global e-business and collaboration · with large-scale cross-functional systems that integrate the...

ICT 41013, ICT in Business and GovernanceBy S.Sabraz Nawaz

M.Sc. in IS (SLIIT), PGD in IS (SLIIT), BBA (Hons.) Spl. In IS (SEUSL),

MIEEE, Microsoft Certified ProfessionalSenior Lecturer in MIT

Module 02E-Business: How Businesses

Use Information Systems

Learning Objectives

Define and describe business processes and their relationship to information systems.

Evaluate the role played by systems serving the various levels of management in a business and their relationship to each other.

Explain how enterprise applications improve organizational performance.

Explain the importance of collaboration and teamwork in business and how they are supported by technology.

Assess the role of the information systems function in a business.

Business Processes and Information

Systems

Business processes refer to the manner in which work

is organized, coordinated, and focused to produce a

valuable product or service. Business processes are

the collection of activities required to produce a

product or service.

These activities are supported by flows of material,

information, and knowledge among the participants in

business processes.

Business processes also refer to the unique ways in

which organizations coordinate work, information, and

knowledge, and the ways in which management

chooses to coordinate work.

EXAMPLES OF FUNCTIONAL

BUSINESS PROCESSESFUNCTIONAL AREA BUSINESS PROCESS

Manufacturing and production • Assembling the product

• Checking for quality

• Producing bills of materials

Sales and marketing • Identifying customers

• Making customers aware of the product

• Selling the product

Finance and accounting • Paying creditors

• Creating financial statements

• Managing cash accounts

Human resources • Hiring employees

• Evaluating employees’ job performance

• Enrolling employees in benefits plans

Some business processes cross many different functional areas and require coordination

across departments.

ICT 41013: ICT in Business and

Governance, By: S. Sabraz Nawaz 4

How Information Technology

Improves Business Processes Information systems automate many steps in business

processes that were formerly performed manually, such as

checking a client’s credit, or generating an invoice and shipping

order.

New technology can actually change the flow of information,

making it possible for many more people to access and share

information, replacing sequential steps with tasks that can be

performed simultaneously, and eliminating delays in decision

making.

Information Technology frequently changes the way a business

works and supports entirely new business models.

◦ Downloading a Kindle e-book from Amazon, buying a computer online at

BestBuy, etc. are entirely new business processes based on new business

models that would be inconceivable without today’s information technology.



requires the close coordination of the sales, accounting, and

manufacturing functions

By conducting a business process analysis, we can understand how

to change the business by improving its processes to make it more

efficient or effective and how they might be improved by using

information technology to achieve greater efficiency, innovation, and

customer service.



Business Process Reengineering –

Ford’s Accounts Payable Case Study



Business Process Reengineering –

Ford’s Accounts Payable

Case Study…



Bottom Line:

Business processes help an organization

organize, coordinate, and focus its workflows

to produce products or services.

The success or failure of a business may

depend on how well its business processes

are designed and coordinated.

Information systems can automate many

steps in business processes and even change

the flow of information.



TYPES OF INFORMATION

SYSTEMS



Systems For Different Management

Groups A typical business organization has systems supporting

processes for each of the major business functions—systems for sales and marketing, manufacturing and production, finance and accounting, and human resources.

Functional systems that operate independently of each other cannot easily share information to support cross-functional business processes. Many have been replaced with large-scale cross-functional systems that integrate the activities of related business processes and organizational units.

A typical firm also has different systems supporting the decision-making needs of each of the main management groups; operational management, middle management, and senior management each use systems to support the decisions they must make to run the company.



Transaction Processing Systems

The operational level of an organization includes various units such as order

processing, material movement control, payroll, accounts payable, and employee

record keeping. This level is responsible for daily operations. The information

systems used in this level of the organization are transaction processing

systems (TPS), so called because they record the routine transactions that take

place in everyday operations.

TPS combine data in various ways to fulfill the hundreds of information needs a

company requires to be successful. The data are very detailed at this level.

For instance, a TPS will record how many pounds of sugar are used in making

our Cybernuts candy bar. It also records the time it takes from beginning to end

to make the candy bar. And it can record the number of people working on the

assembly line when the candy bar is made and what functions they perform.

People using transaction processing systems usually need information to help

them answer routine questions such as: “How many Cybernuts candy bars did

we produce yesterday?” or “How much sugar do we have on hand for today’s

production run?”

A TPS will record the sales and marketing transactions, etc. as well.

Bottom Line: The transaction processing system records the data from

everyday operations throughout every division or department in the

organization. Each division/department is tied together through the TPS to

provide useful information to management levels throughout the company.ICT 41013: ICT in Business and


A TPS for payroll processing captures employee payment

transaction data (such as a time card). System outputs include

online and hard-copy reports for management and employee

paychecks.



Business Intelligence Systems for

Decision Support Think about the functions of managers. Each

manager takes on roles countless times in a day.

Managers review endless amounts of data that make

their jobs easier and more efficient.

Business intelligence is a contemporary term for

data and software tools for organizing, analyzing, and

providing access to data to help managers and other

enterprise users make more informed decisions.

◦ Management Information Systems

◦ Decision Support Systems

◦ Executive Support Systems



Management information systems

(MIS) Management Information Systems provide middle managers with

reports on the organization’s current performance. This information is used to monitor and control the business and predict future performance. Middle management needs systems to help with monitoring, controlling, decision-making, and administrative activities. The principal question addressed by such systems is this: Are things working well?

MIS summarize and report on the company’s basic operations using data supplied by TPS. The basic transaction data from TPS are compressed and usually presented in reports that are produced on a regular schedule.

Bottom Line: A management information system is used by managers throughout the organization to help them in directing, planning, coordinating, communicating, and decision making. The MIS will help answer structured questions on a periodic basis.



In the system illustrated by this diagram, three TPS supply summarized

transaction data to the MIS reporting system at the end of the time period.

Managers gain access to the organizational data through the MIS, which

provides them with the appropriate reports.



Decision-support systems

(DSS) DSS support more non-routine decision making. They focus on

problems that are unique and rapidly changing, for which the

procedure for arriving at a solution may not be fully predefined in

advance. They try to answer questions such as these: What

would happen to our return on investment if a factory

schedule were delayed for six months?

Although DSS use internal information from TPS and MIS, they

often bring in information from external sources, such as current

stock prices or product prices of competitors or given a customer

delivery schedule and an offered freight rate, which vessel

should be assigned at what rate to maximize profits?

Bottom line: DSS are used for complex “what-if” questions

that require internal and external data. Decisions at this

management level are mostly semi-structured so the

information system must respond to the unique

requirements of the executives.ICT 41013: ICT in Business and


Executive support systems (ESS)

ESS help senior management make decisions for questions like

what products should we be making in five years? They

address non-routine decisions requiring judgment, evaluation,

and insight because there is no agreed-on procedure for arriving

at a solution.

ESS present graphs and data from many sources through an

interface that is easy for senior managers to use.

ESS are designed to incorporate data about external events,

such as new tax laws or competitors, but they also draw

summarized information from internal MIS and DSS.

Bottom Line: An ESS helps managers make strategic

decisions affecting the entire company. The decisions use

internal and external data to give executives the information

they need to determine the proper course of action in

unstructured situations.



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