Posted: August 4th, 2022

Associated

 

List the problems associated with information silos. What is the fundamental problem of information silos? How can this problem be remedied? Your response should be at least 200 words in length. You are required to use at least your textbook as source material for your response. All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations.

 

Kroenke, D. (2013). The Importance of MIS. Using MIS (pp. 222-226). Upper Saddle River: Pearson Learning Solutions.

 

Chapter Preview

T h i s c h a p t e r e x p l o r e s s t r u c t u r e d p r o c e s s e s a n d t h e i r i n f o r m a t i o n s y s t e m s w i t h i n a n
o r g a n i z a t i o n . W e w i l l e x t e n d t h e b u s i n e s s p r o c e s s d i s c u s s i o n from C h a p t e r 3 t o i n v e s t i g a t e
t h r e e t y p e s o f processes a n d t h e s c o p e o f i n f o r m a t i o n s y s t e m s t h a t t h e y use. W e w i l l also
i n v e s t i g a t e t h e c o n c e p t o f p r o c e s s q u a l i t y a n d e x p l a i n h o w i n f o r m a t i o n s y s t e m s c a n b e
u s e d t o i n c r e a s e i t . T h e n , w e w i l l d i s c u s s i n f o r m a t i o n silos t h a t o c c m – w i t h d e p a r t m e n t a l
i n f o r m a t i o n s y s t e m s , e x p l a i n w h y s u c h s i l o s c a n b e p r o b l e m a t i c , a n d s h o w h o w t h r e e
t y p e s o f e n t e r p r i s e s y s t e m s c a n e l i m i n a t e t h o s e p r o b l e m s . E n t e r p r i s e r e s o u r c e p l a n n i n g
(ERP) s y s t e m s p l a y a p a r t i c u l a r l y i m p o r t a n t r o l e i n o r g a n i z a t i o n s t o d a y a n d w e w i l l d i s c u s s
t h e i r p u r p o s e a n d c o m p o n e n t s a n d t h e m a j o r ERP v e n d o r s . N e x t , w e s u r v e y t h e m a j o r
c h a l l e n g e s t h a t o c c u r w h e n u n p l e m e n t m g e n t e r p r i s e s y s t e m s . W e ‘ l l w r a p u p t h e c h a p t e r
b y s h o v n n g h o w s e r v i c e – o r i e n t e d a r c h i t e c t u r e (SOA) c a n b e n e f i t e n t e r p r i s e s y s t e m s a n d
d i s c u s s i n g t h e i m p l i c a t i o n s (2022) o f S O A – o r i e n t e d e n t e r p r i s e s y s t e m s i n t h e c l o u d .

ft What Are the Basic Types of
Structured Processes?
A s y o u l e a r n e d i n C h a p t e r 3, a b u s i n e s s p r o c e s s is a n e t w o r k o f a c t i v i t i e s t h a t g e n e r a t e
v a l u e b y t r a n s f o r m i n g i n p u t s i n t o o u t p u t s . A c t i v i t i e s a r e s u b p a r t s o f p r o c e s s e s t h a t
r e c e i v e i n p u t s a n d p r o d u c e o u t p u t s . A c t i v i t i e s c a n b e p e r f o r m e d b y h u m a n s , o n l y ; b y
h u m a n s a u g m e n t e d b y c o m p u t e r s y s t e m s ; a n d b y c o m p u t e r s y s t e m s , o n l y .

F i g u r e 7 – 1 s h o w s a s i m p l i f i e d v i e w o f a t h r e e – a c t i v i t y p r o c e s s f o r a p p r o v i n g
c u s t o m e r o r d e r s . E a c h o f t h e s e a c t i v i t i e s is, i t s e l f , a s u b p r o c e s s o f t h i s o v e r a l l p r o c e s s .
Y o u c a n see t h a t e a c h s t e p — c h e c k i n v e n t o r y , c h e c k c r e d i t , a n d a p p r o v e s p e c i a l
t e r m s — r e c e i v e s i n p u t s a n d t r a n s f o r m s t h e m i n t o o u t p u t s . Y o u w i l l l e a r n h o w t o b e t t e r
d i a g r a m s u c h p r o c e s s e s i n C h a p t e r 10; f o r n o w , j u s t v i e w F i g u r e 7 – 1 as s h o w i n g t h e g i s t
o f a t y p i c a l b u s i n e s s p r o c e s s .

M Stsiiotured Processes Differ from Dvnamie Processes?
B u s i n e s s e s h a v e d o z e n s , h u n d r e d s , e v e n t h o u s a n d s o f d i f f e r e n t p r o c e s s e s . S o m e
p r o c e s s e s a r e s t a b l e , a l m o s t f i x e d , i n t h e f l o w a m o n g t h e i r a c t i v i t i e s . F o r e x a m p l e ,
t h e p r o c e s s o f a s a l e s c l e r k a c c e p t i n g a r e t u r n a t N o r d s t r o m , o r o t h e r q u a l i t y r e t a i l

F i g u r e “–‘l
Business Process with Three
Activities

Order

Out of Stoci<

Credit Rejected

Special Terms
Rejected

Or

Approved Order

To Order Fulfillment Process

Checl< for Inventory

Order in Stock

Check Customer
Credit

Order in Stock
Credit Approved

Approve Special
Terms

216

Q1 What Are the Basic Types of Structured P r o c e s s e s ? 217

s t o r e , is f i x e d . I f t h e c u s t o m e r h a s a r e c e i p t , t a k e t h e s e s t e p s . . . I f t h e c u s t o m e r h a s
n o r e c e i p t , t a k e t h e s e o t h e r s t e p s . . . T h a t p r o c e s s n e e d s t o b e s t a n d a r d i z e d s o
t h a t c u s t o m e r s a r e t r e a t e d c o r r e c t l y , s o t h a t r e t u r n e d g o o d s a r e a c c o u n t e d f o r
a p p r o p r i a t e l y , a n d so t h a t s a l e s c o m m i s s i o n s a r e r e d u c e d i n a w a y t h a t is f a i r t o t h e
sales s t a f f .

O t h e r p r o c e s s e s a r e l e s s s t r u c t u r e d , l e s s r i g i d , a n d s o m e t i m e s c r e a t i v e . F o r
e x a m p l e , h o w d o e s N o r d s t r o m ‘ s m a n a g e m e n t d e c i d e w h a t w o m e n ‘ s c l o t h e s t o c a r r y
n e x t s p r i n g ? T h e y c a n l o o k a t p a s t s a l e s , c o n s i d e r c u r r e n t e c o n o m i c c o n d i t i o n s , a n d
m a k e a s s e s s m e n t s a b o u t w o m e n ‘ s a c c e p t a n c e o f n e w s t y l e s a t r e c e n t f a s h i o n
s h o w s , b u t t h e p r o c e s s f o r c o m b i n i n g a l l t h o s e f a c t o r s i n t o o r d e r s o f s p e c i f i c
g a r m e n t s i n s p e c i f i c q u a n t i t i e s a n d c o l o r s i s n o t n e a r l y as s t r u c t u r e d as t h a t f o r
a c c e p t i n g r e t u r n s .

I n t h i s t e x t , w e d i v i d e p r o c e s s e s i n t o t w o b r o a d c a t e g o r i e s . S t r u c t u r e d p r o c e s s e s
a r e f o r m a l l y d e f i n e d , s t a n d a r d i z e d p r o c e s s e s t h a t i n v o l v e d a y – t o – d a y o p e r a t i o n s :
a c c e p t i n g a r e t u r n , p l a c i n g a n o r d e r , p u r c h a s i n g r a w m a t e r i a l s , a n d s o f o r t h . T h e y
h a v e t h e c h a r a c t e r i s t i c s s u m m a r i z e d i n t h e l e f t – h a n d c o l u m n o f F i g u r e 7-2.

D y n a m i c p r o c e s s e s a r e f l e x i b l e , i n f o r m a l , a n d a d a p t i v e p r o c e s s e s t h a t
n o r m a l l y i n v o l v e s t r a t e g i c a n d l e s s s p e c i f i c m a n a g e r i a l d e c i s i o n s a n d a c t i v i t i e s .
D e c i d i n g w h e t h e r t o o p e n a n e w s t o r e l o c a t i o n o r h o w b e s t t o s o l v e t h e p r o b l e m
o f e x c e s s i v e p r o d u c t r e t u r n s a r e e x a m p l e s , as i s u s i n g T w i t t e r t o g e n e r a t e b u z z
a b o u t n e x t season’s p r o d u c t l i n e . T h e r i g h t h a n d c o l u m n o f F i g u r e 7-2 s h o w s e x a m –
p l e s o f e a c h .

W e w i l l d i s c u s s s t r u c t u r e d p r o c e s s e s a n d i n f o r m a t i o n s y s t e m s t h a t s u p p o r t t h e m
i n t h i s c h a p t e r . W e h a v e a l r e a d y d i s c u s s e d o n e d y n a m i c p r o c e s s , c o l l a b o r a t i o n , i n
C h a p t e r 2, a n d w e v n l l d i s c u s s a n o t h e r , s o c i a l m e d i a , i n C h a p t e r 8. S o m e a s p e c t s o f
b u s i n e s s i n t e l l i g e n c e , i n C h a p t e r 9, a r e a l s o d y n a m i c p r o c e s s e s .

T h e c h a r a c t e r o f s t r u c t u r e d b u s i n e s s p r o c e s s e s v a r i e s w i d e l y d e p e n d i n g o n t h e s c o p e
o f t h e p r o c e s s . P r o c e s s e s t h a t s u p p o r t a s i n g l e f u n c t i o n , s a y a c c o u n t s p a y a b l e , a r e
s i m p l e r a n d e a s i e r t o m a n a g e t h a n t h o s e t h a t s u p p o r t a n e t w o r k o f i n d e p e n d e n t
o r g a n i z a t i o n s , s u c h as a s u p p l y c h a i n . C o n s i d e r t h e n a t u r e o f s t r u c t u r e d d e p a r t m e n t a l ,
e n t e r p r i s e , a n d i n t e r e n t e r p r i s e p r o c e s s e s .

Structured Departmental

Processes

A s t r u c t u r e d d e p a r t m e n t a l p r o c e s s is a s t r u c t u r e d p r o c e s s t h a t e x i s t s t o e n a b l e
d e p a r t m e n t a l e m p l o y e e s t o f u l f i l l t h e c h a r t e r , p u r p o s e , a n d g o a l s o f a p a r t i c u l a r
o r g a n i z a t i o n a l u n i t . A t F o x L a k e , t h e g r o u n d s k e e p e r s ( p e r s o n n e l w h o m a i n t a i n t h e
g o l f c o u r s e s a n d c l u b l a w n s a n d g a r d e n s ) u s e a d e p a r t m e n t a l p r o c e s s f o r s c h e d u l i n g
e m p l o y e e s a n d t a s k s . T h e w e d d i n g e v e n t s d e p a r t m e n t h a s a s t r u c t u r e d d e p a r t m e n t a l
p r o c e s s f o r p l a n n i n g a n d s c h e d u l i n g e v e n t s .

Structured Dynamic

Support operational and structured
managerial decisions and activities

Support strategic and less structured
managerial decision and activities

Standardized Less specific, fluid

Usually formally defined and documented Usually informal

Exceptions rare and not (well) tolerated Exceptions frequent and expected

Process structure changes slowly and
, v îth otgarozational agony

Adaptive processes that change structure
rapidly and readily

\: Customer returns, order entry,
1 purchasing, payroll, etc.

Example: Collaboration, social networking,
ill-defined, ambiguous situations

Structured Versus Dynamic
Processes

218 C H A P T E R 7 Structured Processes and Information Systems

Figui’e 7-3
Common Departmental
Information Systems

Department Example Information Systems

Sales and marketing • Lead generation
• Lead tracking
• Customer management
• Sales forecasting
• Product and brand management

Operations • Order entry
• Order management
• Finished-goods inventory management

Manufacturing • Inventory (raw/ materials, goods-in-process)
• Planning
• Scheduling
• Operations

Customer service • Order tracking
• Account tracking
• Customer support and training

Human resources • Recruiting
• Compensation
• Assessment
• HR planning

Accounting • General ledger
• Financial reporting
• Cost accounting
• Accounts receivable
• Accounts payable
• Cash management
• Budgeting
• Treasury management

F i g u r e 7-3 lists c o m m o n d e p a r t m e n t a l processes. N o t i c e t h a t e a c h o f t h e s e processes
is l a r g e l y c o n t a i n e d v v i t h i n a g i v e n d e p a r t m e n t . T h e s e processes m a y r e c e i v e i n p u t s from
o t h e r d e p a r t m e n t s , a n d t h e y m a y p r o d u c e o u t p u t s d i a t are u s e d b y o t h e r d e p a r t m e n t s ,
b u t a l l , o r a t least t h e b u l k of, t h e processes’ a c t i v i t i e s l a y v n t h i n a s i n g l e d e p a r t m e n t .

A d e p a r t m e n t a l i n f o r m a t i o n s y s t e m is a n i n f o r m a t i o n s y s t e m t h a t e x i s t s t o
s u p p o r t a d e p a r t m e n t a l p r o c e s s . C h a r a c t e r i s t i c s o f d e p a r t m e n t a l i n f o r m a t i o n s y s t e m s
a r e s u m m a r i z e d i n t h e t o p r o w o f F i g u r e 7-4. T y p i c a l d e p a r t m e n t a l i n f o r m a t i o n
s y s t e m s s u p p o r t 10 t o 100 users. T h e p r o c e d u r e s f o r u s i n g t h e m m u s t b e u n d e r s t o o d b y
a l l m e m b e r s o f t h e g r o u p . O f t e n , p r o c e d u r e s a r e f o r m a l i z e d i n d o c u m e n t a t i o n , a n d
u s e r s f r e q u e n t l y r e c e i v e f o r m a l t r a i n i n g i n t h e u s e o f t h o s e p r o c e d u r e s .

Figure 7-4
Scope of Structured Processes Scope Fox Lake Example Characteristics

Departmental Scheduling of groundskeeping 10 to 100 of users; procedures understood
within group; problem solutions within
group; data duplication among
departments; somewhat difficult to
change

Enterprise Charging of membership fees 100 to 1000s of users; procedures formalized;
problem solutions affect enterprise; data
duplication minimized; very difficult to
change

Interenterprise Ordering of restaurant supplies
from suppliers

1000s of users; procedures formalized;
problem solutions affect multiple
organizations; controlled data
duplication; difficult to change;
interorganization IS required

Q1 What Are the Basic Types of Structured P r o c e s s e s ? 219

W h e n p r o b l e m s o c c u r , t h e y a l m o s t a l w a y s c a n b e s o l v e d w i t h i n t h e g r o u p .
I f a c c o u n t s p a y a b l e d u p l i c a t e s t h e r e c o r d f o r a p a r t i c u l a r s u p p l i e r , t h e a c c o u n t s
p a y a b l e g r o u p c a n m a k e t h e fix. I f t h e W e b s t o r e f r o n t h a s t h e w r o n g n u m b e r o f w i d g e t s
i n t h e i n v e n t o r y d a t a b a s e , t h a t c o u n t c a n b e fixed w i t h i n t h e s t o r e f t o n t g r o u p .

