Summary Business Information Systems Management - 1BV20
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Course
1BV20 (1BV20)
Institution
Technische Universiteit Eindhoven (TUE)
Book
Enterprise Systems for Management: Pearson International Edition
Summary of chapters 1,2,3,4,8,9,10, and 11 of the book Enterprise Systems For Management, by Motiwalla & Thompson (2nd Edition), and six additional readings including the following articles:
- Pearson& Saunders – Strategic Management of Information Systems – 5th Edition - Chapter 2
- Asad – F...
L. Motiwalla, J. Thompson - Enterprise Systems for Management, 2nd edition 2014
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Industrial Engineering
1BV20 (1BV20)
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Business Information Systems Management – 1BV20
Motiwalla & Thompson - Enterprise Systems For Management – 2nd Edition
Chapter 1 – Introduction to Enterprise Systems for Management
Enterprise Systems in Organisations
• Management is categorised into three levels:
- Strategic: functions are highly unstructured, and resources are undefined. Managers require
a smaller quantity of information, but that it is a very high quality of information.
- Middle or mid-management: somewhere in between.
- Operational: functions are highly structured, and resources are predefined. Managers
require more detailed information and does not require a high level of analysis/aggregation.
• Business functions are finance; human resources; accounting; operations; and marketing.
Information Silos and Systems Integration
• Business units (BU) within organisations integrate personnel from the various functional units to
work together on a variety of projects within an organisation; BU are dynamic suborganisations.
Enterprise Resource Planning Systems
What is an ERP?
• Enterprise resource planning (ERP) systems are the specific kind of enterprise systems to
integrate data across and be comprehensive in supporting all the major functions of the
organisation. ERP systems are comprehensive software applications that support critical
organisational functions.
• Reasons to implement ERP systems: the need to increase supply chain efficiency; to increase
customer access to products and services; to reduce operating costs; to respond more rapidly to
a changing marketplace; and to extract business intelligence from the data.
• The goal of an ERP system is to integrate departments and functions across an organisation onto
a single infrastructure that serves the needs of each department.
Business Process and ERP
• Another crucial role of ERP in business is to better position the organisation to change its
business processes.
• A business process is a series of tasks or activities grouped to achieve a business function or goal.
• An organisation has two choices when implementing ERP: change business processes to match
the software’s functionality or modify the ERP software.
- Disadvantage of modifying ERP software: every time an organisation has to upgrade the ERP
system, the IT staff will have to upgrade the application and upgrade the modifications.
- Disadvantage of implementing the ERP system ‘as-is’ (vanilla implementation): disruptions
will occur with the functioning of the organisation.
ERP System Components
• An ERP system depends on key components to perform the input, process, and output phases of
a system.
- Hardware: servers and peripherals.
- Software: operating systems and database.
- Information/database: organisational data from internal and external resources.
- Process: business processes, procedures, and policies.
- People: end users and IT staff.
ERP Architecture
• A system’s architecture is a blueprint of the actual ERP system and transforms the high-level ERP
implementation strategy into an information flow with interrelationships in the organisation.
• Whereas other IT architectures are driven by organisational strategy and business processes, ERP
architecture is often driven by the ERP vendor. This is referred to as package-driven architecture.
• The two types of architectures for an ERP system are logical and physical or tiered.
- The logical architecture focuses on supporting the requirements of the end users.
, - The physical or tiered architecture focuses on the efficiency (cost, response time, etc.) of the
system. The logical architecture provides the database schemas of entities and relationships
at the lowest tier, followed by the core business processes and business logic handled by the
system at the second tier. The third tier provides details on the applications that support the
various business functions built into the ERP system.
E-Business and ERP
• While e-business systems are better for sharing unstructured data and collaboration, ERP are
better for sharing structured or transaction data.
• E-business focus was on external integration (interorganisational), while ERP systems’ initial
focus was on internal data integration.
• E-business technology focus on linking a company with its external partners and stakeholders,
whereas ERP focus has been on integrating the functional silos of an organisation into an
enterprise application.
• E-business is a disruptive technology, whereas ERP is adaptive technology.
• The early focus of e-business was on communication, collaboration, marketing and promotion,
and electronic commerce. In contrast, the focus of ERP systems was mainly on data sharing,
systems integration, business process change, and improving decision making through the access
of data from a single source.
• → These two technologies have successfully cohabitated instead of one replacing the other.
Benefits and Limitations of ERP
• System benefits and limitations of ERP systems:
+ Integration of data and applications across functional areas of the organisation.
+ Maintenance and support of the system improves as the IT staff is centralised and is trained
aaaaaaaaato support the needs of users across the organisation.
+ Consistency of the user interface across various applications means less employee training,
aaaaaaaaabetter productivity, and cross-functional job movements.
+ Security of data and applications is enhanced due to better controls and centralisation of
aaaaaaaaahardware, software, and network facilities.
- Complexity of installing, configuring, and maintaining the system increases, thereby
requiring specialised IT staff, hardware, network, and software resources.
- Consolidation of IT hardware, software, and people resources can be cumbersome and
difficult to attain.
- Data conversion and transformation from an old system to a new system can be an
extremely tedious and complex process.
- Retraining of IT staff and personnel to the new ERP system can produce resistance and
reduce productivity over a period of time.
• Business benefits and limitations of ERP systems:
+ Increasing agility of the organisation in terms or responding to changes in the environment
aaaaaaaaafor growth and maintaining the market share in the industry.
+ Sharing of information across the functional departments means employees can collaborate
aaaaaaaaaeasily with each other and work in teams.
