Fall 2023

Chapter 7: Organizations and Information Systems (continued)

Sirine Taleb
Slides: From Pearson Book
9/28/23
Copyright © 2017 Pearson Education, Inc.
 Information
Silos of
ARES

In this question, we will use the ARES example to show how inter-enterprise systems can accomplish the same for enterprise silos.
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§ The isolation of this exercise data causes problems. For example, employers would like to have reports on
exercise data stored in user devices and in health clubs. Users would like to have data like lab test results
from their employer as well as exercise data from their time at health clubs. Health clubs would like to have
lab results and home workout data to integrate with the data they have. All three entities would like to
produce reports from the integrated data.

INFO 200 – AUB – Fall 2023 – Dr. Sirine Taleb 9/28/23 3

 Distributed
Systems
because
applications
Figure shows the structure of an inter-
processing is
enterprise system that meets the goals of
distributed across
the three types of participants. In this
multiple
figure, the labeled rectangles inside the
computing devices.
cloud represent mobile applications. Some
of the application processing might be
done on cloud servers as well as on the
mobile devices. As illustrated, this system
assumes that all users receive reports on
mobile devices but, because of the large
amount of keying involved, employers
submit and manage lab results using a
personal computer.

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§ “Most IT problems are workflow problems, not software problems”
§ Using the knowledge of Chapter 2, you know that workflow problems concern either efficiency (ratio of
costs to value delivered is too high) or effectiveness (not contributing to the competitive strategy).
§ Who fixes a workflow problem?
§ Someone with knowledge of the business and, if the workflow involves an information system, someone who
is knowledgeable and comfortable working with technical people.

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§ Consider an example close to home. Suppose your university has a limited number of classrooms with sophisticated
audiovisual display. And those classrooms are frequently assigned to professors who specialize in old-fashioned lecture
and don’t use audio/visual display.
§ Meanwhile, professors who want to use, in their classrooms are making do with poor-quality, hard-to-view computer-
based display.
§ How would you fix that problem? Change the software that allocates classrooms? But how? Who decides what changes
need to be made? And does it need to be done in software? Could it be done by fixing a workflow? Is there a
convenient point in the professor–class assignment process in which professors (or department chairs) could indicate
which professors should teach in which classrooms? Or are classrooms allocated on a university-wide basis? Or maybe
the audiovisual system is already generating metadata about its use, and without requiring anyone to provide any extra
data, someone in the Assign-Classroom workflow could use these data to allocate those classrooms?
§ Who develops these alternatives? Who evaluates them? Who implements them with the workflow workers?

§ You! Or it could be you.

To do this well, you need to know IS and something: IS

and marketing, IS and operations, IS and finance.
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§ Need knowledgeable business people comfortable working with technical people
§ You and a business analyst

§ a business analyst is someone who knows business, who understands the organization’s competitive strategy and ways to
implement it, and who knows enough information systems technology to be able to model and design workflow changes and to
work with technical personnel, when needed, to effectuate changes to information systems.

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§ Understand levels of information systems and problems
§ Gain perspective information systems and understand issues of information silos
§ Know what CRM, ERP, and EAI applications are, what they do, and some issues involving use and
implementation
§ Finally, understanding how ARES uses the cloud to support an inter-enterprise system will give you the
background for investigating the use of the cloud for other applications as well.

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ETHICS GUIDE: DIALING FOR DOLLARS
• Suppose you are a salesperson and your company’s CRM forecasts that your quarterly sales will be
substantially under quota. You call your best customers to increase sales, but no one is willing to buy more.
• Bad quarter. VP of sales authorized a 20% discount on new orders if customers take delivery prior to end of
quarter so order can be booked for this quarter.
• VP says “Start dialing for dollars, and get what you can. Be creative.”

• Using your CRM, you identify your top customers and present the discount offer to them. The first customer
balks at increasing her inventory: “I just don’t think we can sell that much.”
• “Well,” you respond, “how about if we agree to take back any inventory you don’t sell next quarter?” (By
doing this, you increase your current sales and commission, and you also help your company make its
quarterly sales projections. The additional product is likely to be returned next quarter, but you think, “Hey,
that’s then and this is now.”)

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ETHICS GUIDE: DIALING FOR DOLLARS
• Suppose you are a salesperson and your company’s CRM forecasts that your quarterly sales will be
substantially under quota. You call your best customers to increase sales, but no one is willing to buy more.
• Bad quarter. VP of sales authorized a 20% discount on new orders if customers take delivery prior to end of
quarter so order can be booked for this quarter.
• VP says “Start dialing for dollars, and get what you can. Be creative.”