( N o t i c e , b y t h e w a y , t h a t t h e c o n s e q u e n c e s o f a p r o b l e m a r e n o t i s o l a t e d t o t h e
g r o u p . B e c a u s e d i e d e p a r t m e n t a l i n f o r m a t i o n s y s t e m e x i s t s t o p r o v i d e a s e r v i c e t o t h e
r e s t o f t h e o r g a n i z a t i o n , i t s p r o b l e m s h a v e c o n s e q u e n c e s t h r o u g h o u t t h e o r g a n i z a –
t i o n . T h e fix t o t h e p r o b l e m c a n u s u a l l y b e o b t a i n e d w i t h i n t h e g r o u p , h o w e v e r . )

T w o o r m o r e d e p a r t m e n t s w i t h i n a n o r g a n i z a t i o n c a n d u p l i c a t e d a t a , a n d s u c h d u p l i –
c a t i o n c a n b e v e r y p r o b l e m a t i c t o t h e o r g a n i z a t i o n , as w e d i s c u s s i n Q 2 . F i n a l l y , b e c a u s e
d e p a r t m e n t a l i n f o r m a t i o n s y s t e m s i n v o l v e m a n y users, c h a n g i n g t h e m c a n b e p r o b l e m –
a t i c . B u t , a g a i n , w h e n p r o b l e m s d o o c c u r , t h e y c a n b e r e s o l v e d w i t h i n t h e d e p a r t m e n t .

Structured Enterprise Processes

S t r u c t u r e d e n t e r p r i s e p r o c e s s e s a r e s t r u c t u r e d p r o c e s s e s t h a t s p a n a n o r g a n i z a t i o n
a n d s u p p o r t a c t i v i t i e s i n m u l t i p l e d e p a r t m e n t s . A t F o x L a k e , a l l c u s t o m e r c h a r g e s a r e
r e c o r d e d a g a i n s t m e m b e r s h i p a c c o u n t s ; n o c a s h o r c r e d i t c a r d t r a n s a c t i o n s a r e
a l l o w e d . T h e r e s t a u r a n t , t h e g o l f c o u r s e , t h e p r o s h o p , a n d t h e w e d d i n g e v e n t s d e p a r t –
m e n t s a l l u s e t h e s a m e e n t e r p r i s e p r o c e s s t o r e c o r d sales. A t a m a n u f a c t u r e r , a p r o c e s s
t h a t d e t e r m i n e s r a w m a t e r i a l s o r d e r q u a n t i t i e s b a s e d o n c u r r e n t p r o d u c t sales crosses
t h e b o u n d a r i e s o f t h e sales, m a n u f a c t u r i n g , a n d p u r c h a s i n g d e p a r t m e n t s , a n d t h u s is
a n e n t e r p r i s e p r o c e s s .

E n t e r p r i s e i n f o r m a t i o n s y s t e m s a r e i n f o r m a t i o n s y s t e m s t h a t s u p p o r t e n t e r p r i s e
p r o c e s s e s . A s s h o w n i n t h e s e c o n d r o w o f F i g u r e 7 – 4 , t h e y t y p i c a l l y h a v e h u n d r e d s t o
t h o u s a n d s o f u s e r s . P r o c e d u r e s a r e f o r m a l i z e d a n d e x t e n s i v e l y d o c u m e n t e d ; u s e r s
u n d e r g o f o r m a l p r o c e d u r e t r a i n i n g . S o m e t i m e s e n t e r p r i s e s y s t e m s i n c l u d e c a t e g o r i e s
o f p r o c e d u r e s , a n d u s e r s a r e d e f i n e d a c c o r d i n g t o l e v e l s o f e x p e r t i s e w i t h t h e s y s t e m
as w e l l as b y l e v e l o f a u t h o r i t y .

T h e s o l u t i o n s t o p r o b l e m s i n a n e n t e r p r i s e s y s t e m u s u a l l y i n v o l v e m o r e t h a n o n e
d e p a r t m e n t . A s y o u w i l l l e a r n i n t h i s c h a p t e r , a m a j o r a d v a n t a g e o f e n t e r p r i s e s y s t e m s
i s t h a t d a t a d u p l i c a t i o n is e i t h e r e l i m i n a t e d a l t o g e t h e r o r , i f i t i s a l l o w e d t o e x i s t ,
c h a n g e s t o d u p l i c a t e d d a t a are c a r e f u l l y m a n a g e d t o m a i n t a i n c o n s i s t e n c y .

B e c a u s e e n t e r p r i s e s y s t e m s s p a n m a n y d e p a r t m e n t s a n d i n v o l v e p o t e n t i a l l y
t h o u s a n d s o f u s e r s , t h e y a r e v e r y d i f f i c u l t t o c h a n g e . C h a n g e s m u s t b e c a r e f u l l y
p l a n n e d , c a u t i o u s l y i m p l e m e n t e d , a n d u s e r s g i v e n c o n s i d e r a b l e t r a i n i n g . S o m e t i m e s
u s e r s are g i v e n i n c e n t i v e s a n d o t h e r i n d u c e m e n t s t o m o t i v a t e t h e m t o c h a n g e .

C R M , ERP, a n d E A I a r e t h r e e e n t e r p r i s e i n f o r m a t i o n s y s t e m s t h a t w e w i l l d e f i n e
a n d d i s c u s s i n Q 4 .

Structured Interenterprise Processes
S t r u c t u r e d i n t e r e n t e r p r i s e p r o c e s s e s a r e s t r u c t u r e d p r o c e s s e s t h a t s p a n t w o o r m o r e
i n d e p e n d e n t o r g a n i z a t i o n s . A t F o x L a k e , t h e p r o c e s s t h a t t h e r e s t a u r a n t uses t o o r d e r
s u p p l i e s a n d i n g r e d i e n t s fiom i t s s u p p l i e r s is a n i n t e r e n t e r p r i s e p r o c e s s . T h e p r o c e s s b y
w h i c h a n o r g a n i z a t i o n increases o r decreases t h e r e s o u r c e s p r o v i d e d b y its c l o u d v e n d o r
is a n o t h e r i n t e r o r g a n i z a t i o n a l p r o c e s s . B e c a u s e s u c h processes i n v o l v e m a n y e m p l o y e e s
o f d i f f e r e n t o r g a n i z a t i o n s , p r o c e d u r e s are f o r m a l i z e d a n d u s e r t r a i n i n g is m a n d a t o r y .

S t r u c t u r e d i n t e r e n t e r p r i s e i n f o r m a t i o n s y s t e m s a r e i n f o r m a t i o n s y s t e m s t h a t
s u p p o r t i n t e r e n t e r p r i s e p r o c e s s e s . S u c h s y s t e m s t y p i c a l l y i n v o l v e t h o u s a n d s o f u s e r s ,
a n d s o l u t i o n s t o p r o b l e m s r e q u i r e c o o p e r a t i o n a m o n g d i f f e r e n t , u s u a l l y i n d e p e n d e n t l y
o w n e d , o r g a n i z a t i o n s . P r o b l e m s a r e r e s o l v e d b y m e e t i n g , b y c o n t r a c t , a n d s o m e t i m e s
b y l i t i g a t i o n .

D a t a a r e o f t e n d u p l i c a t e d b e t w e e n o r g a n i z a t i o n s , b u t s u c h d u p l i c a t i o n is c a r e f u l l y
m a n a g e d . B e c a u s e o f t h e i r w i d e sxjan., conxTjle-xits, aiadMse b.^ wvxxVxxvVe. c<=.xxv>?axv\e,s,

(.discussed i n t\\ I n t e r n a t i o n a l D i m e n s i o n , p a g e s 4 5 8 – 4 6 0 ^ i s t i i e c l a s s i c e x a m p l e oi a n
i n t e r e n t e r p r i s e i n f o r m a t i o n s y s t e m .

pages 238-239 demonstrates
how one person’s oction-s can
ajfectan entire compary.

C H A > P T E U 7 SUucVute

H o N N Can In̂ ovmaWon Svslems Improve
Process Quality?
Processes a r e t h e f a b r i c o f o r g a n i z a t i o n s ; t h e y a r e t h e m e a n s b y w h i c h p e o p l e o r g a n i z e
t h e i r a c t i v i t i e s t o a c h i e v e t h e o r g a n i z a t i o n ‘ s g o a l s . A s s u c h , p r o c e s s q u a l i t y is a n
i m p o r t a n t , p o s s i b l y t h e m o s t i m p o r t a n t , d e t e r m i n a n t o f o r g a n i z a t i o n a l success.^

T h e t w o d i m e n s i o n s o f p r o c e s s q u a l i t y a r e e f f i c i e n c y a n d e f f e c t i v e n e s s . P r o c e s s
e f f i c i e n c y is a m e a s u r e o f t h e r a t i o p r o c e s s o u t p u t s t o i n p u t s . I f a n a l t e r n a t i v e t o t h e
p r o c e s s i n F i g u r e 7 – 1 c a n p r o d u c e t h e s a m e o r d e r a p p r o v a l s / r e j e c t i o n s ( o u t p u t )
f o r l e s s c o s t o r p r o d u c e m o r e a p p r o v a l s / r e j e c t i o n s f o r t h e s a m e c o s t , i t i s m o r e
e f f i c i e n t . I n C h a p t e r 2 , G e a r U p i s t r y i n g t o f i n d a m o r e e f f i c i e n t w a y o f c o n d u c t i n g
i t s o n l i n e s a l e s .

P r o c e s s e f f e c t i v e n e s s i s a m e a s u r e o f h o w w e l l a p r o c e s s a c h i e v e s o r g a n i z a t i o n a l
s t r a t e g y . I f a n o r g a n i z a t i o n d i f f e r e n t i a t e s i t s e l f o n q u a l i t y c u s t o m e r s e r v i c e , a n d i f
t h e p r o c e s s i n F i g u r e 7 – 1 r e q u i r e s 5 d a y s t o r e s p o n d t o a n o r d e r , t h e n t h a t p r o c e s s is
i n e f f e c t i v e . F o x L a k e w a n t s t o u s e t h e r e v e n u e o f i t s w e d d i n g e v e n t s b u s i n e s s t o
a c h i e v e i t s r e v e n u e g o a l s . T h e p r o c e s s e s t h a t h a v e l e d t o c o n f l i c t o v e r t h e u s e o f s h a r e d
r e s o u r c e s is i n e f f e c t i v e b e c a u s e i t d o e s n o t s u p p o r t t h a t s t r a t e g y .

O r g a n i z a t i o n s c a n i m p r o v e t h e q u a l i t y ( e f f i c i e n c y a n d / o r e f f e c t i v e n e s s ) o f a p r o c e s s i n
o n e o f t h r e e w a y s :

C h a n g e t h e p r o c e s s s t r u c t u r e .
C h a n g e t h e p r o c e s s r e s o u r c e s .
C h a n g e b o t h .

Change the Process Structure
I n s o m e ca ses, p r o c e s s q u a l i t y can b e c h a n g e d j u s t b y r e o r g a n i z i n g t h e p r o c e s s .
T h e o r d e r a p p r o v a l p r o c e s s i n F i g u r e 7 – 1 m i g h t b e m a d e m o r e e f f i c i e n t i f c u s t o m e r
c r e d i t w a s d o n e f i r s t a n d i n v e n t o r y w a s c h e c k e d s e c o n d . T h i s c h a n g e m i g h t b e m o r e
e f f i c i e n t b e c a u s e i t w o u l d s a v e t h e c o s t o f c h e c k i n g i n v e n t o r y f o r c u s t o m e r s w h o s e
c r e d i t w i l l b e d e n i e d . H o w e v e r , t h a t c h a n g e w o u l d a l s o m e a n t h a t t h e o r g a n i z a t i o n
w o u l d p a y f o r a c r e d i t c h e c k o n c u s t o m e r s f o r w h i c h i t d i d n o t h a v e a p p r o p r i a t e
i n v e n t o r y . W e w i l l i n v e s t i g a t e s u c h c h a n g e s f u r t h e r i n C h a p t e r 10. F o r n o w , j u s t n o t e
t h a t p r o c e s s s t r u c t u r e h a s a s t r o n g b e a r i n g o n p r o c e s s e f f i c i e n c y .

C h a n g i n g p r o c e s s s t r u c t u r e c a n a l s o i n c r e a s e p r o c e s s e f f e c t i v e n e s s . I f a n o r g a n i z a –
t i o n c h o o s e s a c o s t – l e a d e r s t r a t e g y , t h e n t h a t s t r a t e g y m i g h t m e a n t h a t n o s p e c i a l t e r m s
s h o u l d e v e r b e a p p r o v e d . I f t h e p r o c e s s i n F i g u r e 7 – 1 r e s u l t s i n t h e a u t h o r i z a t i o n o f
o r d e r s w i t h s p e c i a l t e r m s , t h e n e l i m i n a t i n g t h e t h i r d a c t i v i t y w i l l m a k e i t m o r e e f f e c t i v e
( m o s t l i k e l y i t w i l l save o n c o s t as w e l l ) .

Change Process Resources
B u s i n e s s p r o c e s s a c t i v i t i e s a r e a c c o m p l i s h e d b y h u m a n s a n d i n f o r m a t i o n s y s t e m s .
O n e w a y t o i m p r o v e p r o c e s s q u a l i t y i s t o c h a n g e t h e a l l o c a t i o n o f t h o s e r e s o u r c e s .
F o r e x a m p l e , i f t h e p r o c e s s i n F i g u r e 7 – 1 is n o t e f f e c t i v e b e c a u s e i t t a k e s t o o l o n g , o n e
w a y t o m a k e i t m o r e e f f e c t i v e i s t o i d e n t i f y t h e s o u r c e o f d e l a y s a n d t h e n t o a d d
m o r e r e s o u r c e s . I f d e l a y s a r e c a u s e d b y t h e c h e c k c u s t o m e r c r e d i t a c t i v i t y , o n e w a y t o
i n c r e a s e p r o c e s s e f f e c t i v e n e s s is t o a d d m o r e p e o p l e t o t h a t a c t i v i t y . A d d i n g p e o p l e
s h o u l d d e c r e a s e d e l a y s , b u t i t w i l l a l s o a d d c o s t , so t h e o r g a n i z a t i o n n e e d s t o f i n d
t h e a p p r o p r i a t e b a l a n c e b e t w e e n e f f e c t i v e n e s s a n d e f f i c i e n c y .

‘ The subject of this chapter is structured processes, and we will discuss process quality in terms of
them. Note, however, that all of the concepts in this question pertain equally well to dynamic
processes, as you’ll see in Chapter 8.

Q2 How C a n Information Systems Improve Process Quality? 221

A n o t h e r w a y t o s h o r t e n t h e c r e d i t c h e c k p r o c e s s w o u l d b e t o u s e a n i n f o r m a t i o n
s y s t e m t o p e r f o r m t h e c u s t o m e r c r e d i t c h e c k s . D e p e n d i n g o n t h e d e v e l o p m e n t
a n d o p e r a t i o n a l c o s t s o f t h e n e w s y s t e m , t h a t c h a n g e m i g h t a l s o b e less c o s t l y a n d
t h e r e f o r e m o r e e f f i c i e n t .

