K201 Lecture Exam 2

Organizations can improve process quality in 3 ways:

1. Change the process structure. 2. Change the process resources. 3. Change both process structure and resources.

Expense and risks arise from five primary factors:

1. Collaborative Management 2. Requirement Gaps 3. Transition Problems 4. Employee Resistance 5. New Technology

Hybrid Model

-ERP customers will store most of their data on cloud servers managed by cloud vendors and store sensitive data on servers that they manage themselves. Governmental agencies, financial analysts, and accountants will have defined standards against which organizations can be monitored for appropriate compliance. Consider also the effect of the Internet of Things. Future users of ERP systems will be not just people but also devices and machines. ERP vendors are adapting their software to the particular requirements of 3D printing. printing. In the future, when a salesperson enters an order, he or she may be starting a machine to make that part on demand. In addition, factory automation will also add to process quality improvements.

Requirement Gaps

-Few organizations today create their own enterprise systems from scratch. Instead, they license an enterprise product that provides specific functions and features and that includes inherent procedures. But such licensed products are never a perfect fit. Almost always there are gaps between the organization's requirements and the application's capabilities. -The first challenge is identifying the gaps. To specify a gap, an organization must know both what it needs and what the new product does. However, it can be very difficult for an organization to determine what it needs; that difficulty is one reason organizations choose to license rather than to build. Further, the features and functions of complex products like CRM or ERP are not easy to identify. Thus, gap identification is a major task when implementing enterprise systems. -The second challenge is deciding what to do with gaps, once they are identified. Either the or- ganization needs to change the way it does things to adapt to the new application, or the applica- tion must be altered to match what the organization does. Either choice is problematic. Employees will resist change, but paying for alterations is expensive. The organization is committing to maintaining those alterations as the application is changed over time. Here, organizations fill gaps by choosing their lesser regret.

Which Companies Are the Major ERP Vendors?

-SAP -Oracle -Infor ERP -Microsoft Dynamics -Sage

(Hardware) ERP Application Cloud-based hosting

-Traditionally, organizations hosted ERP solutions on their own in-house, networked server com- puters. Such hosting is still the case for many large ERP applications, as well as for those ERP applications that were installed years ago and for which the hardware infrastructure is stable and well managed. However, some organizations are switching over. 1. PaaS: Replace an organization's existing hardware infrastructure with hardware in the cloud. Install ERP software and databases on that cloud hardware. The using organization then manages the ERP software on the cloud hardware. 2.SaaS: Acquire a cloud-based ERP solution. SAP, Oracle, Microsoft, and the other major ERP vendors offer their ERP software as a service. The vendor manages the ERP software and offers it to customers as a service. -Existing in-house ERP solutions are likely to migrate to one of these two modes. Larger installations will likely move to PaaS; smaller and new ERP systems are likely to use SaaS.

Transition Problems

-Transitioning to a new enterprise system is also difficult. The organization must somehow change from using isolated departmental systems to using the new enterprise system, while continuing to run the business. -Such transitions require careful planning and substantial training. Inevitably, problems will develop. Knowing this will occur, senior management needs to communicate the need for the change to the employees and then stand behind the new system as the kinks are worked out.

Over time, three categories of enterprise applications emerged:

1. Customer relationship management 2. Enterprise resource planning 3. Enterprise application integration

What Are the Problems of Information Silos?

1. Data duplication, data inconsistency. 2. Additionally, when applications are isolated, business processes are disjointed. 3. A consequence of such disjointed activities is the lack of integrated enterprise information. 4. Isolated decisions lead to organizational inefficiencies. 5. Increased cost for the organization. Duplicated data, disjointed systems, limited information, and inefficiencies all mean higher costs.

2 ERP Training Categories

1. How to implement the ERP solution. -This training includes topics such as obtaining top-level management support, preparing the organization for change, and dealing with the inevitable resistance that develops when people are asked to perform work in new ways. 2. How to use the ERP application software. -This training includes specific steps for using the ERP applications to accomplish the activities in processes.

