Basic Concepts - An Introduction to Business Information Systems PDF

Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved CHAPTER 2 Basic Concepts – An Introduction to Business Information Systems Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning objectives: After studying this chapter, the students should be able to: LO 1. Identify systems and their components. LO 2. Understand what Business Information Systems are? LO 3. Describe the Resources That Support BIS. LO 4. Describe E-business Systems. LO 5. Describe Enterprise Systems. LO 6. Explain BIS and Strategic Advantage. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning Objective 1: Identify systems and their components This objective covers the following point: LO 1. Introduction to Systems LO 1.1- What is a systems theory? LO 1.2- What is a system? Lo 1.3- System components LO 1.4- Other system characteristics LO 1.5- Control in organizational systems LO 1.6- Positive and negative feedback Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 1-1- What is a systems theory? - Systems theory provides a powerful means of analyzing and improving business processes. - It can be applied to a wide variety of different areas and is fundamental to gaining a good understanding of the managerial application of BIS. 1-2- What is a system? - A system can be defined as “a collection of interrelated components that work together towards a collective goal”. - The function of a system is to receive inputs and transform these into outputs. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Figure 2.1, p.34 illustrates the organization of the input- process-output model. Figure 2.1. A basic model of a transformation process: Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 1.3- System components: - A system includes five components: input, process, output, feedback and control. - Each of these components can be described in more detail as follows: 1- Input: - The input to a system can be thought as the raw materials for a process that will produce a particular output. - Examples of inputs might include data, knowledge, raw materials, machinery and premises. 2- Process: - Inputs are turned into outputs by to a transformation process. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3- Output: - The output is the finished product created by the system. Examples might include information, products and services. 4- Feedback mechanism: - Feedback mechanism provides information on the performance of a system which can be used to adjust its behavior. 5- Control mechanism: - If alterations are needed to the system, adjustments are made by a control mechanism. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved - The function of the control component is to ensure that the system is working to fulfill its objective. - Control tends to be exerted by adjusting the process and input components of the system until the correct output is achieved. - Figure 2.2, P.35 shows a generic model of a system. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Figure 2.2. A generic model of a system Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 1.4- Other system characteristics: - All systems share these characteristics: 1- System objective: - The components of a system work towards a collective goal. This is known as the system objective. - The objective of a system is normally very specific and can often be expressed in a single sentence. - As an example, the objective of a car might be expressed simply as follows: to transport people and goods to a specified location. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 2- Systems do not operate in complete isolation: - They are contained within an environment that contains other systems and external agencies. - The scope of a system is defined by its boundary. Note the following: ** everything outside of the boundary is part of the system’s environment, ** everything within the boundary forms part of the system itself. ** Environment: The surroundings of a system, beyond its boundary. ** Boundary: The interface between a system and its environment. ** Interface: Defines exchanges between a system and its environment, or other systems. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3- Systems can be complex and can be made up of other smaller systems: - The smaller systems are known as subsystems. Note the following: ** Systems composed of one or more subsystems are sometimes referred to as suprasystems. ** The objective of a subsystem is to support the larger objective of the suprasystem. ** For an organization, the subsystems such as marketing and finance would lie within the system’s boundary while the following elements would lie outside as part of the business environment: ** customers, ** sales channel/distributors, Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved ** suppliers, ** competitors, ** partners, government and legislation, ** the economy. ** An organization will interact with all these elements which are beyond the system boundary in the environment. ** Systems that have a high degree of interaction with the environment are called open systems. ** Most information systems are open systems because they accept inputs and react to them. ** Systems that have no or limited interaction with the environment are called Closed system. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 4- Subsystems in an information system interact by exchanging information: - The interaction between subsystems by exchanging information is known as the interface between systems. Notice that for information systems and business systems, having clearly defined interfaces is important to an efficient organization. For example, sales orders must be passed from the sales subsystem to the finance subsystem and the distribution subsystem in a clear, repeatable way. - If this does not happen, orders may be lost or delayed and customer service will be affected. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 5- The linkage or coupling between subsystems varies: - The degree of coupling defines how closely linked different subsystems are. Note the following: ** It is a fundamental principle of systems theory and BIS design that subsystems should be loosely coupled. ** close-coupled systems are systems or subsystems that are highly dependent on one another. ** In such cases, the outputs of one system are the direct inputs of another. ** Loose coupling means that the modules pass only the minimum of information between them and do not share data and program code. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved ** Decoupled systems (or subsystems) are less dependent on one another than coupled systems and so are more able to deal with unexpected situations or events. ** Decoupled systems tend to have higher levels of autonomy, being allowed more freedom to plan and control their activities. ** Decoupled systems are more flexible and adaptive than close-coupled systems. 6- Systems are hierarchical: - Systems are made up of subsystems that may themselves be made up of other subsystems. - From this, one should realize that the parts of a system are dependent on each other in some way. - This interdependence means that a change to one part of a system leads to or results from changes to one or more other parts. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 1.5- Control in organizational systems: - Figure 2.3, P.37 shows the relationship between different parts of an organization and how they are related according to systems theory. - The role of an information system is to support managers in making decisions that will help the organization to function properly and achieve its objectives. - Control is being exercised correctly if the organization - including all subsystems - is moving towards its objectives as efficiently as possible. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Figure 2.3- Business information systems as an organizational control mechanism Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Control systems can be classified into: 1- Open-loop control systems in business: - An open-loop control system is one in which there is an attempt to reach the system objective, but no control action to modify the inputs or process is taken once the process has begun. - It should be noted that: a- Open-loop systems have no mechanism for ensuring goals are met once the process is under way. b- Open-loop systems are inadequate in an organizational context because of the complexity of organizational systems and their environments. - Figure 2.4, P.38 provides a generic open-loop system. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Figure 2.4- A generic open-loop system Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 2- Closed-loop control systems in business: - Two types of control mechanisms that can be employed in this situation are feedback control and feedforward control. a- Feedback control responds to changes in the system or its environment after they have taken place. - The output achieved is monitored and compared with the desired output and corrective action is taken if a deviation exists. Feedback control systems generally: ** Provide a relatively cheap method of reactive control, and ** Provide an effective method of bringing a system back under control. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved b- Feedforward control systems attempt to predict likely changes so that any delays before taking action are minimized. - The environment and system process are both monitored in order to provide corrective action if it is likely that the system goal will not be met. - Feedforward control systems provide a proactive way of overcoming the timing delays associated with feedback systems but depend upon the accuracy of the plans on which they are based. - Figure 2.5, P.38 shows a generic closed-loop feedback system, and Figure 2.6, P.39 shows a generic closed- loop feedforward system. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Figure 2.5- A generic closed-loop feedback control system Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Figure 2.6- A generic closed-loop feedforward control system: Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 1-6- Positive and negative feedback: 1- Negative feedback is used to describe the act of reversing any discrepancy between desired and actual output. - In a business setting, for example, a budget overspend in one area might be corrected by cutting spending in others. - The major difficulty with negative feedback systems is the potential for delay in the feedback control loop. 2- Positive feedback responds to a variance between desired and actual output by increasing that variance. - An example of positive feedback might involve a company experiencing rapid sales growth, leading to increased production and higher sales level. - Notice that if sales and production are increased, the company may experience cash flow problems caused by expanding too quickly. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning Objective: 2 What are Business Information Systems? This objective covers the following point: - Definition of a Business Information System. