LECTURE 2 & 3

ORGANIZATION AS A SYSTEM
&
TYPES OF
INFORMATION SYSTEM
 STUDENT LEARNING OBJECTIVES

• What are the major features of a business that are

important for understanding the role of
information systems?
• How do systems serve different management
groups in a business?
• How do systems that link the enterprise improve
organizational performance?
• Why are systems for collaboration and teamwork
so important and what technologies do they use?
• What is the role of the information systems
function in a business?
 Components of a Business

Business: formal organization that makes products or

provides a service in order to make a profit

Organizing a Business: Basic Business Functions

• Four basic business functions

• Manufacturing and production
• Sales and marketing
• Finance and accounting
• Human resources
 Components of a Business

The Four Major Functions of a Business

Every business, regardless of its

size, must perform four functions to
succeed. It must produce the
product or service; market and sell
the product; keep track of
accounting and financial
transactions; and perform basic
human resources tasks, such as
hiring and retaining employees.

Figure 2-1
 Components of a Business

Five Basic Business Entities

• Suppliers
• Customers
• Employees
• Invoices/payments
• Products and services
 Components of a Business

Business Processes
• Logically related set of tasks that define how
specific business tasks are performed
• The tasks each employee performs, in what order, and on
what schedule
• E.g., steps in hiring an employee
• Some processes tied to functional area
• Sales and marketing: identifying customers
• Some processes are cross-functional
• Fulfilling customer order
 Components of a Business

The Order Fulfillment Process

Fulfilling a customer order

involves a complex set of
steps that requires the
close coordination of the
sales, accounting, and
manufacturing functions.

Figure 2-2
 Components of a Business

Managing a Business and Firm Hierarchies

• Firms coordinate work of employees by developing
hierarchy in which authority is concentrated at top.
 Senior management
 Middle management
 Operational management
 Knowledge workers
 Data workers
 Production or service workers
• Each group has different needs for information.
 Major Types of Systems

• Transaction Processing Systems (TPS)

• Management Information Systems (MIS)
• Decision Support Systems (DSS)
• Executive Support Systems (ESS)
MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS
 Types of Business Information Systems

Systems for Management Decision Making and

Business Intelligence
• Transaction processing systems (TPS)
• A computerized system that performs and records the daily
routine transactions necessary to the conduct of the business
• Keep track of basic activities and transactions of organization
 Types of Business Information Systems

• Transaction processing systems:

• Serve operational managers
• Principal purpose is to answer routine questions and to
track the flow of transactions through the organization
• E.g., inventory questions, granting credit to customer
• Monitor status of internal operations and firm’s
relationship with external environment
• Major producers of information for other systems
• Highly central to business operations and functioning
 Types of Business Information Systems

A Payroll TPS

A TPS for payroll

processing captures
employee payment
transaction. System
outputs include online
and hard copy reports
for management and
employee paychecks.

Figure 2-5
MAJOR TYPES OF SYSTEMS IN ORGANIZATIONS

Types of TPS Systems

Figure 2-4
 Types of Business Information Systems

• Management information systems:

• Provide middle managers with reports on firm’s
performance
• To monitor firm and help predict future
performance
• Summarize and report on basic operations using
data from TPS
• Provide weekly, monthly, annual results, but may
enable drilling down into daily or hourly data
• Typically not very flexible systems with little analytic
capability
 Types of Business Information Systems

How MIS Obtain Their Data from TPS

Figure 2-6
 Types of Business Information Systems

Sample MIS Report

This report,
showing
summarized
annual sales
data, was
produced by
the MIS in
Figure 2-6.

Figure 2-7
 Types of Business Information Systems

• Decision support systems (DSS):

• Serve middle managers
• Support nonroutine decision making
• E.g., What is impact on production schedule if
December sales doubled?
• Often use external information as well from
TPS and MIS
• Model driven DSS
• Voyage-estimating systems
• Data driven DSS
• Intrawest’s marketing analysis systems
 Types of Business Information Systems

Voyage-Estimating Decision Support System

This DSS operates on

a powerful PC. It is
used daily by
managers who must
develop bids on
shipping contracts.