Change Both Process Stryciure and Resous-ces

O f c o u r s e , i t is p o s s i b l e t o i m p r o v e p r o c e s s q u a l i t y b y c h a n g i n g b o t h t h e process’s s t r u c –
t u r e a n d r e s o u r c e s . I n f a c t , u n l e s s a s t r u c t u r e c h a n g e is o n l y a s i m p l e r e o r d e r i n g o f tasks,
c h a n g i n g t h e s t r u c t u r e o f a p r o c e s s a l m o s t a l w a y s i n v o l v e s a c h a n g e i n r e s o u r c e s as w e l l .

I n f o r m a t i o n s y s t e m s c a n b e u s e d t o i m p r o v e p r o c e s s q u a l i t y b y :

‘ P e r f o r m i n g a n a c t i v i t y
A u g m e n t i n g a h u m a n w h o is p e r f o r m i n g a n a c t i v i t y

‘ C o n t r o l l i n g p r o c e s s f l o w

Performing an Activity
I n f o r m a t i o n s y s t e m s c a n p e r f o r m t h e e n t i r e t y o f a p r o c e s s a c t i v i t y . I n F i g u r e 7 – 1 , f o r
e x a m p l e , t h e c h e c k c r e d i t a c t i v i t y c o u l d b e e n t i r e l y a u t o m a t e d . W h e n y o u p u r c h a s e
f r o m A m a z o n . c o m o r a n o t h e r m a j o r o n l i n e r e t a i l e r , i n f o r m a t i o n s y s t e m s c h e c k y o u r
c r e d i t w h i l e y o u r t r a n s a c t i o n is b e i n g p r o c e s s e d . A t G e a r U p , o p e r a t i o n s c o s t s c o u l d b e
r e d u c e d b y d e v e l o p i n g a n i n f o r m a t i o n s y s t e m t h a t c o m p u t e s a s u r c h a r g e f o r e v e n t s
w h e n t h e g o o d s are t o b e o b t a i n e d f r o m a p r o b l e m a t i c v e n d o r . T h a t s u r c h a r g e c o u l d
b e c o m p u t e d a n d a u t o m a t i c a l l y a d d e d t o t h e e v e n t ‘ s p l a n n i n g d o c u m e n t s .

W e h a v e d e f i n e d i n f o r m a t i o n s y s t e m s as h a v i n g f i v e c o m p o n e n t s , t h e l a s t o f
w h i c h is p e o p l e . So, i f t h e a c t i v i t y is e n t i r e l y a u t o m a t e d , y o u m i g h t w o n d e r i f i t w o u l d
b e m o r e a c c u r a t e t o s a y t h a t t h e a c t i v i t y is b e i n g p e r f o r m e d b y a computer program
r a t h e r t h a n b y a n information system. I n f a c t , i n m o s t b u s i n e s s s i t u a t i o n s n e i t h e r
t e r m is a c c u r a t e w h e n d e s c r i b i n g a c o m p l e t e l y a u t o m a t e d a c t i v i t y . T h e t e r m i n o l o g y
is n o t p a r t i c u l a r l y i m p o r t a n t , as l o n g as y o u u n d e r s t a n d t h e p r o b l e m w i t h e a c h t e r m .
(See C o l l a b o r a t i o n E x e r c i s e , p a g e 252.)

Augmenting a Human Performing an Activity
A s e c o n d w a y t h a t i n f o r m a t i o n s y s t e m s c a n i m p r o v e p r o c e s s q u a l i t y is b y a u g m e n t i n g
t h e a c t i o n s o f a h u m a n w h o is p e r f o r m i n g t h a t a c t i v i t y . A t F o x L a k e , i f a l l d e p a r t m e n t s
w e r e t o u s e a c o m m o n f a c i l i t y r e s e r v a t i o n i n f o r m a t i o n s y s t e m , t h e n A n n e c o u l d
u s e t h a t s y s t e m w h e n p l a n n i n g a w e d d i n g t o e n s u r e t h a t t h e f a c i h t i e s s h e n e e d s a r e
a v a i l a b l e o n t h e d a t e s t h a t s h e n e e d s t h e m . I n t h i s e x a m p l e , t h e r e s e r v a t i o n s y s t e m
a u g m e n t s o n e o f t h e a c t i v i t i e s i n t h e w e d d i n g p l a n n i n g p r o c e s s .

Controlling Process Flow
A t h i r d w a y t h a t i n f o r m a t i o n s y s t e m s c a n i m p r o v e p r o c e s s q u a l i t y i s b y c o n t r o l l i n g
p r o c e s s f l o w . C o n s i d e r t h e o r d e r a p p r o v a l p r o c e s s i n F i g u r e 7 – 1 . I f t h i s p r o c e s s i s
c o n t r o l l e d m a n u a l l y , t h e n s o m e o n e , s a y a s a l e s p e r s o n , w i l l o b t a i n t h e o r d e r d a t a f r o m
t h e c u s t o m e r a n d t a k e w h a t e v e r a c t i o n s a r e n e e d e d t o p u s h t h a t o r d e r t h r o u g h t h e
t h r e e s t e p s i n t h e o r d e r p r o c e s s . I f t h e s a l e s p e r s o n g e t s b u s y o r i s d i s t r a c t e d o r a w a y
f r o m w o r k f o r a f e w d a y s , o r i f t h e r e are u n e x p e c t e d d e l a y s i n o n e o f t h e a c t i v i t i e s , i t is
p o s s i b l e f o r a n o r d e r t o b e l o s t o r t h e a p p r o v a l u n n e c e s s a r i l y d e l a y e d .

If, h o w e v e r , a n i n f o r m a t i o n s y s t e m is c o n t r o l l i n g t h e o r d e r a p p r o v a l p r o c e s s , t h e n
i t c a n e n s u r e t h a t s t e p s a r e p e r f o r m e d i n a c c o r d a n c e w i t h a n e s t a b l i s h e d s c h e d u l e .
T h e i n f o r m a t i o n s y s t e m c a n a l s o b e r e l i e d u p o n t o m a k e c o r r e c t p r o c e s s – r o u t i n g
d e c i s i o n s f o r p r o c e s s e s t h a t a r e m o r e c o m p l i c a t e d t h a n t h a t i n F i g u r e 7 – 1 . S h a r e P o i n t
w o r k f l o w s , d i s c u s s e d i n t h e c o n t e x t o f c o l l a b o r a t i o n i n C h a p t e r 2, c a n b e u s e d t o
a u t o m a t e s t r u c t u r e d p r o c e s s e s .

222 C H A P T E R 7 Structured Processes and Information Systems

How Do Enterprise Systems Eliminate
the Problem of Information Silos?
A n i n f o r m a t i o n s i l o i s a c o n d i t i o n t h a t e x i s t s w h e n d a t a a r e i s o l a t e d i n s e p a r a t e d
i n f o r m a t i o n s y s t e m s . F o r e x a m p l e , i f a n o r g a n i z a t i o n uses o n e i n f o r m a t i o n s y s t e m f o r
o r d e r p r o c e s s i n g a n d a s e c o n d i n f o r m a t i o n s y s t e m f o r c u s t o m e r s e r v i c e , t h e c u s t o m e r
d a t a are i s o l a t e d i n t w o s e p a r a t e s y s t e m s . A s a r e s u l t , t h e c u s t o m e r s e r v i c e d e p a r t m e n t
m i g h t p r o v i d e t h o u s a n d s o f d o l l a r s o f c u s t o m e r s u p p o r t t o a c u s t o m e r w h o h a s o n l y
o r d e r e d a f e w h u n d r e d d o l l a r s o f p r o d u c t .

N o o r g a n i z a t i o n p l a n s t o c r e a t e i n f o r m a t i o n s i l o s . T h e y a r i s e as a c o n s e q u e n c e o f i n f o r –
m a t i o n s y s t e m s t h a t s u p p o r t d e p a r t m e n t a l r a t h e r t h a n e n t e r p r i s e – l e v e l p r o c e s s e s .

C o n s i d e r t h e e x a m p l e o f F o x L a k e i n F i g u r e 7-5. T h e w e d d i n g e v e n t s d e p a r t m e n t
is n e w , a n d A n n e , t h e m a n a g e r , h a s b e e n g i v e n i n c e n t i v e s t o g r o w t h e b u s i n e s s . A t t h e
s a m e t i m e , b o t h s h e a n d F o x L a k e h a v e a r e p u t a t i o n t o p r o t e c t , so s h e w a n t s t o g r o w
t h e b u s i n e s s so t h a t F o x L a k e w e d d i n g s a n d r e c e p t i o n s h a v e a s u p e r i o r r e p u t a t i o n .

G o l f o p e r a t i o n s h a s a v e r y d i f f e r e n t s e t o f g o a l s . G o l f i n g is t h e p r i m a r y c o n c e r n o f
c l u b m e m b e r s , a n d t h e c l u b m u s t p r o v i d e g o l f e r s w i t h a c c u r a t e t e e t i m e s ( s t a r t i n g
t i m e s ) a n d w i t h a p l e a s a n t g o l f i n g e x p e r i e n c e . T h e c l u b c o n t r a c t s w i t h p r o f e s s i o n a l
g o l f e r s t o t e a c h g o l f l e s s o n s . T h e p r o s m a k e m o s t o f t h e i r i n c o m e f r o m l e s s o n s , a n d
i n o r d e r t o a t t r a c t a n d k e e p q u a l i t y p r o s t h e c o u r s e n e e d s t o g i v e t h e m p l e n t y o f
b u s i n e s s . O t h e r c o n c e r n s o f g o l f c o u r s e o p e r a t i o n s a r e l i s t e d i n F i g u r e 7-5.

T h e g o a l s o f t h e f a c i l i t i e s d e p a r t m e n t a r e c o m p l e t e l y d i f f e r e n t f r o m t h e o t h e r t w o
g r o u p s . F a c i l i t i e s i s c o n c e r n e d w i t h m a i n t e n a n c e f o r t o p – l e v e l a p p e a r a n c e , p r o t e c t i o n
o f c l u b assets, s o l v i n g e q u i p m e n t p r o b l e m s , a n d so f o r t h . U n l i k e w e d d i n g e v e n t s o r
g o l f o p e r a t i o n s , f a c i l i t i e s g e n e r a t e s n o r e v e n u e ; i t is a l l c o s t . So, t h e f a c i l i t i e s m a n a g e r
is g i v e n i n c e n t i v e s t o c a r e f u l l y m a n a g e t h e f a c i l i t i e s b u d g e t .

E a c h o f t h e s e d e p a r t m e n t s w i l l d e v e l o p b u s i n e s s p r o c e s s e s t o a c h i e v e i t s
p a r t i c u l a r g o a l s . W e d d i n g e v e n t s w i l l f o c u s o n p r o c e s s e s f o r s e l l i n g a n d a c c o m p l i s h i n g
w e d d i n g s , w h i c h are o n e – t i m e e v e n t s . G o l f o p e r a t i o n s w i l l d e v e l o p p r o c e s s e s f o r s a t i s –
f y i n g r e p e a t c u s t o m e r s a n d f o r s e l l i n g t h o s e c u s t o m e r s l e s s o n s o n a c o n t i n u i n g b a s i s .
F a c i l i t i e s w i l l f o c u s o n p r o c e s s e s f o r m a i n t e n a n c e a n d p r o b l e m s o l v i n g v « t h i n b u d g e t .

B e c a u s e o f t h e s e d i f f e r e n t p r o c e s s e s , e a c h g r o u p w i l l d e v e l o p i n f o r m a t i o n s y s t e m s
o f a d i f f e r e n t c h a r a c t e r , as s h o w n i n F i g u r e 7 – 6 . B e c a u s e t h e s e s y s t e m s h a v e n e a r l y
n o t h i n g t o d o w i t h e a c h o t h e r , t h e y c a n o p e r a t e as i s o l a t e d e n t i t i e s f o r a l o n g t i m e ,
w i t h o u t p r o b l e m . I n f a c t , i s l a n d s o f a u t o m a t i o n is a n o t h e r t e r m f o r i n f o r m a t i o n s i l o ; i t
j u s t m e a n s g r o u p s o f i n f o r m a t i o n s y s t e m s t h a t o p e r a t e i n i s o l a t i o n from o n e o t h e r .

Fsgyre 7-5
Fox Lake Country Club
Departmental Goals

Wedding Events

Increase business

Develop fiigfi-quality
reputation

Manage complicated
details

One-off customers

Golf Operations

Satisfy golfers

Keep golf pros busy

Extend season

Manage pro shop
profitably

Repeat customers

Facilities

Maintain top-level club
appearance

Protect and conserve
club physical assets

Resolve problems
quickly

Stay within budget

Wedding Planning

Contact manager

Project planner

Event accounting

Q3 HOW DO Enterprise Systems Eliminate the Problem of Information Silos?

Facilities

J-Xi

223

Golf Courses Operations |

Tee-time
reservation system

Pro lesson
scheduling

Pro shop retailing

Tournament
. planning

Islands of Automation

Maintenance
scheduling

Staff scheduling

Problem traci

Expense/budget
tracking

Fox Lake Country Club
Departmental Information
Systems

I n f o r m a t i o n s i l o s (or, e q u i v a l e n t l y , i s l a n d s o f a u t o m a t i o n ) a r e n o t a p r o b l e m u n t i l
p r o c e s s e s b e g i n t o u s e a n d s t o r e d a t a a b o u t t h e s a m e e n t i t i e s . O r , s t a t e d d i f f e r e n t l y ,
u n t i l t h e y d u p l i c a t e d a t a . A t t h a t p o i n t , t h e y c a n b e c o m e q u i t e p r o b l e m a t i c , as F o x
L a k e l e a r n e d w h e n t h e w e d d i n g e v e n t s d e p a r t m e n t m a i n t a i n e d i t s o w n c o p y o f r o o m
r e s e r v a t i o n d a t a t h a t d u p l i c a t e d t h a t s a m e d a t a i n t h e f a c i l i t i e s d e p a r t m e n t .

What Problems Do Information Silos Cause?
W e h a v e s e e n o n e p r o b l e m o f i n f o r m a t i o n s i l o s a t F o x L a k e . B e c a u s e w e d d i n g e v e n t s ,
f a c i l i t i e s , a n d g o l f o p e r a t i o n s u s e t h e s a m e p h y s i c a l s t r u c t u r e s , t h e y d u p l i c a t e d a t a
a b o u t t h o s e f a c i l i t i e s i n t h e i r i s o l a t e d p r o c e s s e s a n d s y s t e m s . B y s t o r i n g i s o l a t e d d a t a ,
t h e i r a c t i v i t i e s c a n c o n f l i c t , as t h e y d i d .