Information systems can be used to improve process quality by:

1. Performing an activity. 2. Augmenting a human who is performing an activity. 3. Controlling data quality and process flow.

customer life cycle:

1. marketing, 2. customer acquisition, 3.relationship management, and 4. loss/churn. Marketing sends messages to the target market to attract customer prospects. When prospects order, they become customers who need to be supported. Additionally, relationship management processes increase the value of existing customers by selling them more product. Inevitably, over time the organization loses customers. When this occurs, win-back processes categorize customers according to value and attempt to win back high-value customers.

ERP Databases

An ERP solution includes a database design as well as initial configuration data. It does not, of course, contain the company's operational data. During development, the team must enter the initial values for that data as part of the development effort. -Large organizational databases contain two types of program code: 1. A trigger 2. A stored procedure -Triggers and stored procedures are also part of the ERP solution. Developers and business users need to configure the operation of such code during the ERP implementation as well.

Business Process Procedures

Another component of an ERP solution is a set of inherent procedures that implement standard business processes. Every function consists of a set of procedures for accomplishing that function. Typically, these procedures require an ERP user to use application menus, screens, and reports to accomplish the activity. As with application programs, ERP users must either adapt to the predefined, inherent processes and procedures or design new ones. In the latter case, the design of new procedures may necessitate changes to application programs and to database structures as well.

Industry-Specific Solutions

As you can tell, considerable work needs to be done to customize an ERP application to a particular customer. :starter kits for specific industries provided by ERP vendors to reduce that work. They contain program and database configuration files as well as process blueprints that apply to ERP implementations in specific industries. -SAP was first with the kits

What Are the Elements of an ERP System?

Because of its importance to organizations today, we will consider ERP in more depth than CRM or EAI. To begin, the term ERP has been applied to a wide array of application solutions, in some cases erroneously. Some vendors attempted to catch the buzz for ERP by misapplying the term to applications that provided only one or two integrated functional applications. For a product to be considered a true ERP product, it must include applications that integrate: -Supply chain (procurement, sales order processing, inventory management, supplier management, and related activities) -Manufacturing (scheduling, capacity planning, quality control, bill of materials, and related activities) -CRM (sales prospecting, customer management, marketing, customer support, call center support) -Human resources (payroll, time and attendance, HR management, commission calculations, benefits administration, and related activities) -Accounting (general ledger, accounts receivable, accounts payable, cash management, fixed asset accounting) An ERP solution is an information system and, as such, has all five components.

Training and Consulting

Because of the complexity and difficulty of implementing and using ERP solutions, ERP vendors have developed training curricula and numerous classes. SAP operates universities, in which customers and potential customers receive training both before and after the ERP implementation. In addition, ERP vendors typically conduct classes on site. To reduce expenses, the vendors sometimes train the organization's employees, called Super Users, to become in-house trainers in training sessions called train the trainer.

2. Change Process Resources

Business process activities are accomplished by humans and information systems. One way to im- prove process quality is to change the allocation of those resources.

2. Augmenting a human who is performing an activity

Consider the process of managing patient appoint- ments. To schedule an appointment, patients call the doctor's office and talk with a receptionist who uses an appointment information system. That information system augments the appoint- ment creation activity.

Enterprise Application Integration (EAI)

ERP systems are not for every organization. For example, some nonmanufacturing companies find the manufacturing orientation of ERP inappropriate. Even for manufacturing companies, some find the process of converting from their current system to an ERP system too daunting. Others are quite satisfied with their manufacturing application systems and do not wish to change them. Companies for which ERP is inappropriate still have the problems associated with information silos, however, and some choose to use enterprise application integration (EAI) to solve those problems. EAI is a suite of software applications that integrates existing systems by providing layers of software that connect applications together.

