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Electronic Business Systems

I. CHAPTER OVERVIEW

This chapter describes how information systems integrate and support enterprise-wide business processes, especially customer relationship management, enterprise resource planning, and supply chain management, as well as the business functions of marketing, manufacturing, human resource management, accounting, and finance. Section I: Section II: Enterprise Business Systems Functional Business Systems

II. LEARNING OBJECTIVES

Learning Objectives 1. Identify the following cross-functional enterprise systems, and give examples of how they can provide significant business value to a company: a. Enterprise application integration b. Transaction processing systems c. Enterprise collaboration systems 2. Give examples of how Internet and other information technologies support business processes within the business functions of accounting, finance, human resource management, marketing, and production and operations management.

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III. TEACHING SUGGESTIONS

The purpose of this chapter is to give students an understanding of the use of information systems to support the major functional areas in business. Figure 7.3 can be used to discuss with students how organizations are using e-business systems to build interrelationships to each other and to customers, employees, and business partners of an internetworked e-business enterprise. Figure 7.7 illustrates the transaction processing cycle. Stress to students that transaction-processing systems use a five-stage cycle of data entry, transaction processing, database maintenance, document and report generation, and inquiry processing activities. Figure 7.8 shows groupware tools for electronic communications, conferencing, and collaborative work supporting enterprise collaboration. Figure 7.11 can be used to discuss with the students several examples of functional business information systems. It should be emphasized that these systems supports the major functional areas of business, and that in reality these systems may overlap each other. Figure 7.12 depicts the marketing function, and is useful to use when discussing the role of information systems as they relate to marketing. PowerPoint slides have been included to discuss manufacturing, human resource management, accounting, and financial information systems. Figure 7.13 outlines the five major components of targeted marketing for electronic commerce on the World Wide Web. Figure 7.15 illustrates how a manufacturing information system supports computer-integrated manufacturing. Figure 7.16 outlines how human resource information systems support the strategic, tactical, and operational use of the human resources of an organization. Figure 7.18 outlines several important accounting information systems for transaction processing and financial reporting. Figure 7.21 gives a number of examples of important financial management systems.

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IV: LECTURE NOTES Section I: Enterprise Business Systems

Introduction
This chapter introduces the fast-changing world of business applications of information technology, which increasingly consists of what is popularly called e-business applications. e-Business is the use of the Internet and other networks and information technologies to support electronic commerce, enterprise communications and collaboration, and Web-enabled business processes, both within a networked enterprise, and with its customers and business partners. Distinction between e-commerce and e-business: e-Commerce is defined as buying and selling over digital media. e-Business encompasses e-commerce, but also includes both front- and back-office applications that form the engine for modern business. e-Business redefines old business models, with the aid of technology, to maximize customer value.

Analyzing Hilton Hotels We can learn a lot about the challenges and benefits of customer relationship management systems from this case. Take a few minutes to read it, and we will discuss it (See Hilton Hotels Corporation: Data-Driven Hospitality in Section IX).

Cross-Functional Enterprise Systems:

Many companies today are using information technology to develop integrated cross-functional enterprise systems that cross the boundaries of traditional business functions in order to reengineer and improve vital business processes all across the enterprise. These organizations view cross-functional enterprise systems as a strategic way to use IT to share information resources and improve the efficiency and effectiveness of business processes, and develop strategic relationships with customers, suppliers, and business partners. Enterprise Application Architecture: [Figure 7.3] Figure 7.3 is an excellent illustration of the concept of enterprise application architecture. It illustrates the interrelationships of the major cross-functional enterprise applications that many companies have or are installing today. This architecture spotlights the roles these business systems play in supporting the customers, suppliers, partners, and employees of a business.

Enterprise Application Integration: [Figure 7.4]

How does a business interconnect some of the cross-functional enterprise systems? Enterprise application integration (EAI) software is being used by many companies to connect major e-business applications. EAI software: Enables users to model the business processes involved in the interactions that should occur between business applications. Provides middleware that performs data conversion and coordination, application communication and messaging services, and access to the application interfaces involved. Integrate a variety of enterprise application clusