UNIT 3

The Information Systems

in the organization

1
CHAPTER 3. THE INFORMATION SYSTEMS IN ORGANIZATIONS

1. Concept of the IS in the organization

2. Functions of an Information System
3. Classification of IS in organizations
1. A traditional view: types of IS according to the organisational
pyramid
2. IS towards the firm and the environment: ERP and CRM
3. Document Management systems
4. Geographic information systems (GIS)
5. The human side in IS: Roles and People

2
1. CONCEPT OF IS IN THE ORGANIZATION

3
1. CONCEPT OF IS IN THE ORGANIZATION
IS

1. Useful if the value of the information it provides is

higher than the cost of collecting and processing it.

1. Effective

 Goal-oriented
 Future-oriented: improves quality of work
 External results

2. Efficient

 Process-oriented
 Present-oriented: improves current workflow
 Internal results – using minimal company resources 4
EVOLUTION OF THE IS: 5 STAGES
 First stage:Basic Manual Procedures
 Very elemental development, only manual procedures are
used to better organise the documents and papers generated
in the business processes.
 Few firms use computer equipment due to its
complexity and high price.

 Second stage: Data Processing Centers

 Application of IT to the process of data (accounting,
salaries), for the decision making and the communications
 The first Data Processing Centres appear

(CPD´s), they automate very basic processes

5
 EVOLUTION OF THE IS
 Third stage: The Information Systems Department

 A new functional area appears, The Information Systems

Department
 Their main objective is solving problems derived of the

processing of information
 The first Management Information Systems (MIS)

Appear

 Fourth stage: Decision Support System DSS

 The top management starts to look for information in the
management information systems to know a bit more about
the external environment
 The integrated systems are generalised
 There is an application of tools for the support of decisions, the
Decision Support System DSS and the Expert Systems appear
6
 EVOLUTION OF THE IS

Fifth stage: Executive Information Systems - Business Modeling

• Today; firms try to integrate the information with the corporate

strategy

• They try to use IT to establish new ways of designing,

manufacturing and selling information

• New ways of establishing relationships with customers, and

growing are being created

• Firms try to achieve a competitive advantage by properly using

an IT
7
 2. FUNCTIONS OF IS

Main objectives, an IS:

 Collect data as main elements of entrance in the process (INPUTS)

 Warehouse information and acts over the data to generate and produce
information (PROCESS)

 Distribute reliable information prepared for the final user (OUTPUTS)

8
2. FUNCTION OF THE IS

 To achieve effectiveness, it must develop in a

systemic way these four functions:
Collecting and registering, Warehousing,
Processing, Spreading

1º- Collecting and registering:

- IS must meet the following requirements:

 Simple: the code used must be easily understood to avoid mistakes of

interpretation and reduce them at a great extent

 Secure: avoid damage from users

Easy to access: easy to read and interpret

9
2. FUNCTION OF THE IS

2º- Warehousing:
Collect information in different places and times to
process them later depending on the demand.
The information in an IS can be:

 Primary data
 They have not been processed, except for recording it

 Information of results
 Information that can be directly used for the decision making

process

10
 2. FUNCTION OF THE IS

3º PROCESSING:

It is the treatment of the information to migrate from primary

data to information. It implies a group of operations:

I. Classify operations according to an established criterion

II. Calculation or comparison orders

III. Operations for the distribution of information

IV. Information of results

11
2. FUNCTION OF THE IS

4º Spreading the information:

 To prepare information for its distribution and

management

 Managers must decide How, when and whom

 So that it can be readable
 In the proper support
 At the precise moment
 To those authorised
12
 2. FUNCTION OF THE IS

Main reason to the implementation and

spread of IS

 The consideration of the information as a strategic asset

 Identification and implementation of competitive

advantages

 Cost reduction

 Teamwork / Company efficiency 13

LEVELS OF MANAGEMENT AND INFORMATION NEEDS

Executive Information System (EIS)

High Level managers

Strategic
Management

Decision Support System (DSS)

Tactical
Management High Level managers

Functional or Management Information System (MIS)

Operational
Management Middle Level managers

Operational Level Transaction Process System (TPS)