C o n s i d e r , h o w e v e r , t h e m o r e c o m p l e x e x a m p l e i n F i g u r e 7-7. E v e r y day, p a t i e n t s are
d i s c h a r g e d f r o m h o s p i t a l s . T h i n k a b o u t t h e n u m e r o u s d e p a r t m e n t s t h a t n e e d t o b e
n o t i f i e d w h e n t h a t o c c u r s . D o c t o r s issue t h e d i s c h a r g e o r d e r . I n r e s p o n s e , n u r s e s n e e d t o

Doctors Nurses Pharmacy Kitchen Family

Doctor Nursing Prescription Menu Room iPhone
Scheduling Operations Application Planning Maintenance Application
Application

•;i
Application 11 Application Application

Patient

Assignments

Patient
Medicine

Patient
Food

Requirements)

Patient/
Room

Assignments

Patient
Records

Examples of Islands of
Automation at a Hospital

224 C H A P T E R 7 Structured Processes and Information Systems

Problems Created by
Information Silos

p r e p a r e t h e p a t i e n t , t h e p h a r m a c y n e e d s t o p r e p a r e t a k e – h d m e m e d i c a t i o n s , t h e k i t c h e n
n e e d s t o s t o p m a k i n g m e a l s f o r t h e d i s c h a r g e d p a t i e n t , h o u s e k e e p i n g n e e d s t o c l e a n t h e
v a c a t e d r o o m , a n d t h e f a m i l y n e e d s t o b e n o t i f i e d t o e n s u r e t h a t s o m e o n e is a v a i l a b l e t o
t a k e t h e p a t i e n t h o m e . I f e a c h o f t h e s e d e p a r t m e n t s m a i n t a i n s i t s o w n i s l a n d o f a u t o m a –
t i o n , i t w i l l m a k e d e c i s i o n s i n i s o l a t i o n f r o m t h e o t h e r s . F o r e x a m p l e , t h e k i t c h e n w i l l
p r e p a r e f o o d f o r p a t i e n t s w h o h a v e b e e n d i s c h a r g e d . O r , f a m i l i e s w i l l a t t e m p t t o v i s i t
p a t i e n t s w h o h a v e b e e n m o v e d t o n e w l o c a t i o n s . I n s h o r t , p a t i e n t s , f a m i l i e s , d o c t o r s ,
n u r s e s , a n d s t a f f w i l l c o m e t o b e l i e v e t h a t ” n o o n e s e e m s t o k n o w w h a t is g o i n g o n . ”

F i g u r e 7-8 s u m m a r i z e s t h e p r o b l e m s o f t h e i n f o r m a t i o n s i l o s c r e a t e d b y i s o l a t e d
i n f o r m a t i o n s y s t e m s . F i r s t , d a t a are d u p l i c a t e d , b e c a u s e e a c h a p p l i c a t i o n h a s i t s o w n
d a t a b a s e . I f a c c o u n t i n g a n d s a l e s / m a r k e t i n g a p p l i c a t i o n s are s e p a r a t e d , c u s t o m e r d a t a
w i l l b e d u p U c a t e d a n d m a y b e c o m e i n c o n s i s t e n t . C h a n g e s t o c u s t o m e r d a t a m a d e i n
t h e s a l e s / m a r k e t i n g a p p l i c a t i o n m a y t a k e d a y s o r w e e k s t o r e a c h t h e a c c o u n t i n g a p p l i –
c a t i o n ‘ s d a t a b a s e . D u r i n g t h a t p e r i o d , s h i p m e n t s m a y r e a c h t h e c u s t o m e r w i t h o u t
d e l a y , b u t i n v o i c e s w i l l b e s e n t t o t h e w r o n g a d d r e s s .

A d d i t i o n a l l y , w h e n a p p l i c a t i o n s a r e i s o l a t e d , b u s i n e s s p r o c e s s e s a r e d i s j o i n t e d .
S u p p o s e a b u s i n e s s h a s a r u l e t h a t c r e d i t o r d e r s o v e r $ 2 0 , 0 0 0 m u s t b e p r e a p p r o v e d b y
t h e a c c o u n t s r e c e i v a b l e d e p a r t m e n t . I f t h e s u p p o r t i n g a p p h c a t i o n s are s e p a r a t e d , i t
w i l l b e d i f f i c u l t f o r t h e t w o a c t i v i t i e s t o r e c o n c i l e t h e i r d a t a , a n d t h e a p p r o v a l w i l l b e
s l o w – t o – g r a n t a n d p o s s i b l y e r r o n e o u s .

I n t h e s e c o n d r o w o f F i g u r e 7-8, sales a n d m a r k e t i n g w a n t s t o a p p r o v e a $ 2 0 , 0 0 0
o r d e r w i t h A j a x . A c c o r d i n g t o t h e sales a n d m a r k e t i n g d a t a b a s e , A j a x h a s a c u r r e n t
b a l a n c e o f $ 1 7 , 8 0 0 , so sales r e q u e s t s a t o t a l c r e d i t a m o u n t o f $ 3 7 , 8 0 0 . T h e a c c o u n t i n g
d a t a b a s e , h o w e v e r , s h o w s A j a x w i t h a b a l a n c e o f $ 1 2 , 3 0 0 , b e c a u s e t h e a c c o u n t s r e c e i v –
a b l e a p p l i c a t i o n h a s c r e d i t e d A j a x f o r a r e t u r n o f $ 5 , 5 0 0 . A c c o r d i n g t o a c c o u n t i n g ‘ s
r e c o r d s , a t o t a l o f $ 3 2 , 3 0 0 w i l l b e n e e d e d t o a p p r o v e t h e n e w $ 2 0 , 0 0 0 o r d e r , so t h a t is
a l l t h e y g r a n t . Sales a n d m a r k e t i n g d o e s n ‘ t u n d e r s t a n d w h a t t o d o w i t h a c r e d i t
a p p r o v a l o f $ 3 2 , 3 0 0 . W a s o n l y $ 1 4 , 5 0 0 o f t h e o r d e r a p p r o v e d ? A n d w h y t h a t a m o u n t ?

Problem Sales and Marketing Accounting

Data duplication, data inconsistency

Ajax Construction
Sfiipto’.Reno,NV
Bill to: Reno, NV

Ajax Construction
Ship to: Reno, NV
Bill to: Buffalo, NY

Disjointed processes

Get Credit Approval

Request $37,800 ^
Approve Customer

Credit
Get Credit Approval

^
Approve $32,300

Approve Customer
Credit

Get Credit Approval Approve Customer
Credit

Limited information and lack of
integrated information

Order
Data

Is IndyMac a preferred customer?

Payment
Data

Isolated decisions lead to
organizational inefficiencies

Order
Data

Redouble sales efforts at IndylVAac.

Payment
Data

OneWest has been slow to pay.

Increased expense
S of problems above.

I T

Q3 How Do Enterprise Systems Eliminate the Problem of Information Silos? 225

B o t h d e p a r t m e n t s w a n t t o a p p r o v e t h e o r d e r . I t w i l l t a k e n u m e r o u s e m a i l s a n d p h o n e
c a l l s , h o w e v e r , t o s o r t t h i s o u t . T h e i n t e r a c t i n g b u s i n e s s p r o c e s s e s a r e d i s j o i n t e d ,

A c o n s e q u e n c e o f s u c h d i s j o i n t e d s y s t e m s is t h e l a c k o f i n t e g r a t e d e n t e r p r i s e d a t a .
F o r e x a m p l e , s u p p o s e sales a n d m a r k e t i n g w a n t s t o k n o w i f I n d y M a c is s t i l l a p r e f e r r e d
c u s t o m e r . A s s u m e t h a t d e t e r m i n i n g a c u s t o m e r ‘ s s t a t u s r e q u i r e s a c o m p a r i s o n o f
o r d e r h i s t o r y a n d p a y m e n t h i s t o r y d a t a . H o w e v e r , w i t h i n f o r m a t i o n s i l o s , t h a t d a t a
w i l l r e s i d e i n t w o d i f f e r e n t d a t a b a s e s , a n d , i n o n e o f t h e m , I n d y M a c is k n o w n b y t h e
n a m e o f t h e c o m p a n y t h a t a c q u i r e d i t , O n e W e s t b a n k . D a t a i n t e g r a t i o n w i l l b e d i f f i c u l t .
M a k i n g t h e d e t e r m i n a t i o n w i l l r e q u i r e m a n u a l p r o c e s s e s a n d d a y s , w h e n i t s h o u l d b e
r e a d i l y a n s w e r e d i n s e c o n d s .

T h i s l e a d s t o t h e f o u r t h c o n s e q u e n c e : i n e f f i c i e n c y . W h e n u s i n g i s o l a t e d f u n c t i o n a l
a p p l i c a t i o n s , d e c i s i o n s are m a d e i n i s o l a t i o n . A s s h o w n i n t h e f o u r t h r o w o f F i g u r e 7-8,
s a l e s a n d m a r k e t i n g d e c i d e d t o r e d o u b l e i t s s a l e s e f f o r t w i t h I n d y M a c . H o w e v e r ,
a c c o u n t i n g k n o w s t h a t I n d y M a c w a s f o r e c l o s e d b y t h e F D I C a n d s o l d t o O n e W e s t a n d
t h a t t h e r e are f a r b e t t e r p r o s p e c t s f o r i n c r e a s e d sales a t t e n t i o n . W i t h o u t i n t e g r a t i o n ,
t h e l e f t h a n d o f t h e o r g a n i z a t i o n d o e s n ‘ t k n o w w h a t t h e r i g h t h a n d i s d o i n g .

F i n a l l y , i n f o r m a t i o n s i l o s c a n r e s u l t i n i n c r e a s e d c o s t s f o r t h e o r g a n i z a t i o n .
D u p h c a t e d d a t a , d i s j o i n t e d s y s t e m s , U m i t e d i n f o r m a t i o n , a n d i n e f f i c i e n c i e s a l l m e a n
h i g h e r c o s t s .

T h e s e p r o b l e m s a r e s o l v e d b y i n f o r m a t i o n s y s t e m s t h a t s u p p o r t e n t e r p r i s e – w d e
p r o c e s s e s , a n d w e c o n s i d e r t h e m f o r t h e r e s t o f t h i s c h a p t e r .

T h e f u n d a m e n t a l p r o b l e m o f i n f o r m a t i o n s i l o s is t h a t d a t a a r e d u p l i c a t e d i n i s o l a t e d
s y s t e m s . T h e m o s t o b v i o u s f i x is t o e l i m i n a t e t h a t d u p l i c a t e d d a t a b y s t o r i n g a s i n g l e
c o p y o f d a t a i n a s h a r e d d a t a b a s e a n d r e v i s i n g b u s i n e s s p r o c e s s e s ( a n d a p p l i c a t i o n s )
t o u s e t h a t d a t a b a s e . A n o t h e r r e m e d y is t o a l l o w t h e d u p l i c a t i o n , b u t t o m a n a g e i t t o
a v o i d p r o b l e m s . W e w i l l d i s c u s s b o t h t e c h n i q u e s i n t h i s c h a p t e r .

f m Enterprise System at Fox Lake
F i g u r e 7-9 s h o w s h o w t h e f i r s t r e m e d y i s a p p l i e d a t F o x L a k e . F i r s t , a d a t a b a s e i s
c r e a t e d t h a t c o n t a i n s r e s e r v a t i o n s f o r c l u b f a c i l i t i e s . E a c h d e p a r t m e n t t h e n a l t e r s i t s
b u s i n e s s p r o c e s s e s ( a n d a p p h c a t i o n s ) t o u s e t h e s h a r e d d a t a b a s e . I n t h i s s i m p l e
e x a m p l e , t h e o n l y c h a n g e n e e d e d i s t o d e v e l o p p r o c e d u r e s t o c h e c k a v a i l a b i l i t y
b e f o r e s c h e d u l i n g a c t i v i t i e s a n d t o r e c o r d a n y i n t e n d e d u s e f o r s h a r e d r e s o u r c e s i n
t h e d a t a b a s e . O n e o r m o r e d a t a b a s e a p p l i c a t i o n s m a y n e e d t o b e d e v e l o p e d t o
e n a b l e a v a i l a b i l i t y c h e c k i n g .

Wedding Events Golf Operations if Facilities

Event
Planning
Process Tournament

Planning
Process

Maintenance
Scheduling f * ”
Process

Reservation
Information
System

Resource
Database

Fox Lake Country Club
Enterprise Reservation System

226 CHAPTER 7 Structured Processes and Information Systems

H o w e v e r , w i t h t h i s s o l u t i o n , e a c h d e p a r t m e n t m u s t b e m i n d f u l t h a t i t is p r o c e s s i n g
a s h a r e d r e s o u r c e . F o r e x a m p l e , p r i o r t o t h e s h a r e d d a t a b a s e , t h e f a c i l i t i e s d e p a r t m e n t
w o u l d b l o c k o u t w e e k s o f t i m e o n i t s c a l e n d a r f o r b u i l d i n g m a i n t e n a n c e , m u c h m o r e
t i m e t h a n i t a c t u a l l y n e e d e d . I t w o u l d t h e n w o r k i n m a i n t e n a n c e a c t i v i t i e s d u r i n g t h a t
b l o c k i n a c c o r d a n c e w i t h i t s o w n t a s k s a n d p r i o r i t i e s . I f f a c i l i t i e s c o n t i n u e s t h i s
p r a c t i c e , i t w i l l n e e d l e s s l y b l o c k o u t w e d d i n g e v e n t s a n d r e d u c e p o t e n t i a l c l u b r e v e n u e .
W i t h t h e s h a r e d d a t a b a s e , f a c i l i t i e s n e e d s t o s c h e d u l e s p e c i f i c a c t i v i t i e s a g a i n s t s p e c i f i c
b u i l d i n g s f o r t h e m i n i m u m n e c e s s a r y b l o c k s o f t i m e .

B e f o r e w e g o o n , t h i s s i m p l e e x a m p l e i l l u s t r a t e s a p h e n o m e n o n t h a t creates d i f f i c u l t
m a n a g e m e n t c h a l l e n g e s . W h e n t h e e n t e r p r i s e s y s t e m is i m p l e m e n t e d , a l l t h e d e p a r t –
m e n t s t h a t use i t m u s t c h a n g e t h e i r b u s i n e s s processes. P e o p l e d o n o t l i k e t o c h a n g e ; i n
f a c t , u n l e s s t h e b e n e f i t o f t h e c h a n g e is e a s i l y r e c o g n i z e d , p e o p l e resist c h a n g e . H o w e v e r ,
i n s o m e cases, n e w e n t e r p r i s e s y s t e m s r e q u i r e d e p a r t m e n t s t o c h a n g e w i t h o u t a n y
o b v i o u s b e n e f i t to that department. I n t h e Fox L a k e e x a m p l e , w h e n m o v i n g t o t h e s y s t e m
i n F i g u r e 7-9, f a c i l i t i e s w i l l n e e d t o c h a n g e its processes f o r t h e b e n e f i t o f w e d d i n g e v e n t s
( a n d f o r Fox L a k e as a n e n t e r p r i s e ) , b u t f o r n o b e n e f i t t o i t s e l f . F a c i l i t i e s p e r s o n n e l m a y
p e r c e i v e t h e n e w s y s t e m as a l o t o f t r o u b l e f o r n o t h i n g .

