Business information Systems 1

Inter-functional information processes

- Order management: it manages the information regarding orders from order check in to post-sale

services.

- Knowledge management: it manages the new information on customers acquired during service

production and distribution by transforming into knowledge that can be used to in future production and

distribution activities to improve customer satisfaction

Order management and operations management coincide

→ Materials management is replaced by knowledge management

→

Knowledge management in services

- Service customization is a fundamental driver of customer satisfaction

- Service customization requires knowledge about (individual) customers

- Knowledge about customers is acquired during service production and distribution, but usually it is

unstructured

- Knowledge management processes gather this unstructured information and transform it into structured

information and related customer service processes

- Knowledge management is a continuous learning process. The environment changes (environmental

uncertainty), therefore organizational processes must change through continuous learning

Horizontal and vertical IT integration in service companies:

1. Horizontal integration: integration of systems along operating processes (Porter’s primary processes) →

personal computers

2. Vertical integration: integration between the operational portfolio and the executive portfolio client-

→

server architectures

Personal computers as a production technology:

- Personal computers have emerged in the ‘80s

- In service companies, service production activities are executed by individuals called knowledge workers

(e.g. bank employee exchanging money)

- Personal computers represent the technology that supports knowledge workers in the execution of

production activities

- Same role as robots in manufacturing?

- Robots play a production automation role

- Should we consider PCs an automation technology?

- From studies on office activities the answer is no

- PCs play a support rather than an automation role

- Example: studies on workforce composition in the insurance industry indicate that professional roles at

lower levels in the hierarchy have increased as a percentage of total employees as a consequence of IT

integration → delegation? Decision-making role of PCs at lower levels in the hierarchy?

- New wave of studies on non-hierarchical organizations

- PCs have brought technology to an individual level

- Mainframe applications are procedural, repetitive

- PC applications are:

– Flexible and user-oriented (e.g. Excel)

– Various: the range of desktop applications is vast, from office applications, to gaming, to a variety of

Web applications

– Usable : the concept of user friendliness did not exist with mainframes, the mouse did not exist (no

need if you have to follow predetermined steps of a procedure, etc.)

Mainframes as an IT integration technology:

- Mainframes (or, currently, data centers) allow data integration

- Client-server architectures have enabled the integration between PCs and mainframes

- Through their PCs knowledge workers can share information among themselves and with the higher

levels of the organizational hierarchy

- This enables integrated and seamless management processes

Obstacles to IT integration in service companies:

- The knowledge management process requires

– the extraction of new knowledge on customers from knowledge workers,

– the transformation of this knowledge into structured information to be stored in the mainframe,

– the design of new procedures to use this knowledge to obtain greater service customization

This learning process is more difficult than the MRP planning process → it is a knowledge management process

→

Knowledge management process in service companies:

Knowledge management is a mix of production planning and service R&D (called service innovation)

[ + case study: Cigna insurance ]

Executive Information Systems

Traditional control model, Anthony’s pyramid

- Strategic control overall business objectives

→

- Management control financial resource management (budgeting vs. strategic

→

objectives)

- Operational control operating activities (vs. business objectives and financial

→

resources)

Technology architecture of executive information systems:

Information in data warehouses:

- Key Performance Indicators, i.e. aggregate information providing a summary evaluation of a set of

production activities or performance parameters

- Indicators have a value defined by different dimensions, including:

– Time (extension and granularity)

– Organizational unit

– Customer

– Product

– Process and activity

– Other dimensions such as channel, geographical area, project…

Design steps of executive information systems:

- Business requirements (key performance indicators)

- Information sources

- Information processing (ETL)

- Information storage (data warehouse design)

– Table of facts

– Table of keys

- Processing level

– Presentation and reporting

– Decision support engines

– Visualization engines

– Knowledge extraction engines

Information sources:

Operational DBs represent the main sources of information. They include:

1. ERP operational data

2. CRM data

3. Operational information from custom applications

4. Operational information from legacy applications

5. Information from the administrative portfolio

Information processing:

1. Selection of source data

2. Data quality control and data cleaning

3. Data integration

4. Data aggregation

Information storage:

1. Load is periodical, e.g. daily in our running example

2. Data are loaded in a datawarehouse and subsequently copied in a smaller database called data mart to

improve time performance

3. Datawarehouses and data marts may have different schemas and involve an additional transformation

step

The processing level includes:

1. Engines

2. Mining & knowledge extraction

3. Reporting

(Design of information model of a report includes data selection + editing functionalities, there’s

automated distribution of reports)

CSF method = Critical Success Factor

- A critical success factor is a business decision variable critical for the success of the whole company,

i.e. a must for success (necessary condition)

- The CSF method is a requirements analysis and specification method for executive information systems

CSFs and KPIs

- CSFs are an abstract concepts, such as:

– Security of cars

– Dependability of cars

– Design appeal of cars

- CSFs are complex constructs and correspond to multiple KPIs

CSF method – steps:

1. Predefinition: desk analysis

2. Interview: with top managers, aimed at identifying CSFs

3. Robustness analysis: aimed at selecting KPIs

4. Refinement and documentation: presentation to customer, possibile modifications, specification

(written, but informal)

CSF method – robustness analysis - Criteria to evaluate/select KPIs:

- Cost of information (e.g. customer satisfaction is costly)

- Significance, that is contribution to understand corresponding CSF

- Frequency, if informaiton is seldom updated, KPI should be eliminated

- Structuredness, quantitative is preferred against qualitative

ERP Architecture

Introduction to ERPs

- ERP (together with CRM) has involved a major change in the IT industry (starting from the mid ‘90s), since:

– It has represented a global phenomenon

– It has transformed the approach to computerization from coding to purchasing a package +.

Consulting services

– It has integrated all three portfolios:

• Operational

• Administrative

• Executive

- Our goals:

– Provide an overview of ERPs

– Relate ERPs to a corresponding organizational change

- ERP stands for Enterprise Resource Planning. The acronym has been coined in the mid ’90s by Gartner

Group.

- There is an important distinction between:

– ERP modules supporting internal processes, called core ERP.

• Core ERP modules include:

– Administrative portfolio

– Operational portfolio (industry dependent, vertical solutions)

– Executive portfolio

– ERP modules supporting the interaction with external parties, such as customers and suppliers, called

extended ERP

• Extended ERP modules include:

– CRM, Customer Relationshiop Management,

– SCM, Supply Chain Management),

– E-Procurement and Market Place

The EPR Paradigm

1. Information integration

2. Extension and modularity

3. Process prescriptiveness

Information integration: integrating legacy systems

Information integration: ERP vision

- Horizontal data consistency (information sharing)

- Vertical data consistency (from operations to executive dashboards) 13

- Conceptual consistency: one, common, integrated data model

Extension and Modularity

- Functional completeness

- Modularity:

– One Stop Shopping (one supplier)

– Best of The Breed (multiple suppliers)

Process prescriptiveness

- ERP packages embed a process logic, e.g.:

– “materials cannot be accepted without corresponding orders”

- Custom applications are develpoped ad hoc based on process requirements

- ERPs bring in a process and organizations have to change and conform to the logic embedded in the ERP

- There are advantages (speed and costs) and disadvantages (diversification/competitiveness)

Observations:

- No single ERP provider can offer all functionalities for all industries

- There exist niche players focused on industry-specific functionalities (e.g. cashier systems for the retail

industry or machine-to-machine and machine-to-ERP integration in manufacturing)

- There’s room for system integration to integrate sofware from different suppliers (or with legacy systems)

- Small and medium size companies typically adopt:

– Simplified ERP packages (ERP light)

– Software as a service (SaaS) / Cloud-based solutions (e.g. Zoho, Magento, …)

ERP alternatives

- Large enterprise, revenues > 50 million euro

- Classic ERP

– BPR

– Industry-specific (vertical)

– System integration

– High costs

– Relatively long time frame (>6 months)

- SMEs

– Light ERPs “plug & play”

– No BPR

– Simple administrative functionalities

– Simple analytics

– Limited scalability, need to change ERP as company grows

ERPs complete integration

- We have talked about horizontal/vertical integration of portfolios

- ERPs complete integration of operational and executive with the administrative portfolio

- This enables a real-