CHAPTER 3

Business Application of IS

 E-Commerce, E-business and e-Governance

 Enterprise Systems
 Decision Support Systems

Prof. Prachi Shah

Part-1 [Ch-7 from book]

E-Commerce, E-business and

e-Governance
Introduction
 New uses of information systems and new
business models have become possible because
of the Internet, which has eliminated many
technical, geographic, and cost barriers obstructing
the global flow of information.

 Internet has also enabled the governments to

connect to businesses, its citizens and to its other
departments that makes the governments more
responsive and thus helps improving the
governance.
e-Commerce
 e-Commerce refers to the use of the internet and
the web to transact business.

 The global availability of Internet for the exchange

of transactions between buyers and sellers has
been instrumental in the growth of e-Commerce.
Categories of e-Commerce
 e-Commerce applications are divided into three
major categories:
1. Business-to-Consumer (B2C) e-Commerce
2. Business-to-Business (B2B) e-Commerce
3. Consumer-to-Consumer (C2C) e-Commerce
E-commerce Sales Life Cycle
 Typically a customer passes through
the following stages:

1. Searching for the item

2. Selection and negotiation
3. Purchasing
4. Product and service delivery
5. After sales service
E-commerce infrastructure
 e-Commerce technology infrastructure is
the key to successful e-Commerce.
 It includes the following:
1. Hardware
 A web-server hardware platform
2. Software
 Web-server Software
 e-Commerce Software
Hardware

 A web server hardware platform is one of the

main e-commerce technology infrastructure
components.

 The various features of the web server like

storage capacity and computing power etc…
depend upon the software runs on the server and
the volume of the e-commerce transactions to be
processed.
 Software
(a) Webserver software :
To perform a large number of functions like security
and identification retrieval and sending of web pages,
website tracking, website development and webpage
development, the website must have web software.

This software is needed in addition to the web server

operating system.
(b) e-Commerce software :
 e-Commerce software must support
following processes:

1. Catalog management
catalog management is required to deliver customize content to the user's
screen.

2. Product configuration
web based product configuration s/w is used to build the required product
online without any help from sales person.

3. Shipping cart
This model is used by many e-commerce sites to track the items.
4. E-commerce transaction processing
This is required to undertake the processing of the data received from the
shopping cart and calculate the cost.

5. Web traffic data analysis

Is required to analyze all the data captured in the web log file. This analysis
is useful to improve website performance.
E-commerce applications
 e-Commerce finds its applications in diverse
areas of business like retail and wholesale,
manufacturing, marketing, finance, etc.
 e-Commerce applications in various areas
are:
◦ Retail and Wholesale
◦ Marketing
◦ Finance
◦ Manufacturing
◦ Auctions
E-commerce payment systems
 Payments are made in a number of different
modes like
◦ electronic cash
◦ electronic wallets
◦ smart card
◦ credit card
◦ debit card, etc.
Management Challenges and
Opportunities
 Internet Technology poses a number of
challenges which are taken as threats to e-
Commerce.
 Some of these challenges include the
following:
◦ New Business Models
◦ Required Changes in Business Processes
◦ Channel Conflicts
◦ Legal & Regulatory environment foe e-
Commerce
◦ Security & Privacy
◦ Managerial Opportunities
E-Business
 E-business is the use of the information
technologies to support e-Commerce, enterprise
communications and collaborations, and web-
enabled business processes both within a net-
worked enterprise, and with its stakeholders.

 E-Business is the powerful business environment

that is created when we connect critical business
systems directly to customers, employees,
vendors, and business partners using intranets, E-
Commerce technologies, collaborative applications
and the Web
E-Business
 The applications of e-business are Enterprise
Resource Planning (ERP) System; Supply Chain
Management (SCM) System; and Customer
Relationship Management (CRM).
E-Business Models
There are three types of market places:

 Controlled by Sellers
 Controlled by Buyers
 Neutral Marketplaces
Seller Controlled Markets
 Set up by single vendor seeking many buyers