T h e s y s t e m i n F i g u r e 7-9 is a n e n t e r p r i s e i n f o r m a t i o n s y s t e m i n t h a t d i f f e r e n t
d e p a r t m e n t s s h a r e d a t a . H o w e v e r , n o t i c e t h a t t h e b u s i n e s s p r o c e s s e s d o n o t o v e r l a p
d e p a r t m e n t s ; t h e y a r e s t i l l i s o l a t e d . T h i s is n o t t h e case i n m o s t o r g a n i z a t i o n s . U s u a l l y ,
e n t e r p r i s e b u s i n e s s p r o c e s s e s s p a n d e p a r t m e n t s . W h e n t h e y d o so, t h e d e v e l o p m e n t
o f e n t e r p r i s e s y s t e m s is c o n s i d e r a b l y m o r e d i f f i c u l t b u t p o t e n t i a l l y m o r e b e n e f i c i a l .
C o n s i d e r t h e h o s p i t a l e x a m p l e p r e v i o u s l y i n t r o d u c e d .

An Enterprise System for Patient Discharge
F i g u r e 7- 10 s h o w s s o m e o f t h e h o s p i t a l d e p a r t m e n t s a n d p r o c e s s e s i n v o l v e d i n
d i s c h a r g i n g a p a t i e n t f r o m a h o s p i t a l . A d o c t o r i n i t i a t e s t h e p r o c e s s b y i s s u i n g a d i s c h a r g e
p a t i e n t o r d e r . T h a t o r d e r is d e l i v e r e d t o t h e a p p r o p r i a t e n u r s i n g s t a f f m e m b e r , w h o
i n i t i a t e s a c t i v i t i e s a t t h e p h a r m a c y t h e p a t i e n t ‘ s f a m i l y a n d h o u s e k e e p i n g . S o m e o f t h o s e
a c t i v i t i e s i n i t i a t e a c t i v i t i e s b a c k at t h e n u r s i n g staff. T h e h o s p i t a l w i l l use a n e n t e r p r i s e –
w i d e i n f o r m a t i o n s y s t e m t o s u p p o r t t h i s p r o c e s s ( o r a n g e a r r o w ) . T h a t i n f o r m a t i o n sys-
t e m w i l l p r o v i d e d a t a e n t r y f o r m s , r e p o r t s , a n d n o t i f i c a t i o n s t o t h e h u m a n a c t o r s i n t h i s
p r o c e s s . I t w i l l also c o n t r o l t h e flow o f p r o c e s s a c t i v i t y , as s h o w n b y t h e d o t t e d r e d l i n e .

P r i o r t o t h e e n t e r p r i s e s y s t e m , t h e h o s p i t a l h a d d e v e l o p e d p r o c e d u r e s f o r u s i n g a
p a p e r – b a s e d s y s t e m a n d i n f o r m a l m e s s a g i n g v i a t h e t e l e p h o n e . E a c h d e p a r t m e n t

Q4 How Do CRM, ERP, and EAI Support Structured Enterprise Processes? 227

k e p t i t s o w n r e c o r d s . W h e n t h e n e w e n t e r p r i s e i n f o r m a t i o n s y s t e m w a s i m p l e m e n t e d ,
n o t o n l y w a s t h e d a t a i n t e g r a t e d i n t o a d a t a b a s e , b u t n e w c o m p u t e r – b a s e d f o r m s a n d
r e p o r t s w e r e c r e a t e d . T o u s e t h e n e w s y s t e m , t h e s t a f f n e e d e d t o t r a n s i t i o n f r o m t h e
p a p e r – b a s e d s y s t e m t o t h e c o m p u t e r – b a s e d o n e . T h e y a l s o n e e d e d t o s t o p m a k i n g
p h o n e c a l l s a n d l e t t h e n e w i n f o r m a t i o n s y s t e m m a k e n o t i f i c a t i o n s a c r o s s d e p a r t –
m e n t s . T h e s e m e a s u r e s i n v o l v e d s u b s t a n t i a l c h a n g e , a n d m o s t o r g a n i z a t i o n s e x p e r i –
e n c e c o n s i d e r a b l e a n g u i s h w h e n u n d e r g o i n g s u c h t r a n s i t i o n s .

How Do CRM, ERP, and EAI Support
Structured Enterprise Processes?
E n t e r p r i s e s y s t e m s l i k e t h e o n e i n F i g u r e 7-10 w e r e n o t f e a s i b l e u n t i l n e t w o r k , d a t a
c o m m u n i c a t i o n , a n d d a t a b a s e t e c h n o l o g i e s r e a c h e d a s u f f i c i e n t l e v e l o f c a p a b i l i t y
a n d m a t u r i t y i n t h e l a t e 1980s a n d e a r l y 1 9 9 0 s . A t t h a t p o i n t , m a n y o r g a n i z a t i o n s
b e g a n t o d e v e l o p e n t e r p r i s e s y s t e m s .

A s t h e y d i d so, o r g a n i z a t i o n s r e a l i z e d t h a t t h e i r e x i s t i n g b u s i n e s s p r o c e s s e s n e e d e d t o
c h a n g e . I n p a r t , t h e y n e e d e d t o c h a n g e t o u t i l i z e t h e s h a r e d d a t a b a s e s a n d t o u t i l i z e
n e w c o m p u t e r – b a s e d f o r m s a n d r e p o r t s . H o w e v e r , a n e v e n m o r e i m p o r t a n t r e a s o n f o r
c h a n g i n g b u s i n e s s p r o c e s s e s w a s t h a t i n t e g r a t e d d a t a a n d e n t e r p r i s e s y s t e m s o f f e r e d
t h e p o t e n t i a l o f s u b s t a n t i a l i m p r o v e m e n t s i n p r o c e s s q u a l i t y . I t b e c a m e p o s s i b l e t o d o
t h i n g s t h a t h a d b e e n i m p o s s i b l e b e f o r e . U s i n g P o r t e r ‘ s l a n g u a g e ( C h a p t e r 3, p a g e 8 2 ) ,
e n t e r p r i s e s y s t e m s e n a b l e d t h e c r e a t i o n o f s t r o n g e r , f a s t e r , m o r e e f f e c t i v e linkages
a m o n g v a l u e c h a i n s .

F o r e x a m p l e , w h e n t h e h o s p i t a l u s e d a p a p e r – b a s e d s y s t e m , t h e k i t c h e n w o u l d
p r e p a r e m e a l s f o r e v e r y o n e w h o w a s a p a t i e n t a t t h e h o s p i t a l as o f m i d n i g h t t h e n i g h t
b e f o r e . I t w a s n o t p o s s i b l e t o o b t a i n d a t a a b o u t d i s c h a r g e s u n t i l t h e n e x t m i d n i g h t .
C o n s e q u e n t l y , c o n s i d e r a b l e f o o d w a s w a s t e d a t s u b s t a n d a l c o s t .

W i t h t h e e n t e r p r i s e s y s t e m , t h e k i t c h e n c a n b e n o t i f i e d a b o u t p a t i e n t d i s c h a r g e s as
t h e y o c c u r t h r o u g h o u t t h e d a y r e s u l t i n g i n s u b s t a n t i a l r e d u c t i o n s i n w a s t e d f o o d . B u t
w h e n s h o u l d t h e k i t c h e n b e n o t i f i e d ? I m m e d i a t e l y ? A n d w h a t i f t h e d i s c h a r g e is c a n c e l l e d
b e f o r e c o m p l e t i o n ? N o t i f y t h e k i t c h e n o f t h e c a n c e l l e d discharge? M a n y p o s s i b i l i t i e s a n d
a l t e r n a t i v e s exist. So, t o d e s i g n its n e w e n t e r p r i s e s y s t e m , t h e h o s p i t a l n e e d e d t o d e t e r –
m i n e h o w b e s t t o c h a n g e i t s p r o c e s s e s t o t a k e a d v a n t a g e o f t h e n e w c a p a b i l i t y . S u c h
p r o j e c t s c a m e t o b e k n o w n as b u s i n e s s p r o c e s s r e e n g m e e r i n g , w h i c h is t h e a c t i v i t y o f
a l t e r i n g a n d d e s i g n i n g b u s i n e s s proce ss e s t o t a k e a d v a n t a g e o f n e w i n f o r m a t i o n s y s t e m s .

U n f o r t u n a t e l y , b u s i n e s s p r o c e s s r e e n g i n e e r i n g is d i f f i c u l t , s l o w , a n d e x c e e d i n g l y
e x p e n s i v e . B u s i n e s s a n a l y s t s n e e d t o i n t e r v i e w k e y p e r s o n n e l t h r o u g h o u t t h e o r g a n i –
z a t i o n t o d e t e r m i n e h o w b e s t t o u s e t h e n e w t e c h n o l o g y . B e c a u s e o f t h e c o m p l e x i t y
i n v o l v e d , s u c h p r o j e c t s r e q u i r e h i g h – l e v e l a n d e x p e n s i v e s k i l l s a n d c o n s i d e r a b l e t i m e .
M a n y e a r l y p r o j e c t s s t a l l e d w h e n t h e e n o r m i t y o f t h e p r o j e c t b e c a m e a p p a r e n t . T h i s
l e f t s o m e o r g a n i z a t i o n s w i t h p a r t i a l l y i m p l e m e n t e d s y s t e m s , w h i c h h a d d i s a s t r o u s
c o n s e q u e n c e s . P e r s o n n e l d i d n ‘ t k n o w i f t h e y w e r e u s i n g t h e n e w s y s t e m , t h e o l d
s y s t e m , o r s o m e h a c k e d – u p v e r s i o n o f b o t h .

T h e stage w a s set f o r t h e e m e r g e n c e o f e n t e r p r i s e a p p l i c a t i o n s o l u t i o n s , w h i c h w e
d i s c u s s n e x t .

W h e n t h e p r o c e s s q u a l i t y b e n e f i t s o f e n t e r p r i s e – w i d e s y s t e m s b e c a m e a p p a r e n t , m o s t
o r g a n i z a t i o n s w e r e s t i l l d e v e l o p i n g t h e i r a p p l i c a t i o n s i n – h o u s e . A t t h e time, o r g a n i z a –
tions p e r c e i v e d t h e i r n e e d s as b e i n g ” t o o u n i q u e ” t o b e s a t i s f i e d b y o f f ” – t h e – s h e l f o r a l t e r e d
a p p l i c a t i o n s . H o w e v e r , as a p p l i c a t i o n s b e c a m e m o r e a n d m o r e c o m p l e x , i n – h o u s e d e v e l –
o p m e n t c o s t s b e c a m e i n f e a s i b l e . A s s t a t e d i n C h a p t e r 4, s y s t e m s b u i l t i n – h o u s e a r e

228 CHAPTER 7 Structured Processes and Information Systems

Despite the clear benefits of
inherent processes and ERP,
there can be an unintended
consequence. See the Guide
on pages 248-249 and
consider that risk.

Hgme 7-11
Thie Customer Life Cycle

Source: Used with permission of Professor
Douglas Maciochion, Michael G. Foster School
of Business, University of Woshingfon.

e x p e n s i v e n o t o n l y b e c a u s e o f t h e i r h i g h i n i t i a l d e v e l o p m e n t costs, b u t also b e c a u s e o f
d i e c o n t i n u i n g n e e d t o a d a p t t h o s e s y s t e m s t o c h a n g i n g r e q u i r e m e n t s .

I n t h e e a r l y 1990s, as t h e costs o f b u s i n e s s p r o c e s s r e e n g i n e e r i n g w e r e c o u p l e d t o
t h e c o s t s o f i n – h o u s e d e v e l o p m e n t , o r g a n i z a t i o n s b e g a n t o l o o k m o r e f a v o r a b l y o n t h e
i d e a o f h c e n s i n g p r e – e x i s t i n g a p p l i c a t i o n s . ” M a y b e w e ‘ r e n o t so u n i q u e , a f t e r aJl.”

S o m e o f t h e v e n d o r s w h o t o o k a d v a n t a g e o f t h i s c h a n g e i n a t t i t u d e w e r e P e o p l e –
S o f t , w h i c h l i c e n s e d p a y r o l l a n d l i m i t e d – c a p a b i l i t y h u m a n r e s o u r c e s s y s t e m s ; S i e b e l ,
w h i c h l i c e n s e d a sales l e a d t r a c k i n g a n d m a n a g e m e n t s y s t e m , a n d SAP, w h i c h
l i c e n s e d s o m e t h i n g n e w , a s y s t e m c a l l e d enterprise resource management.

T h e s e t h r e e c o m p a n i e s , a n d u l t i m a t e l y d o z e n s o f o t h e r s l i k e t h e m , o f f e r e d n o t j u s t
s o f t w a r e a n d d a t a b a s e d e s i g n s . T h e y also o f f e r e d s t a n d a r d i z e d b u s i n e s s processes. T h e s e
i n h e r e n t p r o c e s s e s , w h i c h are p r e d e s i g n e d p r o c e d u r e s f o r u s i n g t h e s o f t w a r e p r o d u c t s ,
s a v e d o r g a n i z a t i o n s f r o m t h e expense, delays, a n d risks o f b u s i n e s s p r o c e s s r e e n g i n e e r i n g .
I n s t e a d , o r g a n i z a t i o n s c o u l d l i c e n s e t h e s o f t w a r e a n d o b t a i n , as p a r t o f d i e d e a l , p r e b u i l t
p r o c e d u r e s , w h i c h t h e v e n d o r s a s s u r e d t l i e m w e r e b a s e d o n ” i n d u s t i y b e s t p r a c t i c e s . ”

S o m e p a r t s o f t h a t d e a l w e r e t o o g o o d t o b e t r u e b e c a u s e , as y o u ‘ l l l e a r n i n Q 6 ,
i n h e r e n t p r o c e s s e s are a l m o s t n e v e r a p e r f e c t f i t . B u t , t h e o f f e r w a s t o o m u c h f o r m a n y
o r g a n i z a t i o n s t o r e s i s t . O v e r t i m e , t h r e e c a t e g o r i e s o f e n t e r p r i s e a p p l i c a t i o n s
e m e r g e d : c u s t o m e r r e l a t i o n s h i p m a n a g e m e n t , e n t e r p r i s e r e s o u r c e p l a n n i n g , a n d
e n t e r p r i s e a p p l i c a t i o n i n t e g r a t i o n . C o n s i d e r e a c h .

Customer Relationship lUlanagement (CBM)
A c u s t o m e r r e l a t i o n s h i p m a n a g e m e n t ( C R M ) s y s t e m i s a s u i t e o f a p p l i c a t i o n s , a
d a t a b a s e , a n d a set o f i n h e r e n t p r o c e s s e s f o r m a n a g i n g a l l t h e i n t e r a c t i o n s w i t h t h e
c u s t o m e r , f r o m l e a d g e n e r a t i o n t o c u s t o m e r s e r v i c e . E v e r y c o n t a c t a n d t r a n s a c t i o n
w i t h t h e c u s t o m e r is r e c o r d e d i n t h e C R M d a t a b a s e . V e n d o r s o f C R M s y s t e m s c l a i m
t h a t u s i n g t h e i r p r o d u c t s m a k e s t h e o r g a n i z a t i o n customer-centric. T h o u g h t h a t t e r m
r e e k s o f sales h y p e r b o l e , i t d o e s i n d i c a t e t h e n a t u r e a n d i n t e n t o f C R M p a c k a g e s .

