Chapter 4: Software and Systems

Centralized Systems

A centralized system connects all users to one central location built around a server or cluster of servers that all authorized users can access - all the network's main business processing occurs at, and business information is stored in, that one place

Decentralized Systems

A decentralized system utilizes multiple locations that each maintain a copy of the data needed for its connected systems -there are multiple access points for users, but not all users are connected to all access points

Distributed Systems

A distributed system is like a decentralized system; however, it goes a step further, as all the users and systems are directly connected to one another across the network - the processing and databases are distributed among several business locations

Transaction Processing

A modern-day TPS collects data continuously, in real time, for day-to-day business activities. Because a TPS collects data as it is created, the system must be available and have data integrity. After data is collected, a TPS processes data in one of two ways: batch processing or real time processing

Systems Software

A system is a set of interrealted components, and there must be a way for these components to communicate Systems softare is specialized software that runs a computer's hardware and other software It's a platform for other software that coordinates all the activities throughout the system

Advantages and Disadvantages of Distributed Systems

Advantages: -Communication among the users is increased since all are connected -Real-time transaction details are more readily available to users. Access and processing speed are faster because the processing workload is spread across the system. -Reduction or complete elimination of an expensive central processing site results in reduced hardware costs -Incremental growth and scalability of systems are possible -With processing and data storage distributed across the system, the failure of a single site is not as damaging because other computers in the network can accommodate the additional processing and data storage Disadvantages: -This is the most expensive option, as it involves higher maintenance costs -This option can be difficult to implement as it is the most complex of the three methods

Advantages and Disadvantages of Centralized Systems

Advantages: -It's easier to set up -There is better security of the central location as there is only one point of access to protect -Data is easy to access for authorized users -There is consistency in processing -Cost is lower, as there is only one central location to maintain Disadvantages: -The risk of business disruption is greater because any disruption impacts the entire system -A single system may experience transaction bottlenecks if processing traffic is high because only one system is performing all the processing -Users in other locations may experience lag time for data access because of network and remote complications

Advantages and Disadvantages of Decentralized Systems

Advantages: -With an increase in locations processing and storing their own transactional data, the processing power and data storage needed at the central site is reduced -There is higher responsiveness from the decentralized systems as remote locations, as each location has its own system to process and retrieve its data -Processing bottlenecks are reduced because employees aren't competing for processing power -If one system fails, the other systems can still process transactions Disadvantages: -Since each location has its own system, there is increase in security risk, as more systems must be protected and monitored -The cost of installing and maintaining multiple systems across different locations is higher

Benefits of an ERP System

An ERP system is a complex and expensive technology The integration of all systems into a unified ERP system has several goals: -Improved data transparency and quality -Future cost savings -Increased business efficiency -Quality improvement -Automation of routine business processes

Immediate Integration

As an alternative to lift and shift, a company can immediately integrate systems, often focusing on priority systems Integrating multiple systems requires converting existing data in the systems to be retired and migrating it into the new system and the original systems are then eliminated While it may seem like a simple copy-and-paste exercise, it's a complex problem, as data in the different systems will not likely be in the same format

Risks Related to In-House Developed Software

Budgeting: The company must employ the talent to write necessary code and maintain the system, which can be expensive Scheduling: Software may take longer to create than expected Technical Specifications: Software may not be properly developed External Market: By the time the software is developed and implemented, there might be industry and market changes that cause the software to require extensive updates Fraud: Software programmers cannot write the code and implement that code within the production environment. By doing so, they could program the software to circumvent fraud controls like allowing unauthorized access or granting unapproved permissions to users.

Systems Configurations

Businesses want these disparate information systems to "talk" to one another and provide users with easier access to data There are three systems configurations that consolidate and coordinate data across multiple locations Cloud computing makes it easier to incrementally grow or scale any of these systems.

Cloud Computing

Cloud computing provides access to shared resources over the internet, such as computer processing, software applications, data storage, and other services In the business context, cloud computing allows companies to minimize computer resources kept on hand, which can be expensive to both purchase and securely store The costs are absorbed by the cloud provider, which maintains the physical equipment at its facility and provides access to customers via the cloud network

Acquisition-Based Growth

Companies can grow in two ways: Organic growth occurs when a company uses its own resources and business processes to increase sales, customers, and market share Acquisition-based growth occurs as a company purchases and integrates other companies into its infrastructure -Companies often pursue acquisition-based growth because it allows them to increase their capabilities more quickly -Merger and acquisition

Risks Related to Purchasing Third-Party Software

Copyright Infringement: If the business isn't adhering to the software licensing policies of the software vendor, the business could face legal allegations and reputational loss. Data Breaches: Since the business isn't the one creating the code, the business is trusting that the third-party software vendor created the software properly. If the third-party software isn't properly secure, the company is vulnerable to hackers and malicious programs. Disruptions: If the third-party vendor closes, the business could be disrupted, as the vendor no longer supports the software. The business should ensure that the third-party vendor provides a source code escrow agreement, which would give the business access to the software's source code under certain circumstances, such as vendor closure. Updates: The vendor may require unnecessary updates, giving the vendor an excuse to bill additional hours to its customers that cannot be refused.