+ Linking and exchanging information in real time with its supply chain partners can improve
aaaaaaaai efficiency and lower costs of products and services.
+ Quality of customer service is better and quicker as information flows both up and down the
aaaaaaaaaorganisation hierarchy and across all business units.
+ Efficiency of business processes are enhanced due to business process reengineering or
aaaaaaaaaorganisational functions.
+ Reduction in cycle time in the supply chain from procurement of raw materials to
aaaaaaaaaproduction, distribution, warehousing, and collection.
- Change of business roles and department boundaries can create upheaval and resistance to
the new system.
- High initial cost of purchasing software, consultant costs, and disrupting the workflow of
employees.
, - Retraining of all employees with the new system can be costly and time consuming.
- To a degree, the company implanting vanilla (as-is) ERP may lose its competitive advantage
when all businesses have the same standardised business processes.
ERP Implementation
Business Process Management
• Business process management is the understanding, visibility, and control of business processes.
A business process represents a discrete series of activities or tasks that can span people,
applications, business activities, and organisations.
• The real value of BPM comes from gaining visibility and control of the business process.
ERP Life Cycle
• The key to a successful implementation is to use a proven methodology, to take it one step at a
time, and to begin with an understanding of the ERP life cycle.
• There are five phases of the life cycle from requirement gathering analysis to stabilisation and
production support, which are applied to the three levels of ERP implementation: functional,
technical, and organisational.
• Five phases of the life cycle: requirements gathering/gap analysis → general system design →
build and test → implementation → stabilisation and production support.
Software and Vendor Selection
• The vendor needs to be evaluated on:
- Business functions or modules supported by their software.
- Features and integration capabilities of the software.
- Financial viability of the vendor as well as length of time they have been in business.
- Licensing and upgrade policies.
- Customer service and help desk support.
- Total cost of ownership.
- IT infrastructure requirements.
- Third-party software integration.
- Legacy systems support and integration.
- Consulting and training services.
- Future goals and plans for the short and long term.
Operations and Post-Implementation
• Stabilisation is the time from Go live to about 90 days after, or until the number of issues and
problems has been reduced. Five areas of stabilisation are important:
- Training for end users.
- Reactive support (i.e., help desk for troubleshooting).
- Auditing support to make sure data quality is not compromised by new systems.
- Data fix to resolve data migration and errors that are revealed by audits.
- New features and functionalities to support the evolving needs of the organisation.
People and Organisation
Project Management
• For an ERP system to be implemented successfully, project management must provide strong
leadership, a clear and understood implementation plan, and close monitoring of the budget.
• The fundamental balance of project management consists of resources, time, and scope. Any
change to one side of the triangle will require a change to one or more sides.
Role of Consultants
• The Capability Maturity Model has five levels of organisational capability, with level one being
the least capable and level five the most capable. This model helps organisations understand and
assess their ability, which is needed to be successful.
• If an organisation’s ability is too low, a consultant should be hired as an implementation partner.
Change Management
• In implementing any new system, communication, preparing, and setting expectations are just
as important as training and supporting the implementation.
, Business Process Reengineering
• While the phrase business process reengineering is overused, it is often the case that current
business processes will need to be changed to use the functionality of an ERP system fully.
• A business process is a group of activities or tasks that are coordinated for achieving a business
goal. A business process can be ordering supplies or designing a new product for the market.
Global, Ethical, and Security Management
• Globalisation has impacted ERP systems in many ways:
- First, a majority of ERP vendors are global.
- Second, large ERP implementation consultants have global offices and staffs to help clients in
ERP implementation projects all over the world.
- Finally, software leasing or Software as a Service (SaaS) is an emerging model for outsourcing
for many companies that do not want to invest large amounts of money on in-house ERP
implementations.
ERP Vendors
• The ERP software market can be grouped into three tiers. Tier I includes large vendors who
provide support for large companies. Tier II includes vendors supporting the midsize companies
(less than 100 users). Tier III vendors support small companies (less than 30 users).
Key Vendors
• SAP is the recognised leader among ERP vendors, claiming the largest current market share.
• Oracle technology can be found in early every industry around the world.
• Infor is the world’s third-largest provider of enterprise software.
• Microsoft Dynamics (MD) is a comprehensive business management solution built on the
Microsoft platform.
• Lawson provides industry-tailored software solutions.
• SSA Global claim to offer solutions that accomplish specific goals in shorter time frames.
• Epicor provides enterprise software solutions for midmarket companies around the world.
Software Extensions and Trends
• Intense competition and fluctuating sales have forced the ERP vendors to expanding their
software functionality to add value and to support new organisational needs from compliance
management, customer support, global supply chain, and such emerging technology platforms
as open-source software and service-oriented architectures.
• Another trend among big vendors has been the expansion of their software market for small to
medium-size businesses.
Implications for management
• Managers implementing ERP systems in their company should remember the following:
- ERP systems implementation is a complex organisational activity.
- ERP systems implementation requires strong project management oversight.
- ERP systems provide improved and added functionality for an organisation.
- ERP systems are set to proliferate globally.
Chapter 2 – System Integration
Functional Silos
• Silos are an airtight pit or tower for preserving products. Silos are basically compartmentalised
operating units isolated from their environment.
Horizontal Silos
• Horizontal division = functional division.
• A functionalised organisation can be divided into five basic areas: planning, organising,
coordinating, commanding, and controlling.
• Later the functional model of organisation expanded into POSDCORB: planning, organising,
staffing, directing, coordinating, reporting, and budgeting.
Vertical Silos
• Vertical division = hierarchical layering.
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