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved What are business information systems? A business information system is: “ a group of interrelated components that work collectively to carry out input, processing, output, storage and control actions in order to convert data into information products that can be used to support forecasting, planning, control, coordination, decision making and operational activities in an organization ”. For example, an organization might use specialized information systems to support sales, marketing and human resource management activities. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning Objective :3 Describe the Resources That Support BIS This objective covers the following points: LO 3.1- Resources that support BIS LO 3.2- Advantages of processing by computer LO 3.3- Disadvantages (Limitations) of computer-based Processing LO 3.4- Business applications of BIS LO 3.5- Categories of BIS Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3.1- Resources that support BIS: BIS typically rely on the following five basic resources: 1. People resources: People resources include the users of an information system and those who develop, maintain and operate the system. 2. Hardware resources: The term “hardware resources” refers to all types of machines, not just computer hardware. - The term also covers any media used by these machines, such as compact discs or paper. 3. Software resources: The term “software resources” does not refer just to computer programs and the media on which they are stored. - The term can also be used to describe the procedures used by people. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 4. Communications resources: Resources are also required to enable different systems to transfer data. - These include networks, and the hardware and software needed to support them. 5. Data resources: The term “data resources” describes all of the data that an organization has access to, regardless of their form. - Computer databases, paper files and measurements taken by sensors on a production line are all examples of data resources. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3-2- Advantages of processing by computer: - Some advantages of processing by computer include: 1- Speed: Computers can process millions of instructions each second, allowing them to complete a given task in a very short time. 2- Accuracy: The result of a calculation carried out by a computer is likely to be completely accurate. - In addition, errors that a human might make, such as a typing error, can be reduced or eliminated entirely. 3- Reliability: In many organizations, computer-based information systems operate for 24 hours a day and are only ever halted for repairs or routine maintenance. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 4- Programmability: Although most computer-based information systems are created to fulfill a particular function, the ability to modify the software that controls them provides a high degree of flexibility. 5- Repetitive tasks: Computer-based information systems are suited to highly repetitive tasks that might result in boredom or fatigue in people. - The use of technology can help to reduce errors and free employees to carry out other tasks. - Notice that these advantages combine to give major benefits to a business. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3.3- Disadvantages (limitations) of computer- based processing: Some disadvantages to computer-based BIS include: 1- Judgment/experience: Despite advances in artificial intelligence techniques and expert systems, computer- based information systems are considered incapable of solving problems using their own judgment and experience. 2- Improvisation/flexibility: In general, computer-based information systems are unable to react to unexpected situations and events. 3- Innovation: Computers are unable to think and therefore are restricted in their ability to discover new ways or solve problems. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 4- Intuition: Human intuition can play an important part in certain social situations. For example, one might use intuition to gauge the emotional state of a person before deciding whether or not to give them bad news. Notice that, BIS cannot use intuition in this way and are therefore unsuitable for certain kinds of situations. 5- Qualitative information: Managers often make unstructured decisions based on the recommendations of others. Their confidence in the person they are dealing with often has a major influence on the decision itself. Notice that, BIS cannot act upon qualitative information of this kind. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3.4- Business applications of BIS: - The key operational activities include: 1- Data Processing: handling the large volumes of data that arise from an organization’s daily activities is described as data processing. 2- Transaction processing involves dealing with the sales and purchase transactions that an organization carries out in the course of its normal activities. 3- Process control systems: Systems which manage manufacturing and other production processes. - Figure 2.7 in P. 43 illustrates areas of applications for BIS in a typical organization. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3.5- Categories of BIS: - Information systems are commonly divided into two broad categories: ** systems that support an organization’s business activities (operations information systems) and ** systems that support managerial decision making (management information systems). (1) Operations information systems: - Systems required for the day-to-day activities of a business such as process control, transaction processing, communications (internal and external) and productivity. (2) Management information systems: - Systems providing feedback on organizational activities and supporting managerial decision making. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Table 2-1. Categories of computer-based information systems: Operations information Management information systems systems - Transaction processing - Decision support systems systems - Process control systems - Information reporting systems - Office automation - Executive information systems systems Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning Objective 4: Describing E-business Systems This objective covers the following points: LO 4.1- Electronic business (e-business) LO 4.2- Electronic commerce (e-commerce) LO 4.3- Benefits of e-business Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved E-Business Systems: E-business systems include: 4-1- Electronic business (e-business): - E-business is part of a broader internet economy which encompasses all of the activities involved in using the Internet for commerce. 4-2- Electronic commerce (e-commerce): - A common activity associated with e-business is electronic commerce (e-commerce) which can be described as using technology to conduct business transactions, such as buying and selling goods and services. E-commerce activities can be broken down into five basic activities: Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 1- Business-to-business (B2B): Transactions take place between companies. 2- Business-to-consumer (B2C): Companies sell products directly to consumers. 3- Business-to-government (B2G): Transactions take place between companies and public-sector organizations. 4- Consumer-to-consumer (C2C): Transactions take place between private individuals. 5- Mobile commerce (m-commerce): M-commerce is a relatively new development and involves selling goods or services via wireless technology, especially mobile phones and tablets. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 4.3- Benefits of e-business: - In general, the benefits of e- business include: 1- Reduced costs: By automating many of the administrative tasks associated with ordering, supplying and delivering goods or services, the cost of a typical business transaction can be reduced significantly. 2- Improved efficiency: Adapting an e-business approach could help to enhance three main areas of business: ** production processes, ** customer-focused processes, and ** internal management processes. - This is often one of the benefits of restructuring the relationship between manufacturer, retailers, and customers. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3- Access to a larger market: The Internet provides access to a global marketplace, allowing manufacturers to sell to customers directly (called e-tailing), or from business relationships with retailers located anywhere in the world. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning Objective 5: Describing Enterprise Systems This objective covers the following points: LO 5.1- What are Enterprise Systems? LO 5.2- Elements of an Enterprise System. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 5.1- What are Enterprise systems? - Enterprise Systems aim to support the business processes of an organization across any functional boundaries that exist within that organization. - They use Internet technology to integrate information within the business and with external stakeholders such as customers, suppliers and partners. 5.2- Elements of an Enterprise System: The main elements of an enterprise system are: 1- Enterprise resource planning (ERP) which is concerned with internal production, distribution and financial processes. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 2- Customer relationship management (CRM) which is concerned with marketing and sales processes. 3- Supply chain management (SCM) which is concerned with the flow of materials, information and customers through the supply chain. 4- Supplier relationship management (SRM) which is concerned with sourcing, purchasing and the warehousing of goods and services. - Note that enterprise systems provide a single solution from a single supplier with integrated functions for major business functions from across the value chain such as production, distribution, sales, finance and human resource management (HRM). - Figure 2.8, P.48 shows an enterprise system in comparison to separate functional applications. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Figure 2.8. Enterprise system in comparison to separate functional applications: Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning Objective 6: Explaining BIS and Strategic Advantage This objective covers the following points: LO 6.1- Competitive strategies LO 6.2- Value chain analysis LO 6.3- The virtual value chain LO 6.4- Using information systems for strategic advantage Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved - In order to survive and grow in a competitive environment, organizations must seek to gain strategic advantage (or competitive advantage) over their competitors. - BIS play a crucial part in gaining and sustaining a competitive edge over other organizations operating in the same industry. 6-1- Competitive strategies: - In order to gain or maintain competitive advantage, organizations can adopt one of Four basic strategies: 1- Cost leadership: - Cost leadership means simply providing goods or services at the lowest possible cost. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved - In most cases this is achieved by reducing the organization’s costs in producing goods or providing services, for example by automating parts of the production process. - Note that cost leadership can also be achieved by helping suppliers and customers to reduce costs. 2- Product differentiation: - Differentiation involves creating a distinction between the organization’s products and those of its competitors. - In many cases, differentiation is used to concentrate on a specific niche in the market so that the company can focus on particular goods and services. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3- Innovation: - Innovation is concerned with finding new ways to approach an organization activities. Examples of innovation include: ** improving existing products or creating new one; ** improving production processes; and ** entering new markets. 4- Focus: - This approach is particularly suited to organizations that rely heavily on Internet technologies, such as social media. - In general, organizations can focus on specific groups of customers and partners, or on specialized products and services. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 6-2- Value chain analysis: - To understand value chain analysis, we need also to consider an organization’s supply chain. 1- Supply chain management (SCM) is the coordination of all supply activities of an organization from its suppliers through to production of goods and services and their delivery to its customers. 2- Value chain is a model for analysis of how supply chain activities can add value to products and services delivered to the customer. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved - Traditional value chain analysis distinguishes between: ** primary activities that contribute directly to getting goods and services to the customers, and ** secondary activities which provide the inputs and infrastructure that allow the primary activities to take place. Figure 2.9, P.50 shows the value chain model which contains the primary and secondary activities of the value chain. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Figure 2.9 The value chain model Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 6-3- The virtual value chain: - Rayport and Sviokla have suggested the concept of the virtual value chain (VVC) to explain how information can help to create competitive advantage. - In doing this, they refer to the physical marketplace and its virtual counterpart, the marketspace. - They suggest that companies adopting a virtual value chain tend to go through three phases. - In each phase, companies have the opportunity to reduce costs, improve efficiency or find new ways of doing things: Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Phase1: Visibility. Companies use information to examine the physical value chain more closely. - Technology is used to manage activities in the physical value chain more efficiently. Phase 2: Mirroring capability. Physical processes start to be replaced by virtual processes. - A parallel value chain is created in the marketspace. Put more simply, activities are moved from the marketplace to the marketspace. Phase3: New customer relationships. Information drawn from the virtual value chain is used to create new customer relationships by delivering value in new ways. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 6-4- Using information systems for strategic advantage: - BIS can be also used to counter the five competitive forces of their environment described by Porter (1980). These five forces are: 1- The threat of new entrants; 2- The bargaining power of suppliers; 3- The bargaining power of customers; 4- The threat of substitute products or services; 5- Rivalry among existing competitors. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Porter’s work can also be used to identify a number of ways in which BIS can be used to achieve competitive advantage. These include: ** Improving operational efficiency; ** Raising barriers to entry; ** Locking in customers and suppliers; ** Promoting business innovation; ** Increasing switching costs; ** Leverage. Figure 2.10, P.52 summarizes the main ways in which computer- based information systems can be used to achieve competitive advantage. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Figure 2.10 Applying computer-based information systems for competitive advantage Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved End of Chapter Two Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved CHAPTER 4 Databases and analytics Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning objectives: After studying this chapter, the students will be able to: LO 1. Understand the use of database application software LO 2. Understand the concept of data warehouses LO 3. Understand the concept of analytics and the use of big data Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning Objective 1: Understand the use of database application software This objective covers the following points: LO 1.1- What is a database? LO 1.2- Business-Level advantages of databases LO 1.3- An overview of database types LO 1.4- Database management systems Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 1.1- What is a database? - A database is a collection of related information stored in an organized way so that specific items can be selected and retrieved quickly. 1.2- Business-level advantages of databases:  The main business benefits of databases derive from the way that databases are designed for sharing information. They are superior for: 1- Multi-user access: - Multi-user access means allowing different people in the business access to the same data simultaneously, such as a manager and another member of staff accessing a single customer’s data. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 2- Distributed access: - Distributed access means users in different departments of the business can readily access data. 3- Speed: - For accessing large volumes of information, such as the customers of a bank, only databases are designed to produce reports or access the information rapidly about a single customer. 4- Data quality: - For data quality, sophisticated validation checks can be performed when data are entered to ensure their integrity. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 5- Security: - Access to different types of data can readily be limited to different members of staff: For example, in a car dealership database the manager of a single branch could be restricted to sales data for that branch. 6- Space efficiency: - Space efficiency can be achieved by splitting up a database into different tables when it is designed, therefore less space is needed. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 1.3- An overview of database types: - Approaches to the design of databases include: file processing databases, database management systems, data warehouses and databases for big data. - The following provides a brief overview of each of these approaches: 1.3.1- File Processing databases: - Early data processing systems were based around numerous files containing large amounts of data related to daily business transactions. - As a result, many organizations found themselves in a position where they held large amounts of valuable data but were unable to maximise their use of them. - A major problem stemmed from the fact that the data held were often stored in different formats. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Notice that in order to make use of these data, it was usually necessary to create specialized computer programs, often at great expense. - With file processing databases, the main types of databases are: 1- Flat-file database: - A flat-file database is a self-contained database that only contains one type of record – or table – and cannot access data held in other database files. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 2- Free-form database: - A free-form database allows users to store information in the form of notes or passages of text. - Notice that information is organized and retrieved by using categories or key words. 3- Hypertext database: - In a hypertext database, information is stored as a series of objects that can consist of text, graphics, numerical data and multimedia data. - Any object can be linked to any other, allowing users to store disparate information in an organized manner. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 1.4- Database management systems (DBMS): 1- Database management system concept: - A DBMS is one or more computer programs that allow users to enter, store, organize, manipulate and retrieve data from a database. 2- Characteristics of database management systems: - Some of the major characteristics of the database management systems (DBMS) approach include the following: Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved a- Programs included a range of general- purpose tools and utilities for producing reports or extracting data. b- The availability of general-purpose tools enabled non-technical users to access data. - Users were able to analyze data, extract records and produce reports with little support from technical staff. c- The use of a DBMS encouraged organizations to introduce standards for developing and operating their databases. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning Objective 2: Understand the concept of a data warehouses This objective covers the following points: LO 2.1- Data warehouses concept LO 2.2- Data marts concept LO 2.3- Data warehousing Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 2.1- Data warehouses concept: - Data warehouses are large database systems containing current and historical data that can be analysed to produce information to support organisational decision making. 2.2- Data marts concept: - Data marts are a smaller, departmental version of a data warehouse which may be easier to manage than a company-scale data warehouse. - It should be noted that: ** Data marts do not aim to hold information across an entire company, but rather focus on one department. ** A data warehouse can consist of many data marts supporting different (smaller) operations. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 2.3- Data warehousing 1. Data warehousing concept: Data warehousing is the process of creating and maintaining a data warehouse. Figure 4.1, P.140 indicates the major steps in data warehousing process. Figure 4.1 The data warehousing process. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved There are three main elements in data warehousing process: First: The data warehouse takes information from internal and external sources such as operational systems which record sales or transactions with customers. Notice that data can come from sources such as: ** legacy databases holding historical data, ** operational systems such as enterprise resource planning (ERP), ** electronic point-of-sale (EPOS) data from customer transactions, and ** data from electronic data interchange (EDI) systems. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Second: Extracting data from one or more databases and transforming those data into a suitable format for the data warehouse. Third: Loading those data into the data warehouse. Note: ETL (Extraction, Transformation, and Load) software extracts data from one or more databases, transforms those data into a suitable format for the data warehouse and loads those data into the data warehouse. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning Objective 3: Understand the concept of analytics and the use of big data This objective covers the following points: LO 3.1- Analytics concept LO 3.2- Types of analytics LO 3.3- Big data concept LO 3.4- Data mining concept Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3.1- Analytics concept: Analytics refers to data (quantitative and qualitative) driven analysis using various methods such as data mining and statistical techniques to provide better decision making. Notice that: ** analytics is built upon various approaches to data- driven analysis. ** analytics can be viewed as the integration of business intelligence/information systems, statistics and modelling and optimisation tools. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3.2- Types of analytics: - In terms of the practice of analytics, techniques can be categorized into three types: 1- Descriptive analytics: - Descriptive analytics answers the question of what has happened and what is happening through approaches such as: ** business intelligence, ** web analytics, and ** statistical techniques. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 2- Predictive analytics: Predictive analytics answers the question of what will be happening through approaches using statistical techniques such as: ** regression analysis, ** data mining, and ** forecasting techniques. 3- Prescriptive analytics: - Prescriptive analytics answers the question of what should be happening (i.e. recommending course of action and the likely outcome of those actions) through approaches such as: ** linear programming, ** decision trees, and ** simulation. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved  The different types of data that are used in analytics include: 1- Structured data: - Structured data are what might be considered the traditional data that are produced by IT systems and include financial and customer data that can be defined in a field within a database file. - For example, customer data fields might include customer number, name, and address. 2- Unstructured data: - Unstructured data represent the majority of business- related data and include video, graphic images, web sites, e-mail, social media posts. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3- Semi-structured data: - Semi-structured data represent data that have elements of structure but also contain arbitrary aspects. - For example, E-mails represent semi-structured data in that the sender's name and timestamp are provided but the content of the e-mail is unstructured. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3.3- Big data concept: - The term big data refers to the large datasets that are enabled by IT systems which support, capture and disseminate these data. - The real value of big data stems from its ability to analyse large datasets using analytical tools. - This analysis has been enabled by innovations such as improved computer network speeds and storage on cloud computing platforms. - A particular emphasis of the analysis of big data is the use of unstructured data such as e-mail exchanges, social media posts, video and voice recordings. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3.4- Data mining concept: - Data mining in its broadest sense is a process that uses statistical, mathematical, artificial intelligence and other techniques to extract useful information from large databases. - Notice that under this wide definition most types of data analysis can be classified as data mining. - In its original definition data mining is used to identify patterns or trends in the data in data warehouses which can be used for improved profitability. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved END of CHAPTER FOUR Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved CHAPTER 6 Enterprise and Functional BIS Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning Objectives After studying this chapter, the students should be able to: LO 1 Identify and describe the major components of an Enterprise System. LO 2 Describe the main types of Enterprise systems. LO 3 Describe and Identify the main types of Operations Information Systems. LO 4 Describe and identify the main types of Management Information Systems. LO 5 Identify and describe Departmental Applications. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning Objective 1 Identify and describe the components of an Enterprise System This objective covers the following points: 1.1. Definition of the Enterprise systems (ES) 1.2. Characteristics of the ES 1.3. The benefits of the ES approach 1.4. The disadvantages of the ES approach Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 1.1. Definition of the Enterprise Systems (ES): - Enterprise systems (ES) are systems that aim to support the business processes of an organization across any functional boundaries that exist within that organization. Notice that: 1- ES use Internet technology to integrate information within the business and with external stakeholders such as customers, suppliers, and partners. 2- The main types of enterprise systems are: ** Enterprise resource planning (ERP), ** Customer relationship management (CRM), ** Supply chain management (SCM), and ** Supplier relationship management (SRM). Figure 6.2, P.205 shows Enterprise application in comparison to separate functional applications. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Figure 6.2 Enterprise application in comparison to separate functional applications Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 1.2. Characteristics of the Enterprise Systems: ES are characterized by: 1- A cross-functional process view of an organization. - They will contain a set of defined business process designs, covering areas such as procurement, production and fulfilment. 2- ES use a centralized database structure that enables integration of data across the organization. 1.3. The benefits of the ES approach - The benefits of the ES approach include: 1. Integration of organizational processes resulting in increased efficiency and quality of customer service. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 2. Better sharing of information within the organization due to integration of modules leading to a better decision making and a more agile(smart)organization. 3. Simplified support and maintenance through a single supplier rather than dealing with many legacy systems. 4. Use of ‘best-of-breed’ ES solution applied by other companies. Best-of-breed are applications offered by vendors that are seen as providing excellent functionality within their area of application. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 1.4. The disadvantages of the ES approach: - The main disadvantages of ES are: 1. High costs charged by suppliers for what is a large complex system; 2. A major planning, training and development effort is needed to introduce successfully a system that will radically change both the information systems and business processes of the organization; Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3. The business usually has to change its processes or way of working in order to fit the ERP process blueprint. ** A Process blueprint is a standardized process design for an organizational process. Notice that: ** Competitor companies can mitigate competitive advantage gained by implementing ES by also implementing the same system using the same process designs. ** The use of ES standard process designs may inhibit (prevent) innovation in developing new ways of undertaking business processes. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning Objective 2 Describe the Main Types of Enterprise Systems This objective covers the following ES: 2.1- Enterprise resource planning (ERP) systems 2.2. Supply chain management (SCM) systems 2.3. Customer relationship management (CRM) systems 2.4. Supplier relationship management (SRM) systems Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 2.1- Enterprise resource planning (ERP) Systems:  ERP systems offer a single solution from a single supplier with integrated functions for major internal processes such as production, distribution, sales, finance and human resource management.  Three core ERP processes are procurement, fulfillment and production.  Note: The activity of procurement will be used as an example of the use of an ERP system. The procurement process:  The role of procurement is to acquire all the materials needed by an organization in the form of purchases, rentals, contracts, and other acquisition methods.  The procurement process also includes activities such as selecting suppliers, approving orders and receiving goods from suppliers. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved ❖The role of the ERP system in the procurement process: - The ERP will make the procurement process more efficient by: ** Supporting the execution of the process. ** Capturing and storing data generated by the process steps, and ** Providing information that can be used to monitor process performance. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 2.2. Supply chain management (SCM) systems: ❑The supply chain consists of the series of activities that moves materials from suppliers, through the organization to customers. Notice that: 1- Each product or service will have its own supply chain, which may involve many organizations in processing, transportation, warehousing and retail. 2- Activities on the input side to the organization are termed “upstream” or “supply side” and are divided into tiers of suppliers. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3- Upstream suppliers that supply the organization directly are termed “first-tier” and suppliers that supply first-tier organizations are termed “second-tier” and so on. - Examples of upstream suppliers are component and sub-assembly suppliers. 4- Activities on the output side are termed “downstream” or “demand side” and are divided into tiers of customers. Examples of downstream customers are wholesalers and retailers. Figure 6.4 p. 210 illustrates the structure of a supply chain. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Figure 6.4 The structure of a supply chain Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved ❑ The terms used in the area of SCM are defined in a number of ways and so the most common terms are: ❑ Supply chain management and logistics are terms used to refer to the management of the flow of materials through the entire supply chain. ❑ Sometimes logistics or business logistics refer to activities in the upstream or downstream portion of the chain. ❑ Inbound (or inward) logistics is used to describe the activity of moving material in from suppliers, and ❑ Outbound (or outward) logistics is used to describe the activity of moving materials out to customers. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 2.3. Customer relationship management (CRM) systems: Customer relationship management (CRM) systems connect the ERP system to its customers and cover the whole process by which relationships with customers are built and maintained. ❖ CRM systems are designed to integrate the range of information systems that contain information regarding the customer. ❖ CRM systems are built around a database and when this database is accessed by employees and customers using a web site technology is often referred to as e- CRM or electronic-CRM. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved ❖Common applications which would be integrated in a CRM system include: 1. Customer data collection. 2. Customer data analysis. 3. Salesforce automation. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 1. Customer data collection: - This includes personal details such as age, gender and contact address, also a record of purchase transactions undertaken in terms of factors such as location, date, time, quantity and price. - This information can be used by call center staff to improve and tailor their services to individual customers. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 2. Customer data analysis: - The captured data allow the categorization and targeting of customers according to criteria set by the firm. - This information can be used to improve the effectiveness of marketing campaigns. 3. Salesforce automation: - The entire sales cycle from lead generation to close of sale and after-sales service can be facilitated using CRM. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 2.4. Supplier relationship management Systems: ❖Supplier relationship management (SRM) systems connect an organization's ERP system to its suppliers and refers to all activities involved with obtaining items from a supplier, which includes not only procurement, but also inbound logistics such as transportation, goods-in and warehousing before the item is used. ❖Procurement is an important aspect of SRM as the cost of materials can represent a substantial amount of the total cost of a product or service. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved - Notice that: 1- SRM can achieve significant savings and other benefits which directly impact the customer. 2- SRM also enables greater flexibility in ordering goods from different suppliers according to best value. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning Objective 3 Describe and Identify the main types of Operations Information Systems This objective covers the following points: 3.1- Definition and types of operations information systems 3.2- Transaction processing systems (TPS) 3.3- Office automation systems (OAS) 3.4- Process control systems Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3.1- Definition and types of operations information systems: ❖ Operations information systems (OIS) are used for the tasks involved in the daily running of a business. ❖ Their performance is often vital to an organization and they are sometimes described as mission-critical or strategic information systems. ❖ We consider three types of operational systems: 1- Transaction processing systems (TPS). 2- Office automation systems (OAS). 3- Process control systems (PCS). Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3.2. Transaction processing systems (TPS): - Transaction processing systems (TPS) are used to manage the exchange of information and funds between a company and third parties such as customers, suppliers and distributors. - Transaction processing systems (TPS) perform the frequent routine external and internal transactions that serve the operational level of the organization. Some examples of transaction processing include: 1- Customers placing orders for products and services from a company; 2- A company placing orders with a supplier for components from which to make its products; 3- A withdrawal of money from an auto-teller machine (ATM); 4- Customers ringing a call center of a bank to pay their bill. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3.3. Office automation systems (OAS): Office automation systems (OAS) are information systems intended to increase the productivity of office workers. - There are three critical organizational roles for office automation systems: 1- They Coordinate and manage the work of local, professional and information workers within the organization. 2- They Link the work being performed across all levels and functions of the organization. 3- They Couple the organization to the external environment, including to its clients and suppliers. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Examples of office automation systems include: 1- Groupware, 2- Document imaging processing (DIP), 3- Workflow management systems (WFM). 3.3.1. Groupware: - Groupware is software that enables information to be shared by people collaborating on solving problems. - This could include activities such as: ** the scheduling and running of meetings, ** sharing documents, and ** communicating over a distance. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved - Note that: Groupware assists teams of people in working together because it provides the “three Cs” of communication, collaboration and coordination: 1- Communication is the core groupware feature which allows information to be shared or sent to others using electronic mail. 2- Collaboration is the act of joint cooperation in solving a business problem or undertaking a task. 3. Coordination is the act of making sure that a team is working effectively and meeting its goals. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3.3.2- Document imaging processing (DIP): - Document imaging processing (DIP) systems attempt to alleviate (lessen) the problems caused by paper-based systems, including: ** the cost of handling large amounts of paperwork, and ** the time wasted searching for paper documents. - DIP systems convert documents (and images) into a digital format which allows storage, retrieval and manipulation of the document on computer. - The document is converted using a scanner which can be either: ** handheld and passed over a document or; ** flat-bed type where a document is placed on a glass sheet and a scanner reader passes under it. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3.3.3- Workflow management systems (WFM): - Workflow management (WFM) is defined by Workflow Management Coalition as: “ the automation of a business process, in whole or part during which documents, information or tasks are passed from one participant to another for action, according to a set of procedural rules “. - Workflow systems are used to automate business processes by providing a structured framework to support the process. - Workflow is usually used in conjunction with DIP technology to improve efficiency by automatically routing documents to the correct person to deal with them. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3.4. Process control systems: - Process control systems are systems that report to employees and supervisors who are very close to a specific activity. - They are particularly associated with the support and control of manufacturing processes. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning Objective 4 Describe and Identify the main types of Management Information Systems This objective covers the following points: 4.1- Definition and types of management information systems 4.2- Classification of decisions by decision type and their relation to type of systems 4.3- Decision support systems (DSS) 4.4- Information reporting systems (IRS) 4.5- Executive information systems (EIS) Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 4.1- Definition and types of management information systems: 4.1.1. Definition of management information systems (MIS): Management information systems can be defined as: “systems providing feedback on organizational activities and supporting managerial decision making”. - The applications of MIS will be considered from a decision-making perspective. - Three types of of management information systems will be considered in our discussion: 1- Decision support systems (DSS) 2- Information reporting systems (IRS) 3- Executive information systems (EIS) Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 4.2- Classification of decisions by decision type and their relation to different types of system: Decision types: - The identification of problems according to their degree of structure provides a useful framework for defining decision types. Figure 6.16, P.231 indicates that: - At the operational level, structured decisions predominate, and these are commonly supported by transaction processing systems (TPS). Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved - At the tactical level, semi-structured decisions that need to be made as part of the evaluation and planning of the business and these are supported by decision support systems (DSS). ❑ At the strategic level which often involves unstructured decisions (strategic decisions) and these are supported by executive information systems (EIS). ❑ Figure 6.16, P.231 shows classification of decisions by decision type and their relation to different types of system. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 4.3- Decision support systems: - Decision support systems (DSS) provide information and models in a form to facilitate tactical and strategic decision making. - Note that when used by teams of people to make decisions, they are known as GDSS or group decision support systems. - They are information systems that support management decision making by integrating: - company performance data; - business rules based on decision tables; - analytical tools and models for forecasting and planning; - an easy-to-use graphical user interface. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved The main features and objectives of DSS are: 1. Features of Decision support systems: - The main features of DSS are: (a) They are often developed by end-users and are departmental rather than corporate systems. (b) DSS tend to be used for ad hoc queries rather than regular reporting. (c) They are frequently used as a marketing tool, with applications such as: ** Forecasting sales through geodemographic analysis; ** Optimizing distribution networks, using a model to select the best retail locations; ** Optimizing product mixes. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 2. Objectives of decision support systems: - The main objectives of DSS are: (a) The DSS should provide support for decision making, but in particular semi-structured and unstructured decisions. (b) The DSS should not focus a single level of management decision making, such as tactical. Rather, it should integrate across all levels in the organization. (c) The DSS should support all phases of the decision-making process. (d) The DSS should be easy to use. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Notice that there are a wide array of terms used to describe software developed to help solve unstructured and semi-structured problems. These include: 1- Artificial intelligence (AI): - Artificial intelligence (AI) is the term given to research how computers can reproduce human intelligence. Note that: Many of the terms such as expert systems and neural networks, are specialist areas of AI from which business applications have been produced. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 2- Expert systems: Features of expert systems: - The main features of expert systems are: (a) Expert systems are used to represent the knowledge and decision-making skills of specialists so that non- specialists can take decisions. (b) They encapsulate the knowledge of experts by providing tools for the acquisition of knowledge and representation of rules and their enactment as decisions. (c) They need to contain information relevant to taking the decision. This is often referred to as the knowledge base and includes the rules on which the decisions are based. Figure 6.17, P.233 shows the relationship between the different components of the expert systems. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Expert systems applications: - Applications of expert systems include: Gold prospecting; Medical diagnosis; Credit decisions; Insurance underwriting; Product design, management and testing. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3. Neural networks: ❑ Neural network are systems that use a similar process to biological intelligence to learn problem-solving skills by ‘training’ or exposure to a wide range of problems. ❑ The learning occurs through interactions between nodes, which are similar to the neurons of the brain. ❑ Neural networks work in a similar way to brain neurons, which gives them the capacity to learn through exposure to different patterns. ❑ For example, a neural network could be used for a photofit application if it learnt the characteristics of different types of people. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved  Neural networks can be applied to business applications, consider a bank processing Visa card transactions, they can predict the likelihood of fraud on an account. 4.4- Information reporting systems (IRS): Information reporting systems, also referred to as management information systems, are systems that provide information in the form of predefined reports for day-to-day decision-making needs. There are two main types of report that these systems produce: 1. Periodic reports: - These are predefined reports that are required by decision makers at regular intervals. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved  Examples include a monthly financial statement and a weekly sales analysis. 2. Exception reports:  These are reports produced only when required.  They can be generated automatically by information system when a performance measure moves outside a predefined range.  Examples include sales falling below a certain level and customers exceeding their credit limits. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 4.5- Executive information systems (EIS): Executive information systems (EIS)/executive support systems (ESS) provide senior managers with a system to analyze, compare and highlight trends to help govern the strategic direction of a company. Some important features of EIS are as follows: 1- They provide summary information to enable monitoring of business performance. 2- They are used mainly for strategic decision making but may also provide features that relate to tactical decision making. 3- They provide analysis tools. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 4. They must be integrated with other facilities to help manage the solving of problems and the daily running of the business. These facilities include electronic mail and scheduling and calendar facilities. 5. They integrate data from a wide variety of information sources, including company and external sources such as market and competitor information. 6. They have to be designed according to the needs of managers who do not use computers frequently. They should be easy to learn. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning Objective 5 Identify and describe Departmental applications This objective covers the main types of accounting information systems (AIS) Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved - There are different functions inside the organization and each function has its own information system such as: 1- Human resource management (HRM) information systems. 2- Marketing information systems. 3- Accounting information systems. - In this part we will focus only on the Accounting information system (AIS). Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 5. Accounting information systems: 5.1- Definition of accounting information systems (AIS): - Accounting information systems are used for the financial activities that take place in any organization. - These include the operation of sales order processing systems, payroll, budgeting and reporting of the financial condition of the organization. - Other functions include the management of capital investment and general cash flow management. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Examples of accounting information systems include: (a) Operational accounting systems: - These systems focus on daily recording of business transactions, that is the flow of funds through an organization. Note that: ** All businesses require this basic information. ** In larger businesses these systems will be linked to other operational functions, such as sales order processing and inventory. (b) Management accounting systems: - These systems enable planning and control of business finance. - These are sometimes referred to as ‘financial information systems’ and will be linked to executive information systems. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 5.2- Application areas for Accounting information systems: - Most companies use an integrated accounting system that covers a number of application areas as shown in Figure 6.18, P.240 : (1) Sales order processing (SOP) system: - This system is particularly important, as it records sales transactions and supplies documents to other areas such as stock control and manufacturing.. (2) Inventory system: - This system maintains stock levels by recording when stock is used for sales orders. - A reorder point (ROP) system will generate an order for stock once the level of a stock item falls below a certain number of units. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved - (3) Payroll system: - This system processes payments to employees, including deductions for such items as National Insurance and income tax. (4) Budgeting systems: - Budgets are an important control tool for management. - A predetermined budgeted amount is periodically compared to the actual expenditure and any difference noted as a variance. (5) Cash flow reporting system: - Cash flow reporting system is necessary to keep track of the organization's cash reserves. - Cash is needed for working capital (day-to-day expense) and for the purchase of long-term assets such as plant or machinery. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved (6) Capital budgeting system: - The financial system should contain tools that allow for the evaluation of capital spending plans. - Major investments are compared to the financial return that the organization could have gained from placing the cash in a bank account and accruing interest. - The investment evaluation may also inform the decision to buy or lease equipment. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved (7) Financial analysis system: - Financial analysts use a variety of performance measures to gauge the financial position of an organization. - These include such measures as the current ratio, inventory turnover and earnings per share. (8) Forecasting systems: - By projecting budget statements into the future, an organization is able to forecast its potential financial state. - These forecasts will need to incorporate economic and market forecasts in order that sales and cost data can be estimated. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved End of Chapter Six Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved CHAPTER 7 An Introduction to Acquiring and Developing BIS Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning objectives: After Studying this chapter Students should be able to understand the following aspects: L O 1 Introduction L O 2 How and Why are Information Systems Acquired? L O 3 Software Acquisition and the Systems Development Lifecycle L O 4 Rapid Application Development and Prototyping. L O 5 Purchase of an Off-the-shelf Package L O 6 User-developed Applications Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning Objective 1: Introduction This objective covers the following points: 1.1- BIS acquisition 1.2- Systems development lifecycle (SDLC) 1.3- SDLC stages Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 1.1- BIS acquisition: - BIS acquisition describes the method of obtaining an information system for a business. - It is the process of evaluation and implementation of BIS. The main choices of BIS acquisition are: * Off-the-shelf (packaged); * Bespoke (tailor-made) applications developed by an in-house IT department or a software house; and * Systems that are end-user-developed (i.e., by non- IS/IT professionals). Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 1.2- Systems development lifecycle (SDLC): - Any information systems project follows a logical series of development phases. These are known as the systems development lifecycle. 1.3- SDLC phases (stages): - Any BIS project follows a logical series of development phases. Typical stages are: ** Initiation, ** feasibility study, ** analysis of business requirements, ** systems design, ** system build and implementation, and, finally, ** review and maintenance. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning Objective 2: How and Why are Information Systems Acquired? This objective covers the following parts: Part 1: Methods for acquiring the information systems: 2.1- Bespoke development 2.2- Purchasing ‘off-the-shelf’ software 2.3- User-developed software 2.4- Hybrid approaches to systems acquisition Part 2: Factors affecting software acquisition Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Part one: Methods for acquiring the information system: - There are three main methods (alternatives) for acquiring the information systems necessary to support a particular business need. These are: ** bespoke development, ** off-the-shelf software, and ** end-user development. Figure 7.2, P.251 summarizes these three alternatives. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 1- Bespoke development: - Bespoke development is the term used when information systems are developed ‘from scratch’ by one or more IS professionals to meet the business requirements of the application. - Here new BIS will be developed from scratch by a team of IS professional. ** The team will either work for business, in which case we refer to this as ‘in-house’ bespoke development, or ** for a third party such as a software house, in this case we say that the software development has been ‘outsourced ’. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Benefits of bespoke development: Bespoke development has the following benefits : ** It produces software tailored to the precise requirements of the business. ** The development of bespoke information systems may confer (grant) specific competitive advantage since competitor organizations do not have the same software solutions. Difficulties of bespoke development: Expense: Bespoke development is the most expensive way of developing new information systems. Time: Bespoke development, especially when using formal structured methodologies, is popular for time overruns, usually with delays of months or years. Quality: Bespoke is usually not free from bugs. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 2.2- Purchasing ‘off-the-shelf’ software: - Off-the-shelf purchase of packaged software is an acquisition method that involves direct purchase of a pre- written application used by more than one company. - The major disadvantages of off-the-shelf software are: ** It may require businesses to process information in a particular way that is different from the way they normally do business. ** A certain off-the-shelf software package may not offer sufficient features. - The major benefit, however, of off-the-shelf software packages is their low cost when compared to acquiring bespoke software with the same level of functionality. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 2.3- User-developed software: User-developed software is software written by non-IS professionals, namely the business users. - The main features of user-developed software are: ** End-user- applications are more limited in scope, ** Applications may be departmental or personal in nature, and ** They are usually output- or report-oriented rather than input-driven. - Note that these applications may be written either by IT professionals or by the end-users themselves. If the latter is the case, they are often referred to as user- developed applications. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 2.4- Hybrid approaches to systems acquisition: - The approaches to systems acquisition described above are not mutually exclusive to a given project or within an organization. - Where the software is generic to all businesses, as is the case with systems software and office productivity packages, off-the-shelf software will be purchased. - Where the business has more specific needs and wishes to achieve a competitive advantage, bespoke and tailored approaches to acquisition will be used. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Part two: Factors affecting software acquisition: - There are a number of factors that will influence the choice of acquisition method. - Three critical ones are time, cost and quality considerations. - The different acquisition options have different strengths when considered in terms of the three critical criteria. Table 7.1, shows how the alternatives compare in terms of these three criteria. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Note that the quality of the delivered product is considered from two aspects: ** the number of bugs or errors found, and ** the suitability of the software in meeting the requirements of the business user. Other factors affecting software acquisition include the following: ** Organization size. ** In-house IS/IT expertise. ** Complexity of the required information system. ** Uniqueness of the business or business area to be supported. ** IS/IT expertise among end-users. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning Objective 3: Software Acquisition and The Systems Development Lifecycle This objective covers the following points: 3.1- Initiation 3.2- Feasibility assessment 3.3- Systems analysis 3.4- Systems design 3.5- System build 3.6- System implementation and changeover 3.7- Review and maintenance Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved - The SDLC approach recognizes that systems are developed in a series of steps or phases and that each phase needs to be completed before the next one starts. - Recognition is also given to the fact that the programming activity (part of the build phase) should only start once user requirements have been determined and the systems design produced. Figure 4.7, P.256 illustrates the normal steps found in the SDLC. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved - The basic steps that most systems development projects follow are: 3.1- Initiation: - The initiation phase is the startup phase and is the first phase in an information system (IS) development project. - Its aims are to establish whether the project is feasible and then prepare to ensure the project is successful. - The initiation phase context is as follows: Input: creative thought and/or systematic evaluation of IS needs. Output: idea for initiation of a new information system. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Note that: The source of this initiation process may be one of the following: ** Management director or other senior management. ** Information systems department. ** Functional business area. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3.2- Feasibility Study (assessment): - Feasibility study is the activity that occurs at the start of the project to ensure that the project is a viable business proposition. - The feasibility report analyzes the need for and impact of the system and considers different alternatives for acquiring software. The feasibility study context is as follows: Input: idea for initiation of new information systems. Output: feasibility report and recommendation to proceed. - The feasibility assessment can be considered to be part of the initiation phase. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved - It will establish whether computer-based information systems fit certain feasibility criteria. Three criteria are usually cited: 1. Technical feasibility: - To be technically feasible, either the technology exists, or it can be created to support the required system. 2. Economic feasibility: - Economic feasibility means that information systems must generate more benefits than the cost needed to produce them. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3. Operational and organizational feasibility: - Assuming that the proposed information systems are both technically and economically feasible, an assessment must be made of whether the project is operationally and organizationally feasible. - By operationally feasible, we mean that the system must be capable of performing within the required speed, volume, usability and reliability parameters. - Organizational feasibility considers how closely the proposed information system will match the needs of the organization. It will also involve a review of how the system users’ skill sets and attitudes will affect the system. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 3. Systems analysis: - Systems analysis is the capture of the business requirements of a system from: ** talking to or observing end-users, and ** using other information sources such as existing system documentation. - The systems analysis context is as follows: Input: terms of reference in feasibility report describing outline requirements. Output: detailed requirements specification summarizing system functions. Supported by diagrams showing the information flow and processes that are required. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved - Once a proposed system is agreed to be feasible, it is necessary to carry out the detailed work of assessing the precise requirements that the intended users have for the new system. - Note that the systems analysis step is sometimes referred to as the “ requirement determination” step or the “system study” step. There are three main tasks within this phase: First, it is necessary to gain an understanding of how the current information systems (computerized or paper- based) work. Secondly, a diagrammatic model of the current system workings is produced to ensure that IT professionals and system users are in agreement. Finally, a set of requirements for the new information system is produced. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved The requirements specification will define: - The features that the new system is required to contain (for e.g. the ability for end-users to be able to design their own reports); - The scope of the system under consideration (e.g. is the system intended for just one functional area of the business or is it to embrace all business activities?); - The intended users of the new system; - System performance standards, including response times, batch processing times (if required) and reliability needs; - Environmental requirements such as physical working environment, operating system and hardware on which the system will run. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 4- Systems design: - The systems design phase defines how the system will work in key areas of user interface, program modules, security and database transactions. The systems design context is as follows: Input: requirements specification. Output: detailed design specification. Note that systems design is broader in scope and will deal with such matters as: choosing an appropriate database management system; establishing general systems security standards; Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved general standards for printed report production; screen design standards for input and output; data capture requirements; data storage requirements. Note that: Detailed design, on the other hand, will result in a blueprint for individual system modules which will be used in the system build phase that follows. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 5. System build: - System build is the creation of software by programmers. - It involves: ** writing the software code (programming), ** building release versions of the software, ** constructing and populating the database and testing by programmers and end-users. - Note that: Writing of documentation and training may also occur at this stage. - The system build context is as follows: Input: requirements and design specification. Output: working software, user guides and system documentation. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Note that: ** If during the build phase it appears from testing that the system does not meet the original requirements as determined during the analysis step, then it will be necessary to revisit the design step to see whether any errors were made in interpreting the systems requirements. - If the design brief was correctly interpreted but the system still contains errors in the delivery of the perceived requirements, it will be necessary to revisit the analysis step to determine the systems requirements more precisely. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 6- System implementation and changeover: - System implementation covers practical issues such as: ** making sure the hardware and network infrastructure for a new system are in place; ** testing of the system; and also ** human issues of how best to educate and train staff who will be using or affected by the new system. - Note that implementation also involves the transition or changeover from the old system to the new. - The system implementation context is as follows: Input: working system, not tested by users. Output: signed-off, operational information system installed in all locations. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 7- Review and maintenance: - Once the system is operating under live running conditions, it will be inevitable that changes will be required over time. - The maintenance phase involves two different types of maintenance. - The first, known as ‘unproductive maintenance’, stems from errors or oversights in the original systems development which, while: ** not preventing the system operating to an acceptable level, and ** are still necessary to correct for it to conform with the original specification. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved - The second form of maintenance involves the addition of new features and facilities that extend the scope and functionality of the information system. - Note that an activity known as the Post-implementation review should also be undertaken. - Post implementation review is a meeting that occurs after a system is operational to review the success of the project and learn lessons for the future. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning Objective 4: Rapid Application Development (RAD) and Prototyping This objective covers the following points: 4.1- Traditional methods disadvantages 4.2- Rapid Application Development 4.3- Prototyping Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 4.1- Traditional methods disadvantages: - The evidence from project failures has implied that traditional structured methodologies such as the SDLC have a tendency to deliver systems that arrive too late and therefore no longer meet their original requirements. Traditional methods can fail in a number of ways: 1- A gap of understanding between users and developers: - Users tend to know less about what is possible and practical from a technology perspective, while developers may be less aware of the underlying business decision- making issues which lie behind the systems development requirement. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 2- Tendency of developers to isolate themselves from users. 3- Quality measured by closeness of product to specification. - The system should not do exactly what the specification said. - The real focus should be on a comparison of the deliverables with the requirements, rather than of deliverables with a specification that was a reflection of a perceived need at a particular point in time. 4- Long development times. 5- Business needs change during the development process. 6- What users get is not necessarily what they want. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 4.2- Rapid Application Development (RAD): - Rapid applications development (RAD) is a possible solution to the traditional SDLC problems and pressures. This uses prototyping to involve users and increase development speed. - Rapid applications development (RAD) is a method of developing information systems which uses prototyping to achieve user involvement and faster development. - The result of the RAD approach should be new information systems that more closely meet the requirements of the intended users, because the requirements will not have changed significantly over a relatively short development timescale. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 4.3- Prototyping: - A Prototype is a preliminary version of part or a framework of all of the information systems which can be reviewed by end-users. - Prototyping is an iterative process where users suggest modifications before further prototypes and the final information system is built. - Note that With prototyping, all the phases within the SDLC are still present, but the activities of analysis, design, test and review will be repeated within the prototyping phase. Figure 7.5, P.261 gives a more realistic representation of systems development. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning Objective 5: Purchase of an off-the-shelf package This objective covers the following point: 5.1- SDLC application for packaged software. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 5.1- SDLC application for packaged software: - The traditional SDLC model was discussed in the context of a system that is being acquired using a bespoke development approach. - However, as we have seen, there are methods of information system (IS) acquisition that do not require the development of bespoke solutions. - For packaged software, the application of the SDLC stages would typically be as follows: Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 5.1- SDLC application for packaged software: 1- Initiation - This step clearly applies regardless of the acquisition method. - There must be some kind of stimulus which creates the idea that a computer-based information system is needed to respond to a business opportunity or problem. 2- Feasibility - This step also must be followed regardless of the acquisition method. - Indeed, it is during the feasibility step that an investigation will be undertaken into the technical aspects of the required system and a make-or-buy decision will be made. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 5.1- SDLC application for packaged software (Continued) - A ‘buy’ decision indicates that a solution is probably available off the shelf; - A ‘make’ decision indicates that a bespoke solution is probably required. 3- Analysis - This is an important step in the acquisition of off-the- shelf software as it is in building bespoke software solutions. - System requirements must be determined and catalogued so that they can be compared with the features offered by the package. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 5.1- SDLC application for packaged software (Continued) - Part of the analysis exercise, therefore, will be to determine the extent to which a software package may be configured to meet the organization's needs. 4- Design - It is here that significant differences are found when compared with bespoke software design. - An off-the-shelf package will have been designed with many different businesses in mind and will offer a range of features to satisfy most requirements. - The ‘how’ aspect of software acquisition has, therefore, already been determined and the system subsequently built. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 5.1- SDLC application for packaged software (Continued) - The task for the purchaser of an off-the-shelf package is to compare the design features required against those offered by different packages. 5- Build - With an off-the-shelf package, the system has already been built by the vendor. - As part of the feature set offered by a package, there may be an ability to customize aspects of the software product by setting certain parameters. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 5.1- SDLC application for packaged software (Continued) For example, an accounting package may be set up either to interface with a sales order processing system from the same vendor, or to offer the ability to interface with a package offered by another supplier or with a bespoke system. - There will also need to be a testing phase where all the relevant features of the package are run in a simulated live environment. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 5.1- SDLC application for packaged software (Continued) 6- Implementation/changeover - As with a bespoke software solution, data will have to be converted or entered from old computer- or paper- based information system. - One of the benefits of purchasing off-the-shelf software is that the product should be free from major bugs and errors. - The purchaser should be confident, therefore, that the software product will work as specified from the outset (start). Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 5.1- SDLC application for packaged software (Continued) 7- Maintenance and review - Maintenance and enhancements of the software will differ from those in a bespoke solution. - Whereas bespoke software can be enhanced over time by the developer (either in-house or by a third party), an off-the-shelf enhancements to the package will differ in a number of ways: ** Enhancements to the package will normally be made available by the vendor as a new release. - As with the bespoke solution, a post-implementation review should be undertaken. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved Learning Objective 6: User-Developed Applications This objective covers the following points: 6.1- What is a user-developed application? 6.2- SDLC application for User-developed software Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 6.1- What is a user-developed application? The main features of user-developed software (applications) are: ** User developed Software (applications) are software written by non-IS professionals, (i.e., the business users). ** User-developed software (applications) ‘should’ be developed in line with the steps normally covered during the bespoke development process. ** The main difference is that end-user-developed applications are usually on a much smaller scale than those developed for corporate use. - The steps for developing user-developed application are: Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 6.2- SDLC application for User-developed software (Continued). 1- Initiation - The stimulus for end-user information system development will typically come from a personal or departmental requirement which can be satisfied by employing easy-to-use end-user development tools. 2- Feasibility. - Part (aspect) of the feasibility exercise is for the user to be sure that the necessary and appropriate end-user development tools exist or can be acquired in order to proceed with the development. - A second aspect is an analysis of the cost involved in end-user developed software. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 6.2- SDLC application for User-developed software (Continued). 3- Analysis - One of the benefits is that an end-user do not need to present information systems requirements to an IS/IT specialist for subsequent development. - This therefore reduces the risk of mistranslating information systems requirements and increases the probability that the developed system is what the user actually wants. 4- Design - End-user-developed software has a tendency to be developed more on a ‘trial and error’ basis than through the use of formal design techniques. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 6.2- SDLC application for User-developed software (Continued). - When it works well, this can result in the faster development of applications software. 5- Build. - Recent improvements in the availability of inexpensive development tools such as Visual Basic for the PC have made it much easier for the end-user developer to build systems without turning to difficult programming techniques. 6- Implementation/changeover - This step is less critical than for company-wide information systems. Copyright 2019, 2015,2008 Pearson Education, Inc. All Rights Reserved 6.2- SDLC application for User-developed software (Continued). - Data are either locally generated or extracted from central databases, where it can be assumed that the data are validated and verified as correct. 7- Maintenance and review - All software has to be maintained in some way. - In many respects, the maintenance of end-user- developed software is more problematic than for other

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