• Using your CRM, you identify your top customers and present the discount offer to them. The first customer
balks at increasing her inventory: “I just don’t think we can sell that much.”
• “Well,” you respond, “how about if we agree to take back any inventory you don’t sell next quarter?” (By
doing this, you increase your current sales and commission, and you also help your company make its
quarterly sales projections. The additional product is likely to be returned next quarter, but you think, “Hey,
that’s then and this is now.”)

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ETHICS GUIDE: DIALING FOR DOLLARS
With another customer, you try a second strategy. Instead of offering the discount, you offer the product at full
price but agree to pay a 20 percent credit in the next quarter. That way you can book the full price now. You
pitch this offer as follows: “Our marketing department analyzed past sales using our fancy new computer
system, and we know that increasing advertising will cause additional sales. So, if you order more product now,
next quarter we’ll give you 20 percent of the order back to pay for advertising.”
In truth, you doubt the customer will spend the money on advertising. Instead, it will just take the credit and sit
on a bigger inventory.
That will kill your sales to the company next quarter, but you’ll solve that problem then.

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ETHICS GUIDE: DIALING FOR DOLLARS
• Even with these additional orders, you’re still under quota. In desperation, you decide to sell product to a
fictitious company that you say is owned by your brother-in-law. You set up a new account, and when
accounting calls your brother-in-law for a credit check, he cooperates with your scheme. You then sell
$40,000 of product to the fictitious company and ship the product to your brother-in-law’s garage.
Accounting books the revenue in the quarter, and you have finally made quota. A week into the next quarter,
your brother-in-law returns the merchandise.

• Meanwhile, unknown to you, your company’s ERP system is scheduling production!!!!!

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1. Side letter to first customer
2. Delayed discount to second customer
3. Fictitious account
§ Send email with return product agreement
§ Offer product at full price but agree to give 20% credit next quarter

§ Sell to fictitious company and ship product to your brother-in-law’s garage

• These techniques, when applied to distributor customers, are often referred to as “stuffing the
channel.” It’s a risky strategy because the company is pushing this quarter’s problem into next
quarter. Unless there is a substantial increase in sales demand, problem will grow worse.

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• In fact, while removing information silos does have the advantages discussed, moving data into a
single, centralized facility creates a potential security problem. Namely, fraudsters can find all the
data they want in one convenient location. It’s one-stop shopping. So, data integration can make
organizations more vulnerable.

• On the other hand, centralizing data in one location enables the organization to focus security
measures on a single resource. The IS support staff need not manage security over several, possibly
many, distributed databases, but rather can focus security management on a single database. So,
assuming appropriate security management, the two factors counterbalance one another: Risk of
loss is higher, but security against such loss can be focused and ultimately result in less actual risk.

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• Take ARES as an example: This means, however, that competing personal trainers (and health
clubs) view data on their competitors’ practices. Is this a problem? It’s likely to be perceived as a
problem even if there is no real danger, and that perception could limit ARES sales and use.

• IS design involves constant trade-offs

§ Risk of loss is higher, security can be focused
§ Inter-enterprise system can connect competitors with different incentives and agendas
§ How secure is the cloud vendor? (in ARES)
§ Bitcoin
§ In February 2014, Mt. Gox, the largest bitcoin exchange at the time, lost about 850,000 bitcoins valued at
$460M.3 It declared bankruptcy and wouldn’t, or couldn’t, explain where all the bitcoins and cash had gone.
§ Centrally located, accessible from anywhere, very large sum of electronic money

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Q1: How do information systems vary by scope?
Q2: How do enterprise systems solve the problems of departmental silos?
Q3: How Do CRM, ERP, and EAI support enterprise systems?
Q4: How do inter-enterprise is solve the problems of enterprise silos?
Ø How does the knowledge in this chapter help you?

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§ The National Health Service (NHS) is the United Kingdom’s publicly funded healthcare system

§ The National Programme for IT in the NHS (NPfIT) was established to develop systems to electronically
administer patient information throughout the regions and their organizations. This required the development of
interorganizational information systems.

§ Consider, for example, the development of the shared X-rays system and the electronic patient records system. The
shared X-rays system was delivered on time and on budget, and because of its success, it is used nationally
throughout the different NHS regions of England and in the organizational units, including trusts and general
practices.
§ By contrast, the electronic patient records system, which was being developed for ach of the regions and
organizational components of the NHS, was cancelled after a long period of investment and beyond what had
originally been planned and, as such, is considered a failure. The electronic patient record system was never put
into operation completely, despite having cost £6.40 billion. Although the Programme in its original form was
cancelled after the National Audit Office report of 2011, it was estimated that the expected total expenditure would
have been £11.40 billion by 2015–16 if it had been implemented.