Figure 2-8
 Types of Business Information Systems

• Executive support systems (ESS):

• Serve senior managers
• Address strategic issues and long-term trends
• E.g., What products should we make in five years?
• Address nonroutine decision making
• Provide generalized computing capacity that can be
applied to changing array of problems
• Draw summarized information from MIS, DSS, and
data from external events
• Typically use portal with Web interface, or digital
dashboard, to present content
 Types of Business Information Systems

Digital Dashboard

A digital dashboard
delivers comprehensive
and accurate
information
for decision making
often using a single
screen. The graphical
overview of key
performance
indicators helps
managers quickly
spot areas that need
attention.
INTERRELATIONSHIPS AMONG SYSTEMS

Figure 2-9
 SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

Sales and Marketing Systems

Major functions of systems:

• Sales management, market research, promotion,
pricing, new products

Major application systems:

• Sales order info system, market research system,
pricing system
 SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

Sales and Marketing Systems

SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL

ORDER PROCESSING ENTER, PROCESS, TRACK ORDERS OPERATIONAL

MARKET ANALYSIS IDENTIFY CUSTOMERS & MARKETS KNOWLEDGE

PRICING ANALYSIS DETERMINE PRICES MANAGEMENT

SALES TRENDS PREPARE 5-YEAR FORECASTS STRATEGIC

Table 2-2
 SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

Manufacturing and Production Systems

Major functions of systems:

• Scheduling, purchasing, shipping, receiving,
engineering, operations

Major application systems:

• Materials resource planning systems, purchase
order control systems, engineering systems,
quality control systems
 SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

Manufacturing and Production Systems

SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL

MACHINE CONTROL CONTROL ACTIONS OF EQUIPMENT OPERATIONAL

COMPUTER-AIDED-DESIGN DESIGN NEW PRODUCTS KNOWLEDGE

PRODUCTION PLANNING DECIDE NUMBER, SCHEDULE OF PRODUCTS MANAGEMENT

FACILITIES LOCATION DECIDE WHERE TO LOCATE FACILITIES STRATEGIC

Table 2-3
SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

Overview of Inventory Systems

 SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

Financing and Accounting Systems

Major functions of systems:

• Budgeting, general ledger, billing, cost accounting

Major application systems:

• General ledger, accounts receivable, accounts
payable, budgeting, funds management systems
 SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

Financing and Accounting Systems

SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL

ACCOUNTS RECEIVABLE TRACK MONEY OWED TO FIRM OPERATIONAL

PORTFOLIO ANALYSIS DESIGN FIRM'S INVESTMENTS KNOWLEDGE

BUDGETING PREPARE SHORT TERM BUDGETS MANAGEMENT

PROFIT PLANNING PLAN LONG-TERM PROFITS STRATEGIC

Table 2-4
 SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

Human Resource Systems

Major functions of systems:

• Personnel records, benefits, compensation, labor
relations, training

Major application systems:

• Payroll, employee records, benefit systems, career
path systems, personnel training systems
 SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

Human Resource Systems

SYSTEM DESCRIPTION ORGANIZATIONAL LEVEL

TRAINING & DEVELOPMENT TRACK TRAINING, SKILLS, APPRAISALS OPERATIONAL

CAREER PATHING DESIGN EMPLOYEE CAREER PATHS KNOWLEDGE

COMPENSATION ANALYSIS MONITOR WAGES, SALARIES, BENEFITS MANAGEMENT

HUMAN RESOURCES PLANNING PLAN LONG-TERM LABOR FORCE NEEDS STRATEGIC

Table 2-5
SYSTEMS FROM A FUNCTIONAL PERSPECTIVE

Human Resource Systems

Figure 2-11
 ENTERPRISE APPLICATIONS

Examples of Business Processes

• Manufacturing and production: Assembling

product, checking quality, producing bills of
materials

• Sales and marketing: Identifying customers,

creating customer awareness, selling
 ENTERPRISE APPLICATIONS

Examples of Business Processes

• Finance and accounting: Paying creditors,

creating financial statements, managing cash
accounts

• Human Resources: Hiring employees,

evaluating performance, enrolling employees in
benefits plans
ENTERPRISE APPLICATIONS
 Types of Business Information Systems