F i g u r e 7 – 1 1 s h o w s f o u r p h a s e s o f t h e c u s t o m e r l i f e c y c l e : m a r k e t i n g , c u s t o m e r
a c q u i s i t i o n , r e l a t i o n s h i p m a n a g e m e n t , a n d l o s s / c h u r n . M a r k e t i n g s e n d s messages t o t h e
t a r g e t m a r k e t t o a t t r a c t c u s t o m e r p r o s p e c t s . W h e n p r o s p e c t s o r d e r , t h e y b e c o m e
c u s t o m e r s w h o n e e d t o b e s u p p o r t e d . A d d i t i o n a l l y , r e l a t i o n s h i p m a n a g e m e n t processes

Marketing Customer acquisition Relationsfiip management Loss/Churn

Attract Sell Support
and resell

^ ^ ^Sell more.

Target Prospect Customer Target Prospect Customer

Categorize

Low-value
customers

Win back

Solicitation ,
Processes Lead-Tracking

Processes

Relationship Management
Processes

Q 4 How Do CRM, ERP, and EAI Support Structured Enterprise Processes? 229

Sales

Applications

Relationship
Managennent
Applications

Solicitation and
Lead

Management
Application

CRM
Database

CRM Applications

Custome

r

Support

Applications

increase the value of existing customers by selling t h e m more p r o d u c t . Inevitably, over
t i m e the organization loses customers. W h e n this occurs, w i n – b a c k processes categorize
customers according to value a n d a t t e m p t to w i n back high-value customers.

Figure 7-12 illustrates the m a j o r c o m p o n e n t s of a CRM a p p l i c a t i o n . N o t i c e t h a t
c o m p o n e n t s exist for each stage of the customer l i f e cycle. As s h o w n , all applications
process a c o m m o n c u s t o m e r database. This design eliminates d u p l i c a t e d customer
data a n d removes the p o s s i b i l i t y of inconsistent data, I t also means that each depart-
m e n t knows w h a t has been h a p p e n i n g w i t h the customer at other d e p a r t m e n t s . Cus-
t o m e r s u p p o r t , for example, w i l l k n o w n o t to p r o v i d e $1,000 w o r t h of s u p p o r t labor to
a c u s t o m e r t h a t has g e n e r a t e d $300 w o r t h of business over t i m e . However, t h e y ‘ l l
k n o w to b e n d over b a c k w a r d s f o r t h e c u s t o m e r s t h a t have g e n e r a t e d h u n d r e d s o f
thousands of dollars of business. The result to the customer is that he or she feels like
they are dealing w i t h one e n t i t y a n d n o t many.

CRM systems vary i n the degree of functionality they provide. One of the p r i m a r y tasks
w h e n selecting a CRM package is to determine the features y o u need and to f i n d a package
that meets that set of needs. You might be involved i n just such a project d u r i n g your career.

Enterprise resource planning (ERP) is a suite of applications called modules, a data-
base, a n d a set of i n h e r e n t processes for c o n s o l i d a t i n g business o p e r a t i o n s i n t o a
single, c o n s i s t e n t , c o m p u t i n g p l a t f o r m . A n E R P system is a n i n f o r m a t i o n

system

based o n ERP technology. As s h o w n i n Figure 7-13, ERP systems i n c l u d e the f u n c t i o n s

Solicitation and
Lead

Management
Applications

Human
Resources

Applications

Sales
Applications

Relationship
Management
Applications

ERP
Database

Inventory
Applications

Manufacturing
Applications

Customer
Support
Applications

Accounting
Applications

ERP Applications

232 CHAPTER 7 Structured Processes and Information Systems

o f C R M systems, b u t also i n c o r p o r a t e a c c o u n t i n g , m a n u f a c t u r i n g , i n v e n t o r y , a n d
l i u m a n resources applications.

Tfie p r i m a r y p u r p o s e o f a n ERP system is i n t e g r a t i o n ; a n ERP system allows the
l e f t h a n d o f t h e o r g a n i z a t i o n t o k n o w w h a t the r i g h t h a n d is d o i n g . This i n t e g r a t i o n
a l l o w s r e a l – t i m e u p d a t e s g l o b a l l y , w h e n e v e r a n d w h e r e v e r a t r a n s a c t i o n takes
p l a c e . C r i t i c a l b u s i n e s s d e c i s i o n s c a n t h e n be m a d e o n a t i m e l y basis u s i n g t h e
latest data.

To u n d e r s t a n d the u t i l i t y of this i n t e g r a t i o n , consider the pre-ERP systems s h o w n
i n Figure 7-17. T h i s d i a g r a m represents the same processes used b y a b i c y c l e
m a n u f a c t u r e r t h a t we discussed i n Chapter 3. I t includes five d i f f e r e n t databases, one
each f o r v e n d o r s , r a w m a t e r i a l s , f i n i s h e d goods, m a n u f a c t u r i n g p l a n , a n d C R M .
Consider the p r o b l e m s t h a t appear w i t h such separated data w h e n the sales depart-
m e n t closes a large order, say for 1,000 bicycles.

First, s h o u l d the c o m p a n y take the order? Can i t meet the schedule requirements
for s u c h a large order? Suppose one of the p r i m a r y parts vendors recently lost capacity
due t o a n earthquake, a n d the m a n u f a c t u r e r cannot o b t a i n parts for the order i n t i m e .
I f so, t h e o r d e r schedule o u g h t n o t t o be a p p r o v e d . However, w i t h s u c h separated
systems this s i t u a t i o n is u n k n o w n .

Even i f parts can be o b t a i n e d , u n t i l t h e order is entered i n t o t h e finished goods
database, p u r c h a s i n g is u n a w a r e o f the need t o b u y n e w parts. The same c o m m e n t
applies to m a n u f a c t u r i n g . U n t i l the new order is entered i n t o the m a n u f a c t u r i n g p l a n ,
t h e p r o d u c t i o n d e p a r t m e n t doesn’t k n o w t h a t i t needs to increase m a n u f a c t u r i n g .
A n d , as w i t h parts, does the c o m p a n y have sufficient m a c h i n e a n d f l o o r capacity to fill
the order o n a t i m e l y basis? Does i t have s u f f i c i e n t p e r s o n n e l w i t h the correct s k i l l

Pre-

ERP Information Systems

In-Bound Manufacturing Outbound Sales and Customer
Logistics

Manufacturing
Logistics Marketing Service

Vendor

Database

Purchase Bicycle Parts

-Vendor

Query

Customer Demand

Query
Vendor
Customer

Raw Materials
Inventory

Sales Pitch
Customer Order
Cash

Boxed Bicycles

Q4 How Do CRM, ERP, and EAI Support Structured Enterprise Processes? 233

sets? S h o u l d i t be h i r i n g ? Can p r o d u c t i o n m e e t t h e o r d e r schedule? N o o n e k n o w s
before the order is approved.

Figure 7-17 does n o t show accounting. We can assume, however, that the c o m p a n y
has a separate a c c o u n t i n g system t h a t is s i m i l a r l y isolated. Eventually, records of
business activity f i n d their way to the accounting department and v«ll be posted into the
general ledger. W i t h such a pre-ERP system, financial statements are always o u t d a t e d ,
available several weeks after the close of the quarter or other accounting period.

Contrast t h i s s i t u a t i o n w i t h the ERP system i n Figure 7-18. Here, all a c t i v i t y is
processed by ERP a p p l i c a t i o n programs and consohdated data are stored i n a central-
ized ERP database. W h e n sales is c o n f r o n t e d w i t h the o p p o r t u n i t y to sell 1,000 bicycles,
the i n f o r m a t i o n that i t needs to c o n f i r m that t l i e order, schedule, and terms are possible
can be o b t a i n e d f r o m the ERP system i m m e d i a t e l y . Once the order is accepted, a l l
departments, i n c l u d i n g purchasing, m a n u f a c t u r i n g , h u m a n resources, a n d accounting,
are n o t i f i e d . Further, transactions are p o s t e d to the ERP database as t h e y occur; the
result is that financial statements are available quickly, i n most cases correct financial
statements can be p r o d u c e d i n real t i m e . W i t h such i n t e g r a t i o n , ERP systems can
display the c u r r e n t status of c r i t i c a l business factors t o managers a n d executives, as
s h o w n i n the sales dashboard i n Figure 7-19 o n the next page.

Of course, the d e v i l is i n the details. It’s one t h i n g to d r a w a rectangle o n a chart,
l a b e l i t “ERP A p p U c a t i o n Programs,” a n d assume t h a t data i n t e g r a t i o n takes a l l t h e
p r o b l e m s away. I t is far m o r e d i f f i c u l t t o w r i t e those a p p h c a t i o n p r o g r a m s a n d t o
design the database t o store t h a t integrated data. Even m o r e p r o b l e m a t i c , w h a t proce-
dures s h o u l d employees a n d others use t o process those a p p l i c a t i o n programs?

ERP Information Systems
ERP
Database

In-bound Manufacturing Outbound Sales and Customer
Logistics

Manufacturing
Logistics Marketing Service

Materials
( Management

Module

Production & \
Manufacturing j

Module J ( Customer Relationship Module Financial & \ Cost Module J
Vendor
Query

Purchase Bicycle Parts
Vendor | Customer Demand
Name

Raw Materials Order
Cash

Update with
Parts Received

Raw Materials
Vendor

Receiving

Update with

Finished Bicycle

Update with
Parts Used

Production
Schedule

Components

Accepted
Materials

Update
with
Sale

Update with
Shipped Bicycles

Finished Goods
Inventory

Finished Bicycle

Make Bicycle Bicycles

Raw Materials
\nMenxory

Shipping

Bicycle
Query

Sales
Prospects

Approved
Order

Salesperson

– Sales Pitch
Customer Order
Cash

Boxed ^\cyc\es

234 CHAPTER 7 Structured Processes and Information Systems

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Specifically, for example, w h a t actions s h o u l d salespeople take before t h e y approve a
large order? Here are some of the questions t h a t need to be answered or resolved:

* H o w does the sales d e p a r t m e n t d e t e r m i n e t h a t an order is considered large?
By dollars? By volume?
W h o approves customer credit (and how)?
W h o approves p r o d u c t i o n capacity (and how)?
W h o approves schedule and terms (and how)?
W h a t actions need to be t a k e n i f the customer m o d i f i e s the order?
H o w does m a n a g e m e n t o b t a i n oversight o n sales activity?

As y o u can i m a g i n e , m a n y o t h e r questions m u s t be answered as w e l l . Because
o f its i m p o r t a n c e t o o r g a n i z a t i o n s today, w e w i l l discuss ERP i n f u r t h e r d e t a i l
i n q u e s t i o n Q5. Before w e d o so, h o w e v e r , c o n s i d e r t h e t h i r d t y p e o f e n t e r p r i s e
system: E A I .

ERP systems are n o t for every o r g a n i z a t i o n . For example, some n o n m a n u f a c t u r i n g
companies f i n d the m a n u f a c t u r i n g o r i e n t a t i o n of ERP i n a p p r o p r i a t e . Even for m a n u –
f a c t u r i n g companies, some f i n d the process of c o n v e r t i n g from t h e i r c u r r e n t system to
an ERP system t o o d a u n t i n g . Others are q u i t e satisfied w i t h t h e i r m a n u f a c t u r i n g
a p p l i c a t i o n systems and do n o t w i s h to change t h e m .

Companies for w h i c h ERP is inappropriate still have the problems associated w i t h
i n f o r m a t i o n silos, however, and some choose to use enterprise application integration
(EAI) to solve those p r o b l e m s . EAI is a suite o f software a p p l i c a t i o n s t h a t integrates
existing systems by p r o v i d i n g layers o f software that c o n n e c t a p p l i c a t i o n s together.
EAI does t i i e f o l l o w i n g :

It connects system “islands” via a n e w layer of software/system.
It enables existing applications to c o m m u n i c a t e a n d share data.
It provides integrated i n f o r m a t i o n .
I t leverages existing systems—leaving f u n c t i o n a l applications as is, b u t p r o v i d i n g
an integration layer over the top.

• It enables a gradual move t o ERR

T h e layers o f E A I s o f t w a r e s h o w n i n Figure 7-20 enable e x i s t i n g a p p l i c a t i o n s
t o c o m m u n i c a t e v d t h each o t h e r a n d t o share data. For example, EAI software can

Q5 What Are the Elements of an ERP System? 235

CRM sends request to
MRP system via EAI Server

EAI Server EAI EAI
Metadata

Design and Implementation
for the Five Components

1
1 ^ r

EAI Interface EAI Interface EAI Interface EAI Interface

CRM MRP Accounting
systems

Human
resources

system

be c o n f i g u r e d to a u t o m a t i c a l l y m a k e the d a t a c o n v e r s i o n r e q u i r e d t o m a k e data
conversions a m o n g d i f f e r e n t systems. W h e n the C R M a p p l i c a t i o n s send data to the
m a n u f a c t u r i n g a p p l i c a t i o n system, for example, the C R M system sends its data to a n
EAI software p r o g r a m . T h a t EAI p r o g r a m makes the c o n v e r s i o n a n d t h e n sends the
c o n v e r t e d data to the ERP system. The reverse a c t i o n is taken to send data back f r o m
the ERP to the C R M .

A l t h o u g h there is no c e n t r a l i z e d EAI database, the EAI software keeps files o f
metadata that describe data formats and locations. Users can access the EAI system t o
find the data they need. I n some cases, the EAI system provides services that provide a
” v i r t u a l integrated database” for the user to process.

The m a j o r b e n e f i t of EAI is that i t enables organizations to use existing applica-
tions w h i l e e l i m i n a t i n g m a n y of the serious p r o b l e m s of isolated systems. C o n v e r t i n g
to an EAI system is n o t nearly as d i s r u p t i v e as c o n v e r t i n g t o a n ERP system, a n d i t
provides m a n y of the benefits of ERR Some organizations develop EAI applications as
a stepping-stone to complete ERP systems.

What Are the Elements of an ERP
System?
Because of its i m p o r t a n c e to organizations today, we w i l l consider ERP i n more d e p t h
t h a n CRM or EAI. To begin, the t e r m ERP has been applied to a w i d e array of a p p l i c a t i o n
solutions, i n some cases erroneously. Some vendors a t t e m p t e d to catch the buzz for
ERP by misapplying the t e r m to applications that provided o n l y one or t w o integrated
f u n c t i o n a l applications.