ERP Application Programs

ERP vendors design application programs to be configurable so that development teams can al- ter them to meet an organization's requirements without changing program code. Accordingly, during the ERP development process, the development team sets configuration parameters that specify how ERP application programs will operate. For example, an hourly payroll application is configured to specify the number of hours in the standard workweek, hourly wages for different job categories, wage adjustments for overtime and holiday work, and so forth. Deciding on the initial configuration values and adapting them to new requirements is a challenging collaboration activity. Of course, there are limits to how much configuration can be done. If a new ERP customer has requirements that cannot be met via program configuration, then it needs to either adapt its busi- ness to what the software can do or write (or pay another vendor to write) application code to meet its requirements. Thus, choosing an ERP solution with applications that function close to the organization's requirements is critical to its successful implementation.

New Technology

Emerging, new technology affects all information systems, but it affects enterprise systems particularly because of their importance and their value. Consider, for example, the cloud. Because of the cost savings of cloud-based computing, organizations would like to move their enterprise systems to the cloud. But legal, risk, and business policy factors may make such a move infeasible. The organi- zation may be required to keep physical control over its data. When moving it to the cloud, the cloud vendor controls the physical location of the data, and that location might not even be in the same country as the organization.

Employee Resistance

First, senior-level management needs to communicate the need for the change to the organization and reiterate this, as necessary, throughout the transition process. Second, employees fear change because it threatens self-efficacy, which is a person's belief that he or she can be successful at his or her job. To enhance confidence, employees need to be trained and coached on the successful use of the new system. Third, in many ways, the primary benefits of a new ERP system are felt by the accounting and finance departments and the senior management. Many of the employees who are asked to change their activities to implement ERP will not receive any direct benefit from it. Therefore, employees may need to be given extra inducement to change to the new system. Straight-out pay for change is bribery, but contests with cash prizes among employees or groups can be very effective at inducing change.

1. Change the Process Quality

In some cases, process quality can be changed just by reorganizing the process. Changing process structure can also increase process effectiveness. If an organization chooses a cost-leader strategy, then that strategy might mean that no special terms should ever be ap- proved.

1. Performing an Activity

Information systems can perform the entirety of a process activity. Ex: When you purchase from Amazon or another major online retailer, information systems check your credit while your transaction is being processed. Reserving a seat on an airline is done automatically; all of the reservation activity is done by an information system.

Distributed Systems

Integrated data processed by a reporting application to be created and distributed.

EAI does this:

It connects system "islands" via a new layer of software/system. It enables existing applications to communicate and share data. It provides integrated information. It leverages existing systems—leaving functional applications as is but providing an integration layer over the top. It enables a gradual move to ERP. The layers of EAI software enable existing applications to communicate with each other and to share data. For example, EAI software can be configured to automatically carry out the data conversion required to make data compatible among different systems. When the CRM applications send data to the manufacturing application system, for example, the CRM system sends its data to an EAI software program. That EAI program makes the conversion and then sends the converted data to the ERP system. The reverse action is taken to send data back from the ERP to the CRM. Although there is no centralized EAI database, the EAI software keeps files of metadata that describe data formats and locations. Users can access the EAI system to find the data they need. In some cases, the EAI system provides services that provide a "virtual integrated database" for the user to process. The major benefit of EAI is that it enables organizations to use existing applications while eliminating many of the serious problems of isolated systems. Converting to an EAI system is not nearly as disruptive as converting to an ERP system, and it provides many of the benefits of ERP. Some organizations develop EAI applications as a stepping stone to complete ERP systems. Today, many EAI systems use Web services standards to define the interactions among EAI components. Some or all of the processing for those components can be moved to the cloud as well.

3. Change Both Process Structure and Resources

Of course, it is possible to improve process quality by changing both the process's structure and resources. In fact, unless a structure change is only a simple reordering of tasks, changing the structure of a process almost always involves a change in resources as well.