13
Low level managers and operators
NEEDS OF INFORMATION AT THE DIFFERENT
ORGANISATIONAL LEVELS

 1.Strategic / High Level Management

 They elaborate the strategy, they formulate main aims,
objectives and plans at a long run to best benefit from
the changes and convert them into competitive
advantages. To make decisions they use:
- External and internal information

- Intuition in the decision making process

 2. Tactical Management
 They elaborate Tactic plans
 Short term plans (for example the yearly budgeting), oriented
to get the objectives required by the strategic level, and the
control of the plans driving to the objectives
- They are normally based, on internal information 15
NEEDS OF INFORMATION AT THE DIFFERENT
ORGANISATIONAL LEVELS

 3. Operational Management
 They are responsible for Daily operations

 They program and control the basic activities

performed in the firm

- They need information useful for planning and following

of these activities, in the short run and with great detail

16
MAIN CHARACTERISTICS OF THE INFORMATION
PROVIDED BY THE IS

Characteristics of the
information OPERATIONAL STRATEGIC

Highly detailed Agregated information

Level of detail

Precision needed High High if posible

Internal External - Internal

Source

Scope Concret Wide

Volume High Low

TYPES OF IS FOR THE DECISION MAKING LEVELS

1.- Transaction processing systems (TPS)

They process in a mechanic way a great quantity of detailed

data generated in the daily operations
 Main objective: reduce costs in routine tasks
 They increase the productivity of employees in
administrative tasks
 The capture data from the transactions and help for the
control of tasks of operational jobs
 The output information is immediate and highly detailed

18
TYPES OF IS FOR THE DECISION MAKING LEVELS

2.- Management Information Systems (MIS)

 Also called Management Reporting Systems.

 They are designed for the operational levels

 They operate over the information generated by the Transaction
Process System TPS, but more aggregated information
 They produced internal information, structured in predefined formats

 Goals of Systems:
 Simplify the work to be developed by intermediate levels
 Labour cost reduction: fewer people will have to perform more tasks
 Reporting: The elaboration of reports, standard documents, according to
predefined rules.

19
TYPES OF IS FOR THE DECISION MAKING LEVELS

3.- Decision Support Systems (DSS) and Executive

Information Systems (EIS):

 Oriented to the solution of problems associated to the

decision making

 They use internal and external information (structured

and non structured)

 The use of simulation models

 Friendly interface and very visual presentation of the

information (graphics). Managers can make decisions easier
and faster.

20
TYPES OF IS ACCORDING TO FUNCTIONAL AREAS

 IS for the Financial area

 Accounts payable,
 Inventory control, cash
 General accounts, budgeting
 IS for the Production area
 Operational information systems,
 manufacturing, quality control, design and production development
 Planning control
 IS for the Commercial areas
 Selling systems

 Market analysis

 Distribution channels

 Pricing
 Analysis of publicity efforts, communication

• de communication and promotion

 IS for the Human resources areas
 Generation of salaries
 Personal recruitment

 Training
 Evaluation of the productivity
21
3.2. IS TOWARDS THE FIRM AND THE
ENVIRONMENT: ERP AND CRM SYSTEMS

Two new philosophies for the building of

information systems:

 ERP (Enterprise Resources Planning):

Integrated information systems that enable a coordinated
automation of business processes in all functional areas of
the company. They are used for the planning of firm’s
resources.

 CRM (Customer Relationship Management)

Based on a management philosophy for the relationship

with customers
22
 3.2.1. ERP (ENTERPRISE RESOURCES PLANNING)

Management software that can be differentiated from the rest

in two main aspects:

 It tries to solve of the firm’s information needs

Global character
 It means a standard solution offering
possibilities for a personalisation in the firm
 They are developed to get the best of standard and
personalised software options

http://www.youtube.com/watch?v=PVRgIXLWDHs 23
THE EVOLUTION OF ERP

 A firm’s environment is characterised by the constant growing of information needs. Firms

demand the following aspects:

 control of costs
 cost/benefit of a product or customer

 Flexibility to answer changes

 A greater information in the decision making process

 Changes in the way of performing business

 Different systems, applications and tools have been

implemented before ERP
- MIS. Management Information Systems
- IIS. Integrated Information Systems
- EIS. Executive Information Systems
- EWS. Enterprise Wide Systems
- MRP. Material Resource Planning
- MRP II. Manufacturing Resource Planning
- MRP III. Money Resource Planning
- CRM. Customer Relationship Management
 ERP´s systems have a more ambitious objective: the global processing of the information
systems in the firm
 CHARACTERISTICS OF AN ERP

 They control the main activities in a firm

 They integrate the information and use only one database to avoid redundancy and
duplicity of information

 They distribute the information in the whole value chain

 They allow the automatic introduction of the last technologies:

Intranet, Internet, e-commerce

 They do not only cover present needs, they offer the possibility of improving
business processes

 They are support tools for the decision making

25
 CHARACTERISTICS OF AN ERP

 ERP systems avoid the costs of maintaining software coming from

different providers and duplicities in the warehousing dispersion of
relevant information

 The ERPs systems offer a common source that allow final users to get it
adapted to the business: this means a great flexibility for the firm

 They avoid the obsolescence of business applications (software)

due to the changes in the needs and demands for information

 They can be implanted by modules for the different functional

areas: Sales, Finance, HHRR, etc.

27
ERP COMPONENTS - MODULES

 The sub-applications provided depend on the

provider and the firm
 The more frequent ones are:
 Sales and marketing
 Materials management

 Control of the supply chain

 Financial management

 Planning and management of production

 Communications containing remote stations

 The development of other solutions

Example of ERP:

27
 EXAMPLE OF ERP:

 SAP (Systems Analysis and Program Development) is a multinational that provides ERP
solutions to small and large firms. The most common modules of SAP are:
 SAP Financial Accounting (FI): deals in managing financial
transactions within enterprises

 SAP Controlling (CO): Supports in the process works of planning, reporting and monitoring
operations of businesses. It enables to plan, track, perform and report about costs.
 SAP Sales and Distribution (SD): Enable managing all transactions ranging from enquiries,
proposals, quotations, pricing and more. It helps in inventory control and management.
 SAP Production Planning (PP): designed specifically for production
planning and management
 SAP Materials Management (MM): procurement processes are managed
with this system
 SAP Human Capital Management (HCM): enhances the work29
process and data management within HR department
 BENEFITS OF ERP IMPLEMENTATION AND USE

- They offer information in on-line formats

- The improve the control of costs
- They improve the response times and the following of
customers
- They improve control and the purchasing response times
- They allow a faster adaptation to changes in the
business operations
- They proportionate an unified DB management system
for all the applications
- They allow the joint management of supply and
demands in the firm
- They help obtaining competitive advantages by
improving the business processes
30
BENEFITS OF ERP IMPLEMENTATION AND USE
 3.2.2. APPLICATIONS TO MANAGE SUPPLY CHAIN (SCM)

 SCM: The process to ensure the managing of activities from the

supplier to the end of the manufacturing and to final costumer.

 Organizations make a special effort to optimize logistics and

invest on applications and software solutions to improve supply
chain which are called SCM Systems.

 Components of a SCM System:

 Demand planning tools

 Inventory analysis tools

 Stock managing tools

 Distribution channels managing tools

SCM Systems are more useful if suppliers and customers

have a compatible system implanted.
31

Case of success in SCM: INDITEX

3.2.2. APPLICATIONS TO MANAGE SUPPLY CHAIN (SCM)
√ Control
√ Efficiency
√ Demand analysis
√ Integration
√ Coordination

• The company´s success in logistics is due to its total control

over the trade, from crafting, to manufacturing and delivery. It
enables them to respond quickly to the changing fashion and
customer preferences.
• They exercises control over suppliers and have a SCM
system integrated with the rest of the systems of the
company, and with suppliers.
• If a product is not being selling in the stores they
automatically stop producing it and avoid overstock.
• With its SCM System new collections and designs are 32
updated weekly in Inditex shops.
3.2.2 CRM (CUSTOMER RELATIONSHIPS MANAGEMENT)

 Integral systems to manage the relationships with

customers
 Business philosophy of CRM Systems: Costumers are an
strategic asset to keep and explode in the long term.
 The idea is to use ICT to improve customer’s
relationships,
 By solving problems in a fast way
 By making the treatment faster
 By making easy the access to the firm

http://www.youtube.com/watch?v=BMtv6sbmdLc 33
MAIN COMPONENTS IN THE CRM SYSTEMS

 1. Components of Costumer service

 2. Components of Sales force and marketing
 3. Components of analysis and intelligence
 4. Components of integration

1. Components of Costumer Service:

 Call centres (versus contact centres)
They try to solve by phone the most common problems coming from
customers and make easier the relationship firm-customer
 Customers self-service