Systems for Linking the Enterprise

• Enterprise applications
• Systems that span functional areas, focus on
executing business processes across the firm,
and include all levels of management
• Four major types
1. Enterprise systems
2. Supply chain management systems
3. Customer relationship management systems
4. Knowledge management systems
 Types of Business Information Systems

Enterprise Application Architecture

Enterprise applications
automate processes that
span multiple business
functions and
organizational levels and
may extend outside the
organization.

Figure 2-9
 Types of Business Information Systems

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
 Types of Business Information Systems

Supply Chain Management Systems

• Manage relationships with suppliers, purchasing

firms, distributors, and logistics companies
• Manage shared information about orders,
production, inventory levels, and so on
• Goal is to move correct amount of product from source to
point of consumption as quickly as possible and at
lowest cost
• Type of interorganizational system:
• Automating flow of information across organizational
boundaries
 Types of Business Information Systems

Supply Chain Management Systems

Advantages of having efficient Supply Chain

Management (SCM).

• Decrease the power of its buyers

• Increase their own supplier power
• Increase switching costs to reduce the threat of
substitute products or services
• Create entry barriers thereby reducing the threat of
new entrants
• Increase efficiencies while seeking a competitive
advantage through cost leadership
 Types of Business Information Systems

Customer Relationship Management Systems

• Help manage relationship with customers
• Coordinate business processes that deal with
customers in sales, marketing, and customer
service
• Goals:
• Optimize revenue
• Improve customer satisfaction
• Increase customer retention
• Identify and retain most profitable customers
 Types of Business Information Systems

Knowledge Management Systems

• Manage processes for capturing and applying
knowledge and expertise
• Collect relevant knowledge and make it available
wherever needed in the enterprise to improve
business processes and management decisions
• Link firm to external sources of knowledge
 Types of Business Information Systems

Intranets and Extranets

• Technology platforms that increase integration
and expedite the flow of information
• Intranets:
• Internal networks based on Internet standards
• Often are private access area in company’s Web
site
• Extranets:
• Company Web sites accessible only to authorized
vendors and suppliers
• Facilitate collaboration
 Types of Business Information Systems

E-Business, E-Commerce, and E-Government

• E-business:
• Use of digital technology and Internet to drive major
business processes

• E-commerce:
• Subset of e-business
• Buying and selling goods and services through Internet

• E-government:
• Using Internet technology to deliver information and
services to citizens, employees, and businesses
 Systems for Collaboration and Teamwork

What Is Collaboration?

• Growing Importance of collaboration:

• Changing nature of work
• Growth of professional work
• Changing organization of the firm
• Changing scope of the firm
• Emphasis on innovation
• Changing culture of work and business
Systems for Collaboration and Teamwork

Figure 2-10
Requirements for Collaboration

Successful collaboration
requires an appropriate
organizational structure
and culture, along with
appropriate collaboration
technology.
 Systems for Collaboration and Teamwork

Tools and Technologies for Collaboration and Teamwork

• E-mail and instant messaging (IM)

• Social networking
• Wikis
• Virtual worlds
• Internet-based collaboration environments
• Virtual meeting systems (telepresence)
• Google Apps/Google Sites
• Microsoft SharePoint
• Lotus Notes
The Information Systems Function in Business

Socialtext's enterprise
social networking
products including
microblogging, blogs,
wikis, profiles, and
social spreadsheets
enable employees to
share vital information
and work together in
real time. Built on a
flexible Web-oriented
architecture, Socialtext
integrates with virtually
any traditional system of
record, such as CRM and
ERP, enabling companies
to discuss, collaborate,
and take action on key
business processes.
 Systems for Collaboration and Teamwork

The Time/Space
Collaboration Tool
Matrix
Collaboration technologies
can be classified in
terms of whether they
support interactions at
the same or different
time or place, and
whether these interactions
are remote or co-located.

Figure 2-11