Modules and Features of ERP

Every function within an ERP system is called an ERP module. Within each ERP system module, various business processes may have their own ERP features, which are specific capabilities 6 common ERP modules: financial module, supply chain management module, production module, customer relationship management module, sales management module, human resources management module

Levels of Information Systems

Executive Support Systems (ESS): support strategic decision making and are a subset of decision support systems Decision Support Systems (DSS): assist in solving nonroutine problems and unstructured decision making Management Information Systems: assist in routine management activities Transaction Processing Systems (TPS): process day-to-day business activities, provide a foundation for other systems, and capture data that is fed through the hgiher-level systems

Implementing an ERP System

Implementing an ERP system is a complex process A business must select a vendor, assess expected costs—including the cost of the system itself and implementation-related expenses—and convert relevant existing systems to the new ERP system Successfully implementing an ERP system is an extensive process that can span many years, and failed ERP system implementations are common horror stories in the business world

Implementation Costs

Implementing an ERP system is a costly endeavor that includes multiple types of expenditures: Licensing fees, customization, hardware, consultants, training

Batch Processing

In batch processing, data is collected as it is generated and then is processed later, at a scheduled time. This is most suitable for transactions that are not time sensitive. 1. business events occur, and transactions are collected and organized into a batch 2. transaction ifle is created 3. transaction file is updated with additional batch transactions 4. transactions are processed at scheduled batch processing time 5. database is updated when batch is processed Batch processing creates and stores a file of transactions that is processed at a scheduled time. 3 benefits of batch processing: efficiency, simplicity, quality of data

Real Time Processing

In real-time processing, a transaction is processed as it occurs. This requires companies to have high processing capabilitiies readily available. 1. business events occue, and transactions are processed in real time 2. database is updated immediately real-time processing eliminates the batch steps and updates the databse at the time a transaction occurs

Online Analytical Processing (OLAP)

It processes reports and analytics by querying the database to answer questions in real time

Online Transaction Processing (OLTP)

It processes transactions by modifying the database & adding and changing transaction data in real time

Solution Types

Most vendors offer different types of solutions for companies to choose from when selecting an ERP system There are three common types: Out-of-the-box ERP system is preconfigured to work one way and will work that way immediately when implemented Configurable ERP system has some add-ins and features that can be customized for customers' needs Customizable ERP system's features are fully customized for an individual customer's needs

Lift and Shift, Then Integrate

One of the easiest and lowest-cost ways to integrate systems is a lift and shift In a lift and shift, the acquiring company moves the acquired systems, physically placing the systems' servers in the data center and maintaining the existing systems as they are and users have access to all the systems simultaneously

Vendor Selection

One of the largest decisions businesses make when implementing an ERP system is selecting which solution to adopt All ERP solutions include the option of a Financial module that businesses can use as their AIS

When information systems are fully online and performing real-time activities, they are considered one of two types of online processing systems: Online Transaction Processing (OLTP) Online Analytical Processing (OLAP) These two systems work together to capture and transform data into useful information

Online Transation Processing (OLTP): system supports core business functions by handling sales, accounting, purchasing, and more Online Analytical Processing (OLAP): systems focus on leveraging the data for information

Three Cloud Deployment Models

Private Cloud: Exclusive for one business and always maintained on a private network. Hardware and software are dedicated solely to that one business. Advantages: customizable and high security Public Cloud: Available to the public through a provider. If an organization uses a public cloud, it will still be secured; however, the user accesses these services through a web browser. Advantages: Readily available and lower costs Hybrid Cloud: Mixture between private and public cloud with a divider between the two. In this environment, the data and applications can move between the two environments. Advantages: increased flexibility, moderate costs, and moderate security

Platform as a Service (PaaS)

Provides customers a platform for software development that is delivered remotely. Developers have access to maintained operating systems, servers, storage, and networks and focus on design and building of application software. Examples: Google App Engine, OpenShift, Apache Stratos

Infrastructure as a Service (IaaS)

Provides customers with fully self-service computers, networking, storage, and operating systems through virtualized environments. Customers are responsible for managing all of their own operating systems, data, and applications. Examples: Amazon Web Services (AWS), Microsoft Azure,Rackspace

Risks of Using SaaS Cloud Providers

Reliability: If the customer loses internet connectivity, then it cannot use the system to access or maintain data because the system cannot be used offline. If the provider is unreliable in providing the software, monitoring and managing the software, and delivering a secure environment, then the system may fail. Privacy: If the provider does not take steps to make data privacy a priority and deliver a secure environment, then it puts the customer's business at risk of litigation and loss of reputation in the event of a breach of the data privacy requirements of state and federal law. Security: If the provider does not take steps to make data security a priority, then the customer's system and data may be accessed and used maliciously, resulting in the potential for significant financial loss.