3. Controlling data quality and process flow

One of the major benefits of information systems is to control data quality. The IS can not only ensure that correct data values are being input, it can also ensure that data are complete before continuing process activities. The cheapest way to correct for data errors is at the source, and it avoids the problems that develop when process activities are begun with incomplete data. Information systems also have a role in controlling process flow. If, however, an information system is controlling the order approval process, then it can ensure that steps are performed in accordance with an established schedule. The information system can also be relied upon to make correct process-routing decisions for processes

Process Quality

Processes are the fabric of organizations; they are the means by which people organize their activities to achieve the organization's goals. As such, process quality is an important, possibly the most important, determinant of organizational success. The two dimensions of process quality are efficiency and effectiveness.

Functional Information Systems

Sometimes, workgroup information systems are called this. systems. Thus, an operations management system is a functional information system, as are a general ledger system and a cost accounting system.

Enterprise Information Systems

Support one or more enterprise processes. they typically have hundreds to thousands of users. Procedures are formalized and extensively documented; users always undergo formal procedure training. Sometimes enterprise systems include categories of procedures, and users are defined according to levels of expertise with the system as well as by level of authority.

How Do Organizations Solve the Problems of Information Silos?

The obvious way to fix such a silo is to integrate the data into a single database and revise applications (and business processes) to use that database. If that is not possible or practical, another remedy is to allow the isolation, but to manage it to avoid problems. First, isolated data created by workgroup information systems are integrated using enterprise-wide applications. Second, today, isolated data created by information systems at the enterprise level are being integrated into inter-enterprise systems using distributed applications (such as ARES). These applications process data in a single cloud database or connect disparate, independent databases so that those databases appear to be one database.

Functional Application

The program component of a functional information system.

Data Integrity Problem

When an organization has inconsistent duplicated data.

What Are the Challenges of Implementing and Upgrading Enterprise Information Systems?

Whether CRM, ERP, or EAI, it's challenging, difficult, expensive, and risky. It is not unusual for enterprise system projects to be well over budget and a year or more late. In addition to new ERP implementations, numerous organizations implemented ERP 15 or 20 years ago and now need to upgrade their ERP installation to meet new requirements.

Collaborative Management

With no single manager, who resolves the disputes that inevitably arise? All of these depart- ments ultimately report to the CEO, so there is a single boss over all of them, but employees can't go to the CEO with a problem about, say, coordinating discharge activities between nursing and housekeeping. The CEO would throw them out of his or her office. Instead, the organization needs to develop some sort of collaborative management for resolving process issues. Usually this means that the enterprise develops committees and steering groups for providing enterprise process management. Although this can be an effective solution, and in fact may be the only solution, the work of such groups is both slow and expensive.

The future

Within the next 10 years, ERP vendors and customers will have sorted out the problems of cloud-based ERP. Will be known as the hybrid model.

Processes are used at three levels of organizational scope:

Workgroup, enterprise, and interenterprise. In general, the wider the scope of the process, the more challenging the process is to manage.

Process Effectiveness

a measure of how well a process achieves organizational strategy. If an organization differentiates itself on quality customer service and if the process requires 5 days to respond to an order request, then that process is ineffective.

Process Efficiency

a measure of the ratio of process outputs to inputs. If an alternative to the process can produce the same order approvals/rejections (output) for less cost or produce more approvals/ rejections for the same cost, it is more efficient.

Business Process

a network of activities that generate value by transforming inputs into outputs.

Enterprise resource planning (ERP)

a suite of applications called modules, a database, and a set of inherent processes for consolidating business operations into a single, consistent, computing platform.

customer relationship management (CRM) system

a suite of applications, a database, and a set of inherent processes for managing all the interactions with the customer, from lead generation to customer service. Every contact and transaction with the customer is recorded in the CRM database. Vendors of CRM systems claim that using their products makes the organization customer-centric. Though that term reeks of sales hyperbole, it does indicate the nature and intent of CRM packages. CRM systems vary in the degree of functionality they provide. One of the primary tasks when selecting a CRM package is to determine the features you need and to find a package that meets that set of needs.