 Main aim: to retain value and power in any

transaction
Buyer Controlled Markets
 Set up by or for one or more buyers

 Main aim: to shift value and power in marketplace

on the buyer’s side

 Buyer intermediaries can also be there… they act

as agents
Neutral Markets
 Set up by third party intermediaries to match many
buyers to many sellers
 Matches buyers to sellers at an auction
 Commission based
E-Business Cycle
FOUR PROCESSES:
 Transform
 Build
 Run
 Leverage
Transform
 Ability of company to transform core
business processes and leveraging the
reach and pervasiveness of the internet

 where to start?
◦ Key to success lies in making e-business
priorities the priorities of business
Transform contd…..
 PRIORITY  WHAT TO DO

 Extending reach  Enable web-site for

and capturing new E-commerce
markets
 start giving instant
 Improve customer information to
retention through customers on web-
better services site
Build
 Involves building the transform applications

 Fastest and effective way is simply to

extend and continue to modernize existing
applications and develop the new ones with
the existing information systems
Run
To run e-business successfully and optimally:

 offer reliability to ensure trust

 provide security that provides confidence
 manageability to ensure performance
 Since e-business solutions must grow quickly in
multiple dimensions, SCALABILITY is also
important
Leverage
Outside the Organization

 Becoming customer-centric means leverage

existing data for greater understanding of the
customer.

 What do customer buy, when and how do they

buy? -----------Use this information optimally
Leverage Contd...
Inside the Organization

 Leverage the experience and knowledge of

individuals within the organization -----
to make a complex process work
to roll out a new product

 Leverage existing knowledge and replicate best

processes across the organization to improve
innovation & responsiveness
e-Governance
 e-Governance refers to the application of advanced
information and communications technology to
improve governance.

 e-Governance helps the government in providing

efficient, convenient & transparent services to the
citizens & businesses through ICT.
Objectives of e-Governance
 The main objective of e-Governance is to improve
relationship between the government and the
citizens. Some of the other objectives of e-
Governance are listed as below:
◦ Cut costs and improve administrative efficiency
◦ Meet citizen’s expectations and improve citizen’s
relationships
◦ Create transparency in administration.
◦ Inform the citizens and encourages them to participate
◦ Facilitate economic development
◦ Simplify governance for all parties
◦ To facilitate a speedy, accountable and efficient process for
administrative activities
 e-Governance Delivery Models
 e-Governance delivery models can be
classified under the following categories:
1. Government to Citizen (G2C )
2. Government to Business (G2B)
3. Government to Government (G2G)
Part-2 [Ch-8 from book]

Enterprise Systems
 Introduction
 Now-a-days, information technology is being used
to develop integrated cross-functional enterprise
information systems
◦ that cut across the traditional functional areas of
a business organization
◦ with an objective to re-engineer and improve the
business processes all across the organization
Enterprise Systems
 Enterprise systems are the highly integrated
information systems that cut across the traditional
functional areas in an organization and thus the
scope of such systems is entire enterprise wide.
 Such systems, even, go beyond the boundaries of
the organization and may have interfaces with the
other stake holders of the business like dealers,
customers etc.
ENTERPRISE RESOURCE
PLANNING (ERP) System
 Enterprise Resource Planning (ERP)
System may be defined as
◦ a highly integrated information system,
◦ which provides information for all the functional
areas as well as at all the management levels of
an organization.
Evolution of ERP
 ERP systems have evolved (1990) from:
◦ Materials Requirements Planning (MRP) systems
(1970): it was need to bring down large inventory
levels by planning the order releases
◦ Manufacturing Resources Planning (MRP-II)
systems (1980): addressed the entire
manufacturing function; includes production
facilities, machine capacities, sequencing
ERP Modules
 Components of ERP Systems
 The ERP System, which is an integrated
computer based information system,
comprises the following components.
1. People (Users and IT staff)
2. Hardware (servers, peripherals) and Software
(Information Systems software, Operating
systems and databases)
3. Database (organizational data from within and
outside)
4. Model base
5. Processes (Business processes, procedures,
and policies)
ERP Life Cycle
Challenges of ERP System
 The implementation of ERP system is a complete
business transformation and thus the costs and
risks are also quite high.
 The lack of understanding of the complexity of the
planning, development and implementation
required for new ERP system could lead to the
failures of ERP Systems
Actions for making ERP effective
 Various factors that make ERP System
effective:
◦ Establish the need and set the stage for ERP
◦ Set performance measures and review them
◦ Assess value to the company
◦ View ERP as an integrated process
Customer Relationship Management
(CRM) System
 Customer Relationship Management (CRM) System
is another kind of enterprise systems that helps an
organization to understand the customer needs and
support in formulating the customer focused
strategies.