The o r g a n i z a t i o n ERPsoftware360 p u b l i s h e s a w e a l t h of i n f o r m a t i o n a b o u t
ERP v e n d o r s , p r o d u c t s , s o l u t i o n s , a n d a p p h c a t i o n s . A c c o r d i n g to its Web site
{wvyw.erpsoftware360.com/erp-I01.htm), for a p r o d u c t to be considered a t r u e ERP
p r o d u c t i t m u s t i n c l u d e applicafions t h a t integrate:

S u p p l y c h a i n ( p r o c u r e m e n t , sales order processing, i n v e n t o r y m a n a g e m e n t ,
supplier management, and related activities)

– M a n u f a c t u r i n g (scheduling, capacity p l a n n i n g , q u a l i t y c o n t r o l , b i l l of materials,
and related activities)

* CRM (sales prospecting, customer management, m a r k e t i n g , customer s u p p o r t ,
call center support)

** H u m a n resources (payroll, t i m e and attendance, HR management, c o m m i s s i o n
calculations, benefits administration, and related activities)
A c c o u n t i n g (general ledger, a c c o u n t s receivable, a c c o u n t s p a y a b l e , cash
m a n a g e m e n t , fixed asset a c c o u n t i n g )

A n ERP s o l u t i o n consists of a p p l i c a t i o n p r o g r a m s , databases, business process
procedures, a n d t r a i n i n g a n d c o n s u l t i n g . We consider each, i n t u r n .

236 CHAPTER 7 Structured Processes and Information Systems

ERP v e n d o r s design a p p l i c a t i o n p r o g r a m s to be c o n f i g u r a b l e so t h a t d e v e l o p m e n t
teams can alter t h e m to m e e t a n organization’s r e q u i r e m e n t s w i t h o u t c h a n g i n g
p r o g r a m code. Accordingly, d u r i n g t h e ERP d e v e l o p m e n t process, t h e developmet\
t e a m sets c o n ^ i g u i a t i o n parameters t h a t specify h o w ERP a p p l i c a t i o n p r o g r a m s w i l l
operate. For example, a n h o u r l y p a y r o l l a p p h c a t i o n is c o n f i g u r e d to specify t h e
n u m b e r o f hours i n the standard workweek, h o u r l y wages for different j o b categories,
wage adjustments f o r o v e r t i m e and h o l i d a y w o r k , a n d so f o r t h .

O f course, there are l i m i t s to h o w m u c h c o n f i g u r a t i o n can be done. I f a n e w ERP
c u s t o m e r has r e q u i r e m e n t s t h a t c a n n o t be m e t via p r o g r a m c o n f i g u r a t i o n , t h e n
i t either needs to adapt its business to w h a t the software can do or w r i t e (or pay another
vendor to write) a p p l i c a t i o n code to meet its r e q u i r e m e n t . As stated i n Chapter 4, such
c u s t o m p r o g r a m m i n g is expensive, b o t h i n i t i a l l y and i n l o n g – t e r m maintenance costs.
Thus, choosing an ERP s o l u t i o n that has applications t h a t f u n c t i o n close to the o r g a n i –
zation’s requirements is c r i t i c a l to its successful i m p l e m e n t a t i o n .

A n ERP s o l u t i o n i n c l u d e s a database design as w e l l as i n i t i a l c o n f i g u r a t i o n data. I t
does n o t , o f course, c o n t a i n the company’s o p e r a t i o n a l data. D u r i n g development, the
t e a m m u s t enter the i n i t i a l values for t h a t data as p a r t of the d e v e l o p m e n t effort.

If your only experience w i t h databases is creating a few tables i n Microsoft Access, t h e n
y o u probably imderestimate the value and importance of ERP database designs. SAR the
leading vendor of ERP solutions, provides ERP databases that contain over 15,000 tables.
The design includes the metadata for those tables, as w e l l as their relationships to each
other, and rules and constraints about how the data i n some tables m u s t relate to data i n
other tables. The ERP solution also contains tables filled w i t h i n i t i a l configuration data.

Reflect o n the d i f f i c u l t y o f c r e a t i n g a n d v a l i d a t i n g data m o d e l s (as discussed i n
Chapter 5), a n d y o u w i l l have some idea of the a m o u n t of i n t e l l e c t u a l c a p i t a l invested
i n a database design of 15,000 tables. Also, consider the m a g n i t u d e of the task of filling
such a database w i t h users’ data!

A l t h o u g h we d i d n o t discuss t h i s database feature i n Chapter 5, large organiza-
t i o n a l databases c o n t a i n t w o types of p r o g r a m code. The first, called a trigger, is a
c o m p u t e r p r o g r a m stored v d t h i n the database that runs to keep the database consis-
t e n t w h e n certain c o n d i t i o n s arise. The second, called a stored procedure, is a c o m –
p u t e r p r o g r a m s t o r e d i n t h e database t h a t is u s e d t o e n f o r c e business rules. A n
example o f such a rule w o u l d be never to sell certain items at a d i s c o u n t . Triggers a n d
stored procedures are also p a r t of the ERP s o l u t i o n . M u c h of this p r o g r a m code needs
t o be c o n f i g u r e d d u r i n g the ERP i m p l e m e n t a t i o n as w e l l .

T h e t h i r d c o m p o n e n t of an ERP s o l u t i o n is a set of i n h e r e n t procedures t h a t i m p l e –
m e n t s t a n d a r d business processes. ERP v e n d o r s d e v e l o p h u n d r e d s , or even t h o u –
sands, of procedures t h a t enable the ERP c u s t o m e r o r g a n i z a t i o n to a c c o m p l i s h its
w o r k u s i n g the a p p l i c a t i o n s p r o v i d e d b y t h e vendor. Figure 7-21 shows a p a r t of the
SAP o r d e r i n g business process; t h i s process i m p l e m e n t s a p o r t i o n of t h e i n b o u n d
logistics activities. Some ERP vendors call the i n h e r e n t processes t h a t are d e f i n e d i n
the ERP s o l u t i o n process blueprints.

W i t h o u t delving i n t o the details, y o u should be able to u n d ^ s t a n d the flow of w o r k
o u t l i n e d i n this process. Every f u n c t i o n (rounded rectangles i n Figure 7-21) consists of a
set of procedures for accomplishing that f u n c t i o n . Typically these procedures require an
ERP user to use application menus, screens, and reports to accomplish the activity.

As w i t h a p p h c a t i o n p r o g r a m s , ERP users m u s t e i t h e r adapt t o t h e p r e d e f i n e d ,
i n h e r e n t processes a n d procedures or design n e w ones. I n the latter case, the design of
n e w procedures m a y necessitate changes to a p p l i c a t i o n p r o g r a m s a n d t o database
structures as w e l l . Perhaps y o u can b e g i n to u n d e r s t a n d w h y organizations a t t e m p t to
c o n f o r m to v e n d o r standards.

Q5 What Are the Elements of an ERP System? 237

/ P^^^hf^ \ RFQ \
( r e q u i s i t i o n >

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of RFQ

issued to vendor
Purchasing

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< transmitted > / o u o t a t o A
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Purchasing
department

/ Rejection \ Quotation \
\s transmitted / \s selected /

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r

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posted and
released for

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Vendor
processing

Symbol Key

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C J 3 Organizational Unit

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Figuro 7 n
SAP Ordering Process
Source: T h o m o s A . C u r r a n , A n d r e w L o d d , a n d

D e n n i s l o d d , SAP/k/3 Reporling and E-Business

Intelligence, 1 St e d . , c o p y r i g l i f 2 0 0 0 . R e p r i n t e d

b y p e r m i s s i o n o f P e a r s o n E d u c o i i o n , i n c . , U p p e r

S a d d l e R i v e r , N J .

3ecause of t h e c o m p l e x i t y a n d d i f f i c u l t y of i m p l e m e n t i n g a n d u s i n g ERP s o l u t i o n s ,
ERP vendors have developed t r a i n i n g c u r r i c u l a and classes. SAP operates universities,
i n w h i c h customers a n d p o t e n t i a l customers receive t r a i n i n g b o t h before a n d after the
ERP i m p l e m e n t a t i o n . I n a d d i t i o n , ERP v e n d o r s t y p i c a l l y c o n d u c t classes o n site.
To reduce expenses, the vendors sometimes t r a i n t h e ovganization’s employees, called
Super Users, to b e c o m e i n – h o u s e trainers i n t r a i n i n g sessions called t r a i n the trainer.

240 C H A P T E R 7 Structured Processes and \rAformaVion Sysrems

ERP t r a i n i n g falls i n t o t w o b r o a d categories. T h e f i r s t category is t r a i n i n g about
h o w to i m p l e m e n t the ERP s o l u t i o n . This t r a i n i n g includes topics such as o b t a i n i n g

t o p – l e v e l m a n a g e m e n t s u p p o r t , p r e p a r i n g the o r g a n i z a t i o n f o r change, and” d e a l i n g
w i t h the inevitable resistance that develops w h e n people are asked to p e r f o r m w o r k i n
n e w ways. The second category is t r a i n i n g o n h o w to use the ERP a p p l i c a t i o n software;
>Ocv\s> vn.cV\iete?. s^ecVtvc svep?, lox ViS>va%’0cve,’¥S5 •a:5>p\\c«S\w\?> VQ •̂ LtCCiTWp\N.̂ X!!c\
activities i n processes hke those i n Figure 7-21.

ERP vendors also p r o v i d e on-site c o n s u l t i n g for i m p l e m e n t i n g a n d u s i n g the ERP
system. A d d i t i o n a l l y , a n i n d u s t r y o f t h i r d – p a r t y ERP c o n s u l t a n t s has d e v e l o p e d to
s u p p o r t n e w ERP c u s t o m e r s a n d i m p l e m e n t a t i o n s . These c o n s u l t a n t s p r o v i d e
k n o w l e d g e g a i n e d t h r o u g h n u m e r o u s ERP i m p l e m e n t a t i o n s . Such k n o w l e d g e is
v a l u e d because most organizations o n l y go t h r o u g h an ERP c o n v e r s i o n once. I r o n i –
cally, h a v i n g d o n e so, t h e y n o w k n o w h o w to do i t . Consequently, some employees,
seasoned by an ERP c o n v e r s i o n w i t h t h e i r employer, leave t h a t c o m p a n y to become
ERP consultants

l!ifi!iiii58Kr|f”Spacsfic Solutions
As y o u can tell, considerable w o r k needs to be done to customize an ERP a p p l i c a t i o n
to a p a r t i c u l a r customer. To reduce t h a t w o r k , ERP vendors p r o v i d e starter kits for spe-
cific industries called industry-specific solutions. These s o l u t i o n s c o n t a i n p r o g r a m
a n d database c o n f i g u r a t i o n files as w e l l as process b l u e p r i n t s t h a t a p p l y to ERP i m p l e –
m e n t a t i o n s i n specific industries. Over t i m e , SAP, w h i c h first p r o v i d e d such solutions,
a n d o t h e r ERP v e n d o r s created dozens of s u c h starter kits for m a n u f a c t u r i n g , sales
a n d d i s t r i b u t i o n , h e a l t h care, and other m a j o r industries.

Whgit Coeiiparites Pm the Mmm E R P \febiidors?
A l t h o u g h m o r e t h a n 100 d i f f e r e n t companies advertise ERP p r o d u c t s , n o t a l l of those
p r o d u c t s meet the m i n i m a l ERP c r i t e r i a . Even of those t h a t do, the b u l k of the m a r k e t
is h e l d by the five vendors s h o w n i n Figure 7-22. This figure shows m a r k e t r a n k rather
t h a n m a r k e t share because i t is d i f f i c u l t t o o b t a i n c o m p a r a b l e revenue n u m b e r s .
I n f o r is o v m e d b y p r i v a t e e q u i t y i n v e s t o r s a n d does n o t p u b h s h f i n a n c i a l d a t a .

Figure 7-22
C h a r a c t e r i s t i c s of
Top E R P V e n d o r s Company

ERP Market
Rank Remarks Future

Epicor 5 Strong-industry specific
solutions, especially retail.

Epicor 9 designed for flexibility (SOA).
Highly configurable ERP Lower cost.

Microsoft
Dynamics

4 Four products acquired:
AX,Nav, GP,and
Solomon. AX and Nav more
comprehensive. Solomon on
the way out? Large VAR
channel.

Products not well integrated with Office.
Not integrated at all with Microsoft
development languages. Product direction
uncertain. Watch for Microsoft ERP
announcement on the cloud (Azure).

Infor 3 Privately held corporation that
has acquired an ERP product
named Baan, along with more
than 20 others.

Span larger small companies to smaller
large companies.Offers many solutions.

Oracle 2 Combination of in-house and
acquired (PeopleSoft, Siebel)
products.

Intensely competitive company with strong
technology base. Large customer base.
Flexible SOA architecture. Expensive.
Oracle C E O Ellison owns 7 0 % of NetSuite.

SAP 1 Led ERP success. Largest
vendor, most comprehensive
solution. Largest customers.

Technology older. Expensive and seriously
challenged by less expensive alternatives.
Huge customer base. Future grov\/th
uncertain.

Q6 What Are the Challenges of Implementing New Enterprise Information Systems? 241

Microsoft’s ERP revenue is c o m b i n e d w i t h its C R M revenue, a n d its t r u e ERP revenue
is u n k n o w n . S i m i l a r l y , Oracle a n d SAP c o m b i n e ERP r e v e n u e w i t h r e v e n u e f r o m
o t h e r p r o d u c t s .

What Are the Challenges of
Innplementing New Enterprise
Information Systems?
I m p l e m e n t i n g n e w e n t e r p r i s e systems, w h e t h e r C R M , ERP, or E A I , is c h a l l e n g i n g ,
d i f f i c u l t , expensive, a n d risky. I t is n o t u n u s u a l for enterprise system projects to be
w e l l over b u d g e t a n d a year o r m o r e late. T h e expense a n d risks arise f r o m f o u r
p r i m a r y factors {see Figure 7-23).

U n l i k e d e p a r t m e n t a l systems i n w h i c h a single d e p a r t m e n t m a n a g e r is i n charge,
enterprise systems have no clear boss. Examine the discharge process i n Figure 7-10;
there is n o m a n a g e r of discharge, T h e discharge process is a c o l l a b o r a t i v e e f f o r t
a m o n g m a n y d e p a r t m e n t s {and customers).

W i t h n o single manager, w h o resolves the disputes t h a t i n e v i t a b l y arise? A l l o f
these d e p a r t m e n t s u l t i m a t e l y r e p o r t t o the CEO, so there is a single boss over a l l o f
t h e m , b u t employees can’t go to t h e CEO w i t h a p r o b l e m a b o u t , say, c o o r d i n a t i n g
discharge activities between n u r s i n g a n d housekeeping. The CEO w o u l d t h r o w t h e m
o u t of his or her office. Instead, the o r g a n i z a t i o n needs to develop some sort o f collab-
orative m a n a g e m e n t for resolving process issues.

U s u a l l y t h i s means t h a t the enterprise develops c o m m i t t e e s a n d steering groups
f o r p r o v i d i n g e n t e r p r i s e process m a n a g e m e n t . A l t h o u g h t h i s c a n be a n effective
s o l u t i o n , a n d i n fact m a y be t h e only s o l u t i o n , t h e w o r k of s u c h groups is b o t h slow
a n d expensive.

