CHAPTER

2
Systems for Integration

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Learning Objectives
• Understand the impact of organizational structure on information
systems.
• Find out about the types of functional silos in organizations.
• Learn about the evolution of information systems technology
generations and architectures and their influence on silo environment.
• Know what systems integration is and why it is important for
organizations.
• Understand the role of Enterprise Resource Planning (ERP) systems in
systems integration.

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Preview
• In today’s organization, integration of information systems
(IS) is very critical for their survival and growth.
• Systems integration means that you allow a heterogeneous
(hodgepodge) IS to communicate or integrate and share
information (or data) seamlessly with one another.
• The keyword here is seamlessly because systems have
shared information with each other for a long time;
however, they required a human link.
• Information generated from one system had to be re-
entered manually by users into other systems (a manual
data integration process).
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Preview
• This process takes much longer to get information into the
system, there are errors and inaccuracies, and information
sharing cannot happen in real between the various
organization stakeholders.
• E.g. warehouse employee does not know the status of
shipped products.
• Systems integration is a key issue for an organization for its
growth; therefore, management needs to pay close
attention to this issue.

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Functional Silos
• Silos are basically compartmentalized operating units
isolated from their environment.
• Functional silos categorize an organization’s tasks and
activities into groups to improve efficiency and responsibility
of work in the organization.
• They are generally represented by departments such as
accounting or HR, each having its own goals and
responsibilities.

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Functional Silos
• As organizations grow in size and complexity, they are
divided into horizontal functions and vertical layers.
• Horizontal grouping is called functional divisions, and
vertical grouping of management functions is called
management hierarchy.
• Silos can improve productivity, but they often lead
employees to achieve departmental goals rather than overall
organizational goals. This can create interdepartmental
conflicts and a loss of competitive edge for the organization
because the focus is not on the needs of the customers.

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Horizontal Silos

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Vertical Silos

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Matrix Structure of
Organization

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Business Process and
Silos
• The problem of functional silos gave birth to business process re-
engineering (BPR).
• Organizations are re-oriented their management towards
improving the efficiency and effectiveness by focusing on business
processes such as selling products, product development, order
processing, etc.
• Business process provides an alternative view of grouping people
and resources focusing on an organization’s activity, which
involves interactions between sales , warehousing and accounting
functional areas, as the work progresses from initial sales order to
collection of payment from the client.

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Business Process and
Silos
• The cross-functional business process can involve people
and resources from various functional departments working
together, and sharing information at any level of the
organization.
• Business process has moved management thinking away
from a functional department to the business process.
• This organizational evolution from functional silos to
business processes and to even customer-centric
approaches has had a big impact on the evolution of
information systems.

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Evolution of Information
Systems in Organizations
• As business changes and expands, the results sometimes
lead to a wide variety of Information Systems and computer
architectures creating heterogeneous independent
nonintegrated systems (silos).
• These systems lack control and configurations, so they
become breeding grounds for inconsistency, inaccurate and
incompatible data, and ultimately lead to mismanagement.
• A silo information system is inefficient, inaccurate, and
expensive. These systems can not share data and therefore
require users to access multiple systems to integrate the
data manually.

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Evolution of Information
Systems in Organizations
• Silos systems focus on individual tasks or functions or both,
rather than on process or team. This makes it very difficult for
an organization to be customer-centric because data can not be
assimilated from different functional areas to address customer
needs.
• Organizations have been designed around functions for a long
time (e.g., sales, manufacturing, and HR). These functions are
important as they provide a structure by which an
organization’s function runs smoothly.
• The system creates bottlenecks for everyone and information is
not available in real-time.
• The evolution of IS suggests that its role has generally been to
support evolving information needs of the organization.
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UPS Example
• UPS implemented its publicly accessible package tracking system
for customers, partners, and suppliers
• Before the system
• there were tremendous bottlenecks in finding the status of a
package in UPS’s vast distribution network.
• It was costing UPS millions of dollars to answer customer
queries on package status.
• After the system
• UPS spent less on answering customer queries, and customers
got their answers whenever they wanted to know.
• In an integrated system environment, all parties have access to
the same data sources from a network in real-time.

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IS Architectures
• Three major types of information systems architecture
have been commonly used in organizations: Centralized,
Decentralized, and Distributed systems architecture.
• Centralized approach utilizing the mainframe computer
(the central computer) to host all application systems and
data resources of the organizations.
• With a decentralized approach, each user had a personal
computer.
• Distributed architecture allows sharing of applications and
data resources between the end user and the server
computers(centralized)

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IS Architectures

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IS Functionalization
• IS Serves the different management levels,
• IS supports major business functions, such as manufacturing,
marketing, accounting, finance, and HR.
• Each functional area has different information needs and
reporting requirements.
• Each functional area in an organization also has multiple levels of
management, each requiring different levels of analysis and
details of the information.
• Figure 6 shows these various information systems by levels of
management and functional areas of the organization.