 It may be defined as a highly integrated cross-

functional information system that includes
◦ a set of tools to integrate and automate customer-related
processes
◦ in sales, marketing and customer services
◦ to provide fast, convenient and reliable services to its
customer.
 Concept of a CRM System
Business Sales Marketing Services
process

Data warehouse/
Data mining CRM
software

Customer Customer

Organizational user
Components of CRM System
1. Customer Interface
2. Sales
3. Marketing
4. Customer Service and Support
5. CRM Model base and Database
Challenges of CRM System
 The failure of CRM systems can be attributed to
the lack of understanding and planned
implementation of CRM systems.
 Customer solutions cannot be automatic and
generated with the buying of CRM systems.
 CRM implementation framework
The following CRM implementation framework can be
adopted by the organizations.
 Understand your Business and Customer
 Do SWOT Analysis
 Define CRM System Strategy for Your Organization
 Make Your Organization Business Process Re-
engineer Ready
 Plan Implementation of CRM System
 Top Management Support
 Develop a Performance Scorecard
Supply Chain Management
(SCM) System
 Supply chain management system is a cross-
functional inter-enterprise system that
◦ uses information technology to help support and manage
the linkages between
◦ company’s processes involved in buying, making and
moving a product.
 It integrates supplier, manufacturer, distributor and
custom logistics processes to improve
manufacturing efficiency and distribution
effectiveness.
Concept of a SCM System
Supplier Manufacturer Distributor

Retailer

Services
SCM software

Organizational user
Benefits of SCM System
Supply chain management systems can provide the following
benefits to the organizations:
 The organization would be able to decide when and what to
produce, store, and move.
 Orders can be communicated quickly.
 Organizations can track the status of orders.
 Inventory availability can be checked and inventory levels can
be monitored.
 Inventory, transportation, and warehousing costs can be
reduced.
 Shipments can be tracked.
 Production can be planned based on the actual plan.
 Any changes in the product design can be communicated
quickly.
Challenges of SCM System
 A lack of proper demand planning knowledge, tools
and guidelines is a major source of SCM failure.
 Demand forecasts, which are not accurate, will lead
to major production, inventory and other business
problems.
 Inconsistent or wrong data, due to lack of
integration with ERP of the organization is another
common cause of SCM problems.
 Lack of adequate collaboration among marketing,
production and inventory within a company, and
with suppliers, distributors, and others will
adversely affect SCM system.
SCM Implementations
framework
The following SCM implementation framework
suggesting guiding steps can be adopted by the
organization.
 Understand Your Business and Supplier
 Define SCM System Strategy for Your Organization
 Make Your Organization Business Process Re-
engineer Ready
 Plan Implementation of SCM System
 Top Management Support
 Develop a Performance Scorecard
Part-3 [Ch-9 from book]

