Systin Chapter 2 (Revised Copy) PDF

CHAPTER 2: Systems Integration Subtopics: Functional Silos Business Process and Silos Evolution of IS in Organizations ERP and System Integration ERP Modules Learning objectives Understand the impact of organizational structure on information systems. Find out a...

CHAPTER 2: Systems Integration Subtopics: Functional Silos Business Process and Silos Evolution of IS in Organizations ERP and System Integration ERP Modules Learning objectives Understand the impact of organizational structure on information systems. Find out about the types of functional silos in organizations. Learn about the evolution of information systems technology generations and architectures and its influence on silo environment. Know what systems integration is and why it is important for organizations. Understand the role of Enterprise Resource Planning (ERP) systems in systems integration. SYSTEM INTEGRATION Systems integration means that you allow a heterogeneous (hodgepodge) IS to communicate or integrate and share information (or data) seamlessly with one another. Systems integration is a key issue for an organization for its growth. ERP systems are a major kind of enterprise information system allowing organizations to integrate different systems into one organization-wide application with an integrated database management system. SYSTEM INTEGRATION System Integration refers to the process of linking different computing systems and software applications physically or functionally, so they work together as a coordinated whole. It involves combining various subsystems or components into one large system, ensuring they operate harmoniously to meet the organization’s needs. WHAT IS SILO? WHAT IS SILO? Silo - a tower or pit on a farm used to store grain. Information Silos Resource Marketin Accounti Human ng s g isolate (one system, process, department, etc.) Functional Silos Functional Silos in organizations refer to the compartmentalization of operations into distinct units or departments, which often work independently from each other. This structure can lead to inefficiencies in communication and information sharing, especially as organizations grow in size and complexity. The evolution of these silos is linked to historical management theories and practices, which have emphasized breaking down complex tasks into smaller, more manageable units for the sake of control and coordination. Functional Silos Silos are basically compartmentalized operating units isolated from their environment. Horizontal Silos - refer to the division of an organization into functional areas or departments based on specific activities or tasks, such as marketing, finance, human resources, etc. Vertical Silos - refer to the hierarchical layers of management within an organization, where different levels focus on different aspects of the organization’s operations. Horizontal Silos The POSDCORB (Planning, Organizing, Staffing, Directing, Coordinating, Reporting and Budgeting) categorization by Luther Gulick led to a set of formal organization functions such as control, management, supervision, and administration starting in late 1930s. Classification of organizations into departments like Accounting and Human Resources, reflects the breaking of complex tasks into smaller manageable tasks that could be assigned to a group of people who could then be held responsible. Horizontal Silos Vertical Silos Organizations also divided roles in hierarchical layers from strategic planning to management control and operation control. CEOs and Presidents plan long-term strategy, midlevel management focuses on tactical issues and on the execution of organizational policy whereas the lower- level management task is to focus on the day-to-day operations of the company. Vertical Silos Business Process and Silos The problem of functional silos gave birth to business process re-engineering (BPR). In the late 1980s and early 1990s, many organizations began to realize the problems caused by functional silos, leading to the development of BPR. This approach focuses on improving overall organizational efficiency by looking at the entire business process (e.g., from product development to order processing) rather than just individual departments. Business Process and Silos Business Process Reengineering (BPR) is a management strategy that focuses on redesigning and radically improving an organization’s core business processes to achieve significant enhancements in performance, such as cost reduction, speed, quality, and service. A business process is about how work is organized and executed to meet goals, while silos refer to the barriers that can impede effective collaboration and efficiency within an organization. Evolution of Information Systems (IS) Information Systems are designed to support business activities and improve worker efficiency. However, as businesses grow and change, their systems often become diverse and uncoordinated, leading to isolated, or "siloed," systems. These silos can create inefficiencies, data inconsistencies, and difficulties in providing good customer service. Problem with Siloed IS These systems do not share data easily, requiring manual integration, which is time-consuming and error-prone. This makes it difficult for organizations to be customer-centric, as information from different departments is not easily accessible. Evolution of Information Systems (IS) 1950s – EDP and Transaction Processing Systems Computers were first introduced into business organizations, marking the beginning of IS. During the 1950s, Electronic Data Processing (EDP) systems were introduced to automate basic business processes like transaction processing, recordkeeping, and accounting. These early systems, also known as Transaction Processing Systems (TPS), primarily handled tasks like payroll and customer orders using batch processing. TPS replaced manual processes, improving speed, accuracy, and reducing clerical costs. Evolution of Information Systems (IS) 1960s to 1970s – EDP to MIS In the 1960s and 1970s, Management Information Systems (MIS) emerged from EDP, providing managers with predefined reports for decision-making. MIS consolidated data into detailed, summary, or exception reports, aiding managerial control and strategic planning. This period saw organizations shift from automating basic processes to using data for more advanced decision-making. Evolution of Information Systems (IS) 1970s to 1980s – PCs and Decision Support Systems (DSS) The introduction of personal computers (PCs) in the 1970s expanded computing power across organizations, giving rise to Decision Support Systems (DSS). These systems provided ad- hoc, interactive support for managers, helping them manipulate data for decisions. DSS allowed for a broader range of data analysis, pulling from both internal and external sources to support more complex decision-making processes. Evolution of Information Systems (IS) 1980s to 1990s – EIS and the Internet In the 1980s, Executive