As stated i n Q3, few o r g a n i z a t i o n s t o d a y create t h e i r o w n e n t e r p r i s e systems f r o m
scratch. Instead, t h e y license a n enterprise p r o d u c t t h a t provides specific f u n c t i o n s
a n d features a n d t h a t includes i n h e r e n t procedures. But, such licensed p r o d u c t s are
never a perfect f i t . A l m o s t always there are gaps b e t w e e n the organization’s require-
m e n t s a n d the application’s capabilities.

The first challenge is i d e n t i f y i n g the gaps. To specify a gap, an o r g a n i z a t i o n m u s t
k n o w b o t h w h a t i t needs a n d w h a t t h e n e w p r o d u c t does. However, i t c a n be v e r y
d i f f i c u l t for a n o r g a n i z a t i o n to d e t e r m i n e w h a t i t needs; t h a t d i f f i c u l t y is one reason
o r g a n i z a t i o n s choose t o license r a t h e r t h a n t o b u i l d . F u r t h e r , t h e features a n d
f u n c t i o n s o f c o m p l e x p r o d t i c t s Hke C R M or ERP are n o t easy t o i d e n t i f y . T h u s , gap
i d e n t i f i c a t i o n is a m a j o r task w h e n i m p l e m e n t i n g enterprise systems.

The second challenge is d e c i d i n g w h a t to do w i t h gaps, once t h e y are i d e n t i f i e d .
Either t h e o r g a n i z a t i o n needs t o change the w a y i t does t h i n g s t o adapt to t h e n e w

Figure 7-m

• Collaborative management Four Primary Factors

• Requirements gaps

• Transition problems

. Employee resistance

242 CHAPTER 7 Structured Processes and Information Systems

a p p l i c a t i o n , or the a p p l i c a t i o n m u s t be altered to m a t c h w h a t the o r g a n i z a t i o n does.
Either choice is p r o b l e m a t i c . Employees w i l l resist change, b u t p a y i n g for alterations is
expensive and, as n o t e d i n Chapter 4, the organization is c o m m i t t i n g t o m a i n t a i n i n g
those alterations as the a p p l i c a t i o n is changed over t i m e . Here, organizations f i l l gaps
b y choosing t h e i r lesser regret.

Transifosi Probiiems
T r a n s i t i o n i n g t o a n e w e n t e r p r i s e system is also d i f f i c u l t . The o r g a n i z a t i o n m u s t
s o m e h o w change f r o m u s i n g isolated d e p a r t m e n t a l systems to using the n e w enter-
prise system, w h i l e c o n t i n u i n g to r u n the business. It’s like h a v i n g heart surgery w h i l e
r u n n i n g a 100-yard dash.

Such transitions require careful p l a n n i n g a n d substantial t r a i n i n g . Inevitably, p r o b –
lems w i l l develop. K n o w i n g this w i l l occur, senior management needs to c o m m i m i c a t e
the need for the change to the employees and t h e n stand b e h i n d the new system as the
kinks are w o r k e d out. It is an i n c r e d i b l y stressful t i m e for all i n v o l v e d . We w i l l discuss
development techniques and i m p l e m e n t a t i o n strategies further i n Chapter 10.

EsYsplioyes Resisteiic©
People resist change. Change requires e f f o r t a n d i t engenders fear. Considerable
research and literature exists about the reasons for change resistance a n d h o w organi-
zations can deal w i t h i t . Here we w i l l summarize the m a j o r principles.

First, senior-level m a n a g e m e n t needs t o c o m m u n i c a t e the need for the change to
the o r g a n i z a t i o n , a n d reiterate this, as necessary, t h r o u g h o u t the t r a n s i t i o n process.
Second, employees fear change because i t threatens self-efficacy, w h i c h is a person’s
behef t h a t he or she can be successful at his or her j o b . To enhance c o n f i d e n c e ,
employees need to be t r a i n e d a n d coached o n the successful use of the n e w system.
W o r d – o f – m o u t h is a v e r y p o w e r f u l factor, a n d i n some cases key users are t r a i n e d
ahead of t i m e to create positive buzz about the n e w system. Video d e m o n s t r a t i o n s of
employees successfully u s i n g the n e w system are also effective.

T h i r d , employees m a y need t o be given extra i n d u c e m e n t t o change t o the n e w
system. As one experienced change consultant said, ” N o t h i n g succeeds like praise or
cash, especially cash.” Straight-out pay for change is b r i b e r y ; b u t contests w i t h cash
prizes a m o n g employees or groups can be very effective at i n d u c i n g change.

I m p l e m e n t i n g n e w enterprise systems can solve m a n y p r o b l e m s a n d b r i n g great
efficiency a n d cost savings to an organization, b u t i t is n o t for the f a i n t of heart.

How Will Service-Oriented
Architecture (SOA) Impact Enterprise
Information Systems?
Service-oriented architecture (SOA) is a software design p h i l o s o p h y i n w h i c h activities
are organized i n t o m o d u l e s of f u n c t i o n a l i t y called Web services t h a t are requested
and delivered over the Internet^ u s i n g SOA standards. I n t h i s q u e s t i o n , we w i l l f i r s t
describe SOA principles and t h e n explain h o w SOA w i l l i m p a c t enterprise i n f o r m a t i o n
systems like ERP.

I t is d i f f i c u l t to explain SOA directly w i t h o u t d e l v i n g i n t o details of c o m p u t e r p r o g r a m
design a n d i m p l e m e n t a t i o n . Instead, consider the analogy of a pizza stand. The stand
p u b l i s h e s a m e n u of pizzas t h a t i t is capable of p r o d u c i n g . As everyone k n o w s , t h e

Some companies may change
too often. See the Guide on
pages 246-247for a
discussion on how
management fads can grow
tiresome for employees.

^ Actually, any internet that uses TCP/IP could be used. Here, to simplify, we’ll assume the Internet.

Q7 How Will Service-Oriented Architecture (SOA) Impact Enterprise Information Systems? 243

c u s t o m e r studies t l i e m e n u , orders a pizza, the p i z z a is created, a n d the c u s t o m e r
pays. The m e n u specifies the content, size, and price of the pizza. As a customer, y o u
have no idea h o w or where the pizza is b e i n g made. The pizza s t a n d c o u l d be b u y i n g
f r o z e n pizzas f r o m a grocery d o w n the street a n d b a k i n g t h e m , or i t c o u l d make the
sauces i n – h o u s e b u t b u y the d o u g h elsewhere, or i t c o u l d make e v e r y t h i n g in-house.
You have n o idea h o w i t is done, a n d as l o n g as the pizza is delivered i n accordance
w i t h t h e t e r m s i n t h e m e n u , y o u d o n ‘ t need t o . The p i z z a s t a n d can make m a j o r
changes i n t h e ways t h a t i t makes pizzas, and y o u n e e d never k n o w a b o u t those
changes. You s t i l l get the pizza you’ve ordered at the price o n the m e n u .

U s i n g SOA t e r m i n o l o g y , w e w o u l d say t h a t the pizza stand provides a service t h a t
is c o n s u m e d by the customer. The p r o d u c t i o n of the service (pizza) is encapsulated,
w h i c h means that the m e t h o d o l o g y a n d l o c a t i o n of the service is private. Users of the
service do n o t k n o w h o w or where the service is p e r f o r m e d , and they need n o t know.
A l l they need to k n o w is the m e n u .

A Web service is an encapsulated software service p r o v i d e d over the I n t e r n e t using
standard protocols. A service provider creates a service description, w h i c h documents
h o w to use the service, and publishes that d e s c r i p t i o n u s i n g a standardized language
called Web Service Description Language (WSDL).

A l l service p r o v i d e r s p u b l i s h W S D L d e s c r i p t i o n s o f t h e i r services. For example,
A m a z o n . c o m offers aWeb service for programs to use to search its Web site. I f y o u w a n t
t o w r i t e a p r o g r a m t o access t h a t service, y o u f i r s t need t o access t h e Web service’s
W S D L service d e s c r i p t i o n . You can f i n d i t at http://soap.amazon.com/schemas2/
AmazonWebServices.wsdl. T h a t code has m e a n i n g to c o m p u t e r p r o g r a m m e r s ; t h e y
k n o w h o w t o use i t to w r i t e programs to search A m a z o n . c o m . Check i t out just for f u n .

Because the service is encapsulated, n o one knows h o w or where t h a t service is
p r o v i d e d . A m a z o n . c o m c o u l d e m p l o y m i l l i o n s of people w h o m a d l y search p r i n t e d
catalogs i n a d u s t y back r o o m i n Chicago, or, t h a t service c o u l d be d i s t r i b u t e d over
t h o u s a n d s o f c o m p u t e r s u s i n g A m a z o n . c o m ‘ s o w n Elastic C l o u d 2 (EC2; see Case
Study 1, page 28). Or i t c o u l d be s o m e t h i n g else. But, because of encapsulation, the
search m e t h o d a n d l o c a t i o n can change t o m o r r o w w i t h o u t i m p a c t i n g any p r o g r a m
that accesses that s e m c e .

P r o g r a m m e r s w h o w a n t t o d e v e l o p p r o g r a m s t o request the service use t h e
service d e s c r i p t i o n t o d e s i g n t h e i r p r o g r a m s . Later, t h e services are d e l i v e r e d a n d
c o n s u m e d using standards such as X M L , SOAP, REST, a n d others.

T h e m a j o r e n t e r p r i s e a p p l i c a t i o n s l i k e SAP a n d Oracle ERP were d e v e l o p e d l o n g
before the I n t e r n e t a n d l o n g before the SOA standards were developed. They consist
of h u n d r e d s o f t h o u s a n d s of lines of c o m p u t e r code, a l l w r i t t e n t o use p r e – I n t e r n e t
technology.

Today however, ERP customers do n o t w a n t to be restricted to thick-cUent applica-
tions o n t h e i r desktop c o m p u t e r at w o r k . They w a n t to be able to access ERP a n d other
enterprise a p p l i c a t i o n s u s i n g a Web browser, a n iPad, a s m a r t p h o n e , a n d H T M L 5
devices yet to come. The changing technical landscape poses a n e n o r m o u s challenge
and b u r d e n o n enterprise s o l u t i o n vendors. R e w r i t i n g all of the SAP code, for example,
to enable use of these other devices is too costly and w o u l d take too l o n g . Even i f SAP
c o u l d afford the redevelopment investment, by the t i m e i t has r e w r i t t e n its software a
n e w standard or device w i l l have come along.

Web services p r o v i d e a s o l u t i o n to this p r o b l e m . Rather t h a n r e w r i t i n g all of the
ERP code, SAP can b u i l d an SOA interface a r o u n d p a r t i c u l a r features and f u n c t i o n s i n
their existing code a n d expose the f u n c t i o n a l i t y o f that older code via a Web service.

For example, ail ERP applications m a i n t a i n a vendor list and a list o f items and prices
of p r o d u c t s each vendor provides. The existing t h i c k – c l i e n t , desktop a p p l i c a t i o n is
accessed via forms a n d reports b u i l t i n t o the code. N o w suppose SAP or another ERP

— – customers that w a n t to access this fist ancf these prices using an I’Pador an

No SQL?
Who knows?

I n this case, SAP or another s o l u t i o n provider can expose the vendor and price Hsts
as a Web service. They can p r o v i d e Web services for q u e r y i n g for a vendor, q u e r y i n g
for all parts p r o v i d e d by a vendor, u p d a t i n g prices, r e m o v i n g a vendor or i t e m f r o m a
l i s t , a n d so f o r t h . As s h o w n i n Figure 7-24, once t h e y have d o n e t h a t , c u s t o m e r s
or t h i r d – p a r t y vendors can w r i t e code that w i l l expose these services o n a w i d e variety
of devices.

F u r t h e r m o r e , the c u s t o m e r c a n use t h i s ERP data i n ways t h a t n o one ever
envisioned. Suppose, for example, t h a t the customer wants to compare prices of the
items i t purchases to prices for the same items o n A m a z o n . c o m . N o one at SAP or any
other ERP v e n d o r ever p l a n n e d o n t h a t r e q u i r e m e n t , b u t a customer c o u l d use data
f r o m b o t h the ERP and A m a z o n . c o m Web services to develop a r e p o r t a p p l i c a t i o n .

We t h i n k of H T M L a n d Web browsers as h a v i n g p r o v i d e d m o s t of the u t i l i t y o f t h e
Web. However, i n t e r m s of n o n t r i v i a l I n t e r n e t a p p l i c a t i o n s with deep f u n c t i o n a l i t y ,
SOA Web services are at least of equal i m p o r t a n c e .

2022? J^^
Because of the exceedingly l o w processing costs, w e can expect t h a t m o r e a n d m o r e
enterprise IS solutions w i l l move to the c l o u d . Because of the flexibility a n d adaptability
of Web services, we can f u r t h e r expect that those cloud-based enterprise solutions w i l l
be exposed as Web services. A l l of this is h a p p e n i n g r i g h t now, i n 2012.

B u t , let’s take the n e x t step. W h a t h a p p e n s w h e n c l o u d – b a s e d SOA e n t e r p r i s e
applications have m o v e d t o the iPad and the A n d r o i d p h o n e a n d are h o s t e d i n Office
365 a n d SharePoint Online? You’ll l e a r n about tribes and their r e l a t i o n s h i p to Google-H
i n the next chapter, b u t w h a t happens w h e n users have t a k e n t h e i r d a t a f r o m t h e i r
s m a r t p h o n e a n d posted i t i n a w o r k circle o n G o o g l e + w i t h a h n k for m o r e data back
t o SharePoint Online?

This e v o l v i n g , b u t real, scenario creates e n o r m o u s security challenges t h a t w e ‘ l l
discuss i n Chapter 12. B u t w h a t else?

It’s ine\’itable: islands of automation, version 2,0. A n e w type of i s l a n d of a u t o m a –
t i o n w i l l result f r o m t h e s t o r i n g o f data i n t h e i C I o u d , i n Google-f-, i n SharePoint
O n l i n e , a n d so o n , w h i l e o t h e r versions o f t h e data are stored i n the c o r p o r a t e d a t a
center i n SAP or w h a t e v e r — m a y b e n o longer t h e c u r r e n t version, b u t some version.

Using t h i s perspective, examine Figm’e 7-10 again. It’s likely that doctors, nurses,
a n d f a m i l i e s w i l l w a n t t o access a n d process p a t i e n t d a t a o n w h a t e v e r devices are
c o n v e n i e n t for t h e m . I n that case, where is the integrated data for any given patient?
The enterprise database s h o w n i n t h a t figure has some version of i t . But where is the
rest? A n d w h e r e is t h e c u r r e n t version? The d a t a are spread over devices used by
people all over the h o s p i t a l , at doctors’ chnics, a n d i n their homes. I n t r u t h , there is no
data i n t e g r a t i o n i n this scenario.

We have re-created i n f o r m a t i o n silos, b u t these version 2.0 silos are m o r e isolated
a n d less secure t h a n the previous ones. The cost savings of the c l o u d and the c o n v e n –
ience of personal devices ensure the success of this n e w scenario. But, t h e n what? You
a n d y o u r classmates w i l l f i n d o u t as y o u manage y o u r w a y t h r o u g h this p r o b l e m i n t l i e
next 10 years.

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