved
in buying, making, and moving of a product.
 A supply chain is a network of organizations
and business processes for procuring
materials, transforming raw materials into
intermediate and finished products, and
distributing the finished products to
customers

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 Supply chain management systems
(Continued)

 SC Planning Systems enable the firm to

generate demand forecasts for a product and
to develop sourcing and manufacturing plans
for that product.
 SC Execution Systems manage the flow of
products through distribution centers and
warehouses to ensure that products are
delivered to the right locations in the most
efficient manner.

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 Customer relationship management
systems

 Instead of treating customers as exploitable

sources of income, businesses are now
viewing them as long term assets to be
nurtured through CRM
 CRM focuses on managing all the ways a
firm deals with its existing customers and
potential new customers.

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 Good CRM Systems
 Good CRM systems consolidate data from various sources and
provide analytical tools for answering questions such as:
– What is the value of a particular customer over his or her lifetime?
– Who are our most loyal customers? According to research, it costs
six times more to sell to new customers than to sell to existing
customers.
– Who are our most profitable customers? Typically, 80 to 90
percent of profit comes from 10 to 20 percent of customers.
– What do these profitable customers want to buy?
 Firms that can answer these questions acquire new customers,
provide better service and support, customize their offerings
more precisely to customer preferences, and provide
ongoing value to retain profitable customers

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 Knowledge management systems

 The value of a firms products and services is

based not only on its physical resources but
also on intangible knowledge assets.
 Knowledge management systems collect all
relevant knowledge and experience in the
firm and make it available whenever and
wherever it is needed to support business
processes and management decisions.

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The End

Thank You 