Control Activity Considerations for Small Businesses

Segregations of Duties: It can be expensive for small businesses with few employees to enforce proper segregation of duties, and incompatible functions are often combined. A small business should focus on segregating duties where it makes financial sense and implementing compensating controls such as manager supervision. Physical Access: Physical access controls prevent unauthorized individuals from accessing physical resources like buildings, computers, hard drives, inventory, and more. Because many employees in small businesses use personal devices for work, enforcing controls can be difficult. Companies should focus on bring your-own-device policies and procedures that are both flexible for the work environment and address these unique risks. Any company data should be saved on the company's secure network and not on personal device hard drives. Logical Access: Logical access controls prevent unauthorized users from accessing systems on a network, workstation, database, or application. These controls can also assign different access privileges to different persons, depending on their roles, and authenticate users' identities. Because small companies often cannot afford to implement complex, sophisticated security measures, small businesses can practice safety by requiring employees to use strong usernames and passwords that are tied to the functions they are allowed to access.

Cloud Computing Service Models

Software as a Service (SaaS) Platform as a Service (PaaS) Infrastructure as a Service (IaaS)

Utility Programs

Software used for analyzing, configuring, optimizing, and maintaining a computer examples: network manager, antivirus software, backup software

Data Communication Software

Software used to provide remote access to exchange data between computers and users examples: messaging and email software, file transfer protocol

Systems Integration

Systems integration is the process of joining different systems or subsystems into one larger system and ensuring that they function as one system Companies may have hundreds of applications and databases that must be integrated and must decide if they will integrate these systems gradually or immediately

Different Levels of Information Systems

There are different levels of information systems, each providing information for users at different levels of the company

A Solution for Systems Integration

To address the issue of disparate systems that cannot easily communicate with one another, businesses turn to a solution that offers a single system with aggregated parts that meet the needs of each business function. An enterprise resource planning (ERP) system is a solution that integrates multiple systems into a single, cohesive communication system. ERP systems are often described as the "ideal state" of a system

Software as a Service (SaaS)

Utilizes the internet to provide customers with applications that are managed by the third-party provider. The software leverages the provider's data storage and IT infrastructure. Examples: Google Drive, Salesforce, Slack, Microsoft Office 365, Tableau Server

Software Sourcing

Whether they need systems software or application software, companies must decide where to acquire it -Software can be purchased from a third-party vendor, as when a company buys a license to use Microsoft Office application software -Alternatively, companies can develop software from scratch, called in-house development

Application Software

also known as app, is an end-user program that provies specific functions

Popular Software Programming Languages

java, html, python, C#, C++

Database Management System (DBMS)

software used to define, manipulate, retrieve, and manage data in a database examples: MySQL, SQL Server, Oracle, Microsoft Access

Software

the interface between the components and the users -it governs how the other components work with one another and provides users with the means of interacting with the system -it is created using programming languages, which are written sets of coded instructions that the system understands

Executive Support Systems

used by executive leadership for strategic decisions; these systems provide customized information and have the smallest group of users- executives

Management Information Systems

used by middle management for routine decisions; these systems use data from transaction processing systems to support structured tactical and operational decision making by providing pre-specified historical reports from TPS, such as routine summary reports and exception reports. Financial statements are summary reports

Decision Support Systems

used by upper-level management for nonroutine decisions; these systems use both internal data and external data- for example, stock market data. They can model data, do siumulations, and perform "what if" analyses. They can also use artificial intelligence to perform tasks normally requiring human intelligence. The reporting format will be suitable for making a specific decision at a specific point in time.

Transaction Processing Systems

used by workers to capture data; workers like cashiers use TPS for basic business operations. Many of these basic business activities result in accounting transactions

Managing Risks

• All companies face risks - for startups and small businesses, some of these risks are different from those faced by their large, corporate counterparts • Startup has fewer resources to mitigate its risks than a large corporation • Compensating controls can also be used to reduce the risk when more expensive or more complex controls are missing

Technology for Startups

• The lack of capital and the business need to purchase more complex systems make startups the perfect candidates for purchasing third-party vendor software or for using SaaS • Software used by small businesses include Square - for payment processing Excel - for data processing Access - for data storage Internet of Things (IoT) QuickBooks - for accounting