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§ The NPfIT – the two major components of the system:
§ Electronic Sharing of X-rays System (ESXS)
§ Electronic Patient Record System (EPRS)

§ ESXS
§ Involvement of health professionals, clinical requirements understood, good planning and organization

§ EPRS
§ Political motivation, lack of health/IT professional involvement
§ These could have been mitigated against had an interorganizational information system development— ERP, CRM, and EAI—
been undertaken from the start of the project.

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Figure shows some of the organizations involved
in the NPfIT in the NHS. Clearly, an interorganizational
information system is needed. As you know from this
chapter, such projects are often difficult to develop and
manage, and it is not surprising that some providers
failed to deliver the systems needed, most notably the
electronic patient records system.

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§ The computer accessible X-ray system was delivered smoothly
§ On budget
§ On time

§ The X-ray system was a rare product of consultation with health professionals
§ The X-ray system was added to the NPfIT after the original specifications were drawn up

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§ The system was successfully rolled out and delivered to all parts of the NHS organization in 2007
§ Full buy-in with respect to all stakeholders
§ Requirements met clinically as well as organizationally
§ X-ray sharing system an exemplar for other projects and systems within the NPfIT

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§ Still far from completion by 2011
§ Substantial further investment required for completion 2015-2016
§ Functional specification reduced
§ Timescales and cost savings would have been largely unaffected

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§ Forensic examination of the time and budget over-runs undertaken by National Audit Office
(NAO)
§ Several factors contributed to these:

§ Motives: the Programme was motivated by government in a top-down fashion without fully
consulting with IT experts, who would have been able to bring their project management skills
and experience to bear

§ buy-in: Lack of involvement of health professionals

§ Haste: the speed with which contracts were awarded for the development of the system

§ multi-sourcing:Having many contactors

§ End result: Electronic Patient Record System development failed

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Copyright © 2017 Pearson Education, Inc.
Fall 2023
Chapter Extension 9: ERP Systems
Sirine Taleb
Slides: From Pearson Book
9/28/23
Copyright © 2017 Pearson Education, Inc.
 CHAPTER
EXTENSION 9

Enterprise Resource
Planning (ERP) Systems
Q1: What is the purpose of ERP systems?
Q2: What are the elements of an ERP solution?
Q3: How are ERP systems implemented and upgraded?
Q4: What types of organizations use ERP?
Q5: How do the major ERP vendors compare?

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• Suite of modules, database, set of inherent processes for consolidating business operations into a single, consistent
computing platform
• ERP system is an information system based on ERP technology.

§ Primary purpose
§ Integration of purchasing, human resources, production, sales, and accounting data into a single system
§ Allow the left hand of the organization to know what the right hand is doing.
§ Allow real time global updates of transactions
§ Enable critical business decisions using latest data on a timely basis

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FIVE NON-INTEGRATED DATABASES)
one each for
vendors, raw
materials, finished
goods,
manufacturing
plan, and CRM.

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FIVE NON-INTEGRATED DATABASES)
Consider the problems
that appear with such
separated data when the
sales department closes a
large order, say for 1,000
bicycles.

The Figure does not show

accounting. We can
assume, however, that the
company has a separate
accounting system that is
similarly isolated.

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§ First, should the company take the order? Can it meet the schedule requirements for
such a large order?
§ Suppose one of the primary parts vendors recently lost capacity due to an earthquake,
and the manufacturer cannot obtain parts for the order in time. If so, the order
schedule ought not to be approved. However, with such separated systems, this
situation is unknown.
§ Even if parts can be obtained, until the order is entered into the finished-goods
database, purchasing is unaware of the need to buy new parts.
§ The same comment applies to manufacturing. Until the new order is entered into the
manufacturing plan, the production department doesn’t know that it needs to increase
manufacturing.
§ And, as with parts, does the company have sufficient machine and floor capacity to
fill the order on a timely basis? Does it have sufficient personnel with the correct skill
sets? Should it be hiring? Can production meet the order schedule?
§ No one knows before the order is approved.
9/28/23 31
Here all activity is processed by ERP application
programs (called modules) and consolidated data are
stored in a centralized ERP database. Copyright © 2017 Pearson Education, Ltd.