ERP system

an information system based on ERP technology. ERP systems include the functions of CRM systems but also incorporate accounting, manufacturing, inventory, and human resources applications. The primary purpose of an ERP system is integration; an ERP system allows the left hand of the organization to know what the right hand is doing. This integration allows real-time updates globally, whenever and wherever a transaction takes place. Critical business decisions can then be made on a timely basis using the latest data.

Structured Processes

are formally defined, standardized processes that involve day-to-day operations: accepting a return, placing an order, purchasing raw materials, and so forth.

Workgroup Process

exists to enable workgroups to fulfill the charter, purpose, and goals of a particular group or department. A physicians' partnership is a workgroup that follows processes to manage patient records, issue and update prescriptions, provide standardized postsurgery care, and so forth.

Workgroup Information System

exists to support one or more processes within the workgroup. Typical workgroup information systems support 10 to 100 users. Because the procedures for using them must be understood by all members of the group, those procedures are often formalized in documentation. Users generally receive formal training in the use of those procedures as well. Because workgroup information systems involve multiple users, changing them can be problematic. But when problems occur, they almost always can be solved within the group.

Dynamic Processes

flexible, informal, and adaptive processes that normally involve strategic and less structured managerial decisions and activities. Deciding whether to open a new store location and how best to solve the problem of excessive product returns are examples, as is using Twitter to generate buzz about next season's product line. Dynamic processes usually require human judgment. Another ex: Collaboration

A Stored Procedure

is a computer program stored in the database that is used to enforce business rules. An example of such a rule would be never to sell certain items at a discount.

A Trigger

is a computer program stored within the database that runs to keep the database consistent when certain conditions arise.

Enterprise Processes

span an organization and support activities in multiple departments. At a hospital, the process for discharging a patient supports activities in housekeeping, the pharmacy, the kitchen, nurses' stations, and other hospital departments.

Inter-Enterprise Processes

span two or more independent organizations. For example, the process of buying a healthcare insurance policy via a healthcare exchange involves many insurance companies and governmental agencies.

Activities

subparts of processes that receive inputs and pro- duce outputs. Activities can be performed by humans only, by humans augmented by computer systems, and by computer systems only.

Inter-Enterprise Information Systems

support one or more inter-enterprise processes. Such systems typically involve thousands of users, and solutions to problems require cooperation among different, usually independently owned, organizations. Problems are resolved by meeting, by contract, and sometimes by litigation. Data are often duplicated among organizations; such duplication is either eliminated or carefully managed. Because of their wide span, complexity, and use by multiple companies, such systems can be exceedingly difficult to change. Supply chain management is the classic example of an inter-enterprise information system.

Business process reengineering

the activity of altering existing and designing new business processes to take advantage of new information systems. However, it's difficult, slow, and exceedingly expensive. Business analysts need to interview key personnel throughout the organization to determine how best to use the new technology. Because of the complexity involved, such projects require high- level, expensive skills and considerable time. Many early projects stalled when the enormity of the project became apparent. This left some organizations with partially implemented systems, which had disastrous consequences. Personnel didn't know if they were using the new system, the old system, or some hacked-up version of both.

Information Silo

the condition that exists when data are isolated in separated information systems. It's completely natural for workgroups to develop information systems solely for their own needs, but, over time, the existence of these separate systems will result in information silos that cause numerous problems.

Process Blueprints

what some ERP vendors call the inherent processes that are defined in the ERP solution

Inherent processes

which are predesigned procedures for using the software products, saved organizations from the expense, delays, and risks of business process reengineering. Instead, organizations could license the software and obtain, as part of the deal, prebuilt processes that the vendors assured them were based on "industry best practices." Some parts of that deal were too good to be true because inherent processes are almost never a perfect fit. But the offer was too much for many organizations to resist.