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IS Functionalization

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IS as Categorized by Functional
and Hierarchical Models
• Above system infrastructure (e.g. operating systems, databases and
networking) the lowest level of IS pyramid which consists of:
• Office Automation System (OAS): support the activities of
employees
• Transaction Processing System (TPS): record detailed information
in all the major functional areas. They support the organization's
operations and record every transaction, whether it is a sale, a
purchase, or a payment. They are often categorized by the
functional areas in the organization (sales, purchasing, shipping,
etc.)
• Management Information System (MIS): reporting systems that
categorize and organize information as required by the midlevel
managers. These report can be sales by product for a quarterly
period.
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IS as Categorized by Functional
and Hierarchical Models
• Decision Support Systems (DSS): are analytical systems that use
mathematical equations to process data from TPS to assistant
managers in conducting what-if analysis, identifying trends and
in generally assisting in making data driven decisions. (e.g. go-
seeking, pivot tables, etc using spreadsheet or more
sophisticated such as OLAP software).
• Expert System also assist managers in their decision making
using qualitative analysis that captures problem solving to
identify solutions.
• Executive Support System (ESS): provide visual dashboard of
strategic information to top level management in real time
(snapshot of the organization performance). These system are
categorized for each functional area of the organization.

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Systems Integration
• Integrated systems allow companies to accomplish the linking of
demand and supply side functions in a way that enables a quick
and flexible response to changes.
• Logical (human level) integration
• Develop information systems that allow organizations to share data
with all of their stakeholders based on need and authorization. It
means allowing access to shared data resources by people from
different functional areas of the organization.
• Management needs to change organizational structures, processes,
and employee roles and responsibilities.

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Systems Integration
• Physical (technical level) integration
• Provide seamless connectivity between heterogeneous
systems.
• Business process reengineering involves changing the mindset
of the employees in the organization, encouraging and enabling
them to do their tasks in a new way.
• Shifting the focus of employees from achieving departmental
goals to organizational goals is an essential task for
management.
• It also requires a change in traditional hierarchical
management structures that are purely functionally oriented.
• Teamwork is an essential component if organizations want to
break functional silos and have workers from all levels of
management collaborate on solving organizational problems.
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 Steps in Integrating
Systems
Step 1 Resource Take an inventory of the various hardware and software
categorization resources focusing on vendors, operating systems
platforms, IS architectures used in these resources.

Step 2 Compliance and Check whether the database and other technologies
standards used in various applications are such supporting
standards as JDBC/ODBC compliance for database.

Step 3 Legacy systems Develop a policy in support of older legacy applications.

support

Step 4 Middleware tools Middleware tools are essential for integration in the
short term if existing applications must be used by the
organization.

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 Steps in Integrating
Systems
Step 5 Authentication and Single sign-on policy for application and data
authorization access because all employees and external partners
policies will need access to an integrated system from
anywhere, anytime.

Step 6 Centralized IT The IT staff needs to be able to support all

services and applications and platforms with a centralized IT help
support desk support.

Step 7 Back-up, recovery, A good back-up and recovery system is essential

and security if there is a system failure or a major disaster.

Step 8 Hardware and Develop organization standards and policy on

software acquisition of new hardware and software which is
standardization aligned with organization IT strategy.
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 Benefits and Limitations
of Systems Integration
Benefits Limitations
• Increased Revenue and Growth • High Initial Set-up Costs

• Leveling the Competitive • Power and Interdepartmental

Environment Conflicts (due to the sharing of
information)

• Enhanced Information Visibility • Long-term and Intangible ROI

(Usually several years)
• Increased Standardization • Creativity Limitations (Restricts
Creativity and Independence)

• For more details, refer to the textbook pages (53-54)

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ERP and Systems
Integration
• Enterprise Resource Planning (ERP) systems are integrated, multi-
module application software packages designed to serve and
support several business functions across an organization.
• ERP system is a strategic tool that helps the organization improve
its organization and management by integrating business
processes and helping to optimize the allocation of available
resources
• ERP systems are typically commercial software packages that
facilitate collection and integration of information related to
various areas of an organization including finance, accounting, HR,
customer services, etc.
• ERP systems enable the organization to standardize and improve
its business processes to implement best practices for its industry.
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ERP’s Role in Logical
Integration
• 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.
• An ERP system implements best practices via specific built-in
steps for processing a customer order in terms of:
• order entry.
• routing through departments.
• communication of output to various parties.
• Example Dell computers: Receive an order – divide the order
by major components and transmit to various units, partners
and/or suppliers.
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ERP’s Role in Physical
Integration
• Before installing the ERP system, an organization may have to
upgrade or install middleware or get rid of their legacy system’s
hardware and software.
• Integration is also required at the Data level (one database), Client
level (standardizing on all client platforms), and Application level
(common user interface design, back-end access, and backup
recovery plan).
• A good ERP implementation improves operational efficiency with
better business processes that focus on organizational goals rather
than on individual departmental goals.
• Improved efficiency with a paperless flow and electronic data
interchange (EDI) or business-to-business (B2B) commerce
environment with partners.
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