The possibility of accessing to the business information system, offers two

advantages,
 It saves some parts of work to the firm, since they are directly
performed by the customer
 They allow customers search for the information they are really
searching by solving their own problems in a clear and easy way

34
MAIN COMPONENTS IN THE CRM SYSTEMS
2. Components of Sales force and marketing:
 Automatic systems for the sales force
They make easy the relationship with customers, by providing them
the required tools and information
 Telemarketing

The call centres provide tools that allow offering new services: they
mean an alternative channel for selling purposes
 Automation of the activities with customers and sales

CRM use automatic tools that allow a faster understanding of the

customer needs.

3. Components of analysis and intelligence

They are applications for the analysis of relationships with the
customer that let the company identify business opportunities and
solve weaknesses related to the pool of customers

4. Components of integration
 They connect all the CRM components with each other to let the system
work
35
3.3. DOCUMENT MANAGEMENT SYSTEM

 Companies need to manage (create, organise, distribute, store

and destroy) documents which are a physical format
(paper) so they need a document management System (DMS)

 DMS are systems to manage the cycle of life of the

documents of organizations. Companies usually digitalise the
physical documents to improve the flow and control.
 DMS are based on a web platform that enable to control the
flow of documents in the organization, controlling who and
when use or modify the documents.

 Big companies try to implant global solutions that integrate the

DMS with the information originated by the ERP and CRM. This
systems are called Enterprise Content Management (ECM)
36
3.4. GEOGRAPHIC INFORMATION SYSTEMS (GIS)
GIS: Systems composed by hardware, software and procedures
designed to obtain, maintain, manipulate, analyse and represent
spatial or geographic data to solve complex planning and
managing problems.

37
 3.4. GEOGRAPHIC INFORMATION SYSTEMS (GIS)

GIS is used in many different sectors as real estate, public

health, crime mapping, national defense, sustainable
development, natural resources, climatology, regional and
community planning, transportation and logistic.

Some applications of this systems are:

Mapping data: to provide a visual representation of data Proximity
Analysis: define the relationship between a specific location and other
locations (analyze competitors)
Location Analysis: The technique best used to identify a
location for a new retail outlet.
Buffering: to indicate the sphere of influence of a given point

38
3.5. THE HUMAN SIDE IN IS: ROLES AND PEOPLE
 Human Resources are esential for an effective use of ICT.
Organigram of an IS

CIO

Development Mainteinance Operations Data Base Networks

Manager Manager Manager Manager Manager

Systems Systems Data Base

Operators Operators
analysts analysts Administrator

Programmers Programmers 39
3.5. THE HUMAN SIDE IN IS: ROLES AND PEOPLE
CIO is the maximum responsible for the IS of the company and
reports to the CEO

 The responsibilities of a CIO are:

 Participate in the design of the strategy (business and

ICT must be in line)
 Ensure communication with the intern customers
 Define, use and control the financial resources for the
system
 Negociate and keep relationships with ITC suppliers
 Control the development and implantation of the system
 Manage the HHRR that work in the system to ensure a
good performance
40
 3.6. BUSINESS INTELLIGENCE
 BI: refers to the design and
implantation of ICT infrastructure
and processes for the storage,
integration, communication and
analysis of the business information.

 In BI different tools, technologies and applications are used to

analyse and present an organization’s raw data in order to create
insightful and actionable business information. BI as a discipline
and as a technology-driven process is made up of several related
activities, including:
 Data mining: process of discovering patterns in large data base
 Online analytical processing
 Benchmarking: Information gathered about other companies
 Reporting
41
3.6. BUSINESS INTELLIGENCE

 Business Intelligence software systems provide

historical, current, and predictive views of
business operations, most often using data that
has been gathered into a data warehouse

 Potential benefits of BI:

 Accelerating and improving decision making
 Optimizing internal business processes
 Increasing operational efficiency
 Driving new revenues
 Gaining competitive advantages over business rivals.
 Identifying market trends
 Spotting business problems that need to be addressed
42