Decision Support Systems

Introduction
 Today’s manager has to operate, under ever-
increasing complexities of business as well as that
of management. It is more difficult to make
decisions for several reasons. For example
 The number of available alternatives is much larger
than ever before because of improved technology
and communication systems.
 Any wrong decision may be very costly because of
the complexity and magnitude of operations,
automation and the chain reactions that it can
cause in an organization.
 The environment today is more dynamic, and the
ever-increasing competition, forces the managers
to act fast and take quick decisions.
Decision-Making: A Concept
Decision-making is a process of selecting one
optimum alternative from among alternatives
of a course of action
Simon’s Model Of Decision-making
 Herbert A. Simon has given a model which
comprises of three major phases
Simon’s Model Of Decision-making
(1) Intelligence
 Continuous scanning & Intermittent scanning
 Conscious & unconscious
 Involves
◦ Problem searching:
 Desired / Expected – Actual / Reality = Difference (Problem)
◦ Problem formulation:
 Well understand the problem
 Establish relations with earlier solved problems
(2) Design
 Explore all possible alternatives
(3) Choice
Types Of Decisions
 Decisions are classified on the following
bases:
1. Purpose of Decision-making
2. Level of Programmability
3. Knowledge of Outcomes
1. Purpose of Decision-making
 Strategic planning decisions
◦ Objectives, resource allocation
◦ Long-time period decisions
◦ Large investment and effort
 Management control decisions
◦ Use of resources
◦ Analysis of variance, product mix planning
 Operational control decisions
◦ Problems that affect operation of organization
◦ E.g. number of products to be produced, ordered, etc.
2. Level of Programmability
 Programmed / Structured decisions
◦ Specific procedure or rule may be applied to take decision
◦ Techniques involve operation research, mathematical
analysis, modelling and simulation, etc.
◦ Handled by low level managers
◦ E.g. inventory reorder decisions
 Non-programmed / Unstructured decisions
◦ No specific procedure
◦ To be solved through judgement, intuition and rule of thumb
◦ Handled by strategic planning level managers
◦ E.g. introduction of new product, planning for R&D, etc.
 Semi-structured
 Classes of Decisions

Operational Management Strategic

Class
Control Control Planning
Order Processing
Structured Budget Analysis Warehouse location
Account Receivable

Inventory Control
Introduction to new
Semi-structured Analysis of variance
product
Production scheduling

Cash management
Unstructured Budget formulation R&D Planning
Long-term forecast
3. Knowledge of Outcomes
 Decision under certainty
◦ Outcome of each alternative is fully known

 Decision under risk

◦ Possibilities of multiple outcomes of each alternatives and
probability of the occurrence is attached to each outcome

 Decision under uncertainty

◦ Probability of the occurrence is not known
Methods For Decision Making
 A decision-maker makes use of various methods
for making decisions i.e. choosing among
alternatives.
I. Decision Theory or Decision Analysis
II. Utility
III. Decision Tree
IV. Optimization Techniques
 (I) Decision Theory or
Decision Analysis
 For analyzing decision under risk and uncertainty
◦ Goal / purpose / objective
◦ Strategy
◦ States of nature
◦ Pay-off
 Decision making under risk (Example):
Pay-off Matrix
States of Nature

Strategies N1 N2 N3
(Same condition) (New Competitor) (Govt. Ban)
(0.40) (0.40) (0.20)
S1 (Modify) 7 5 -5
S2 (New Product) 10 3 -13
S3 (Do Nothing) 5 1 -2
 (I) Decision Theory or
Decision Analysis (contd.)
 Methods for decision making under uncertainty:
1. Maximax or criterion of optimism
2. Maximin or criterion of pessimism
3. Criterion of regret
4. Criterion of rationality
 Example:
Pay-off Matrix

States of Nature
Strategies N1 N2 N3
(Same condition) (New Competitor) (Govt. Ban)
S1 (Modify) 7 5 -5
S2 (New Product) 10 3 -13
S3 (Do Nothing) 5 1 -2
 (II) Utility
 Pay-offs are measured in monetary value
 Factors like goodwill, image of an organization,
perception of quality, advertising effects, etc. need
not be measured in monetary value.
 So, Utility measure is used. It has Utiles as its unit.
 Small amount of money has small utility, but large
money has much more utility.
 Utility gets limited with more money.
 Utility has various applications, as it helps the
decision-maker to decide about non-monetary
factors.
 (III) Decision Tree
 It is a graphic representation of a sequence of
decisions and actions.
 Decision tree helps in:
◦ Problem structuring: structuring the problem to understand the
process logic of a problem Action
◦ Problem analysis Condition
Action
Condition
Action
Condition
Action
Root
Action
Condition
Action
Condition
Action
Condition
Action
(III) Decision Tree (contd.)
 (IV) Optimization Techniques
 These techniques assume that all alternatives and
outcomes are known.
 The decision maker is required to calculate optimal
alternative for his objective function.
 Techniques used are: linear programming, integer
programming, dynamic programming, queuing
models, inventory models, etc.