Information Systems (EIS), or Executive Support Systems (ESS), were developed to cater to top executives by providing easy access to strategic data. Meanwhile, the rapid advancement of PC hardware, software, and the adoption of the Internet in the late 1980s enabled greater departmental autonomy, yet also raised data compatibility challenges across organizations. Evolution of Information Systems (IS) 1990s to 2000 – AI, Expert Systems (ES), and ERP The 1990s brought about the commercialization of the Internet, along with advancements in Artificial Intelligence (AI) and Expert Systems (ES). ERP (Enterprise Resource Planning) systems also emerged, integrating business functions such as sales, planning, and human resources into one platform. These systems streamlined business processes and facilitated more efficient resource management. Evolution of Information Systems (IS) 2000s to Present – e-Business, Mobile, and Cloud Computing Since the 2000s, the rise of the Internet, e-business, e- commerce, mobile, and cloud computing has transformed how businesses operate. Companies have adopted cloud computing and big data technologies, enabling scalable, on-demand access to computing resources and real-time data insights. This era also introduced mobile and wireless technologies, fostering greater global connectivity and collaboration. Summary of IS Evolution TPS provides the foundational data. MIS organizes this data into structured reports for managers. DSS adds interactivity and analysis for strategic decision- making. EIS/ESS simplifies this for executives, focusing on top-level, summarized insights. AI and ES bring automation and expert-level decision support to systems. ERP integrates all these systems, creating a unified platform for managing the entire organization. Modern systems incorporate advanced AI, big data, and mobile solutions, offering real-time, on-demand data and insights across global networks. IS Architectures Information Systems (IS) Architectures refer to the structural design of how different components of information systems are organized and interact to meet the needs of an organization. It defines how hardware, software, data, and network resources are combined to deliver IT services and support business processes. IS Architectures IS Architectures 1. Centralized Architecture - All data processing and application management occur on a central server or mainframe. 2. Decentralized Architecture - Data and applications are distributed across multiple servers or computers. 3. Distributed Architecture - Combines elements of both centralized and decentralized architectures. Applications and data are distributed across multiple servers, often connected via a network. IS Functionalization Information Systems (IS) Functionalization refers to the specialization and organization of information systems to support specific business functions and processes within an organization. It involves tailoring IS to meet the distinct needs of different departments or business areas, ensuring that each function has the appropriate tools and information to operate effectively. Key Aspects of IS Functionalization: Support for Business Functions: Manufacturing Marketing Accounting Finance Human Resources IS Functionalization TYPES OF SYSTEM Transaction Processing Systems (TPS) handle day-to-day operations and record transactions (e.g., sales orders, inventory updates). Ex: POS, Order Processing System, etc. Management Information Systems (MIS) provide reports and summaries for middle management to support decision- making and operational control (e.g., sales performance reports, production schedules). Ex: Meralco Billing and Energy Management System IS Functionalization TYPES OF SYSTEM Decision Support Systems (DSS) aid in complex decision- making by analyzing large volumes of data. Ex: Philippine Airlines (PAL) Revenue Management System. Executive Support Systems (ESS) provide senior executives with easy access to internal and external information relevant to strategic decision-making. Ex: SM Group’s Strategic Management Platform IS Functionalization TYPES OF SYSTEM Office Automation Systems (OAS) support daily work activities that increase productivity within an office environment. Ex: Google Workspace Knowledge Management Systems (KMS) facilitate the capture, storage, retrieval, and dissemination of knowledge within an organization. Ex: SharePoint System Integration Logical vs. Physical System Integration Logical Integration: Sharing data across different departments and stakeholders based on their access needs. ⚬ Example: Sales and HR departments sharing customer data to better serve them. Physical Integration: Connecting different software and hardware systems seamlessly (legacy systems, new web- based architectures, etc.). ⚬ Example: Connecting older software with modern applications using middleware, a tool that makes different systems appear connected. ERP Modules The key role of an ERP system is to provide support for such business functions as accounting, sales, inventory control, and production for the various stakeholders of the organization. Organizations often selectively implement the ERP modules that are both economically and technically feasible. ERP provides the same functionality to the users (e.g., the silo systems of the past), but the data are integrated or shareable across all the ERP modules. ERP Modules 1. Production Module Helps plan and optimize manufacturing by using sales forecasts and past production data. Example: A car manufacturer uses this module to schedule production and ensure enough materials are on hand to meet demand. 2. Purchasing Module Streamlines the procurement process, from finding suppliers to handling purchase orders and billing. Example: Automates buying raw materials like steel or rubber for manufacturing processes. ERP Modules 3. Inventory Management Module Manages stock levels, tracks usage, and replenishes inventory based on set targets. Example: A warehouse uses this module to avoid stockouts and track the movement of products. 4. Sales and Marketing Module Handles order placement, invoicing, shipping, and integrates with e-commerce websites. Example: Automates online orders and generates invoices directly from the system for faster processing. ERP Modules 5. Finance Module Core module that manages financial data, producing reports like balance sheets and income statements. Example: Nonprofits use this module to generate quarterly financial statements for stakeholders. 6. Human Resource Module Manages employee information, salaries, attendance, and performance evaluations. Example: HR teams use this module to manage employee promotions and payroll data. ERP Modules 7. Miscellaneous Modules Includes additional modules like Business Intelligence (for real-time reporting and decision-making) and Self-Service (for employee access to benefits or consumers tracking purchases). Example: Employees access their pay statements or customers track orders through self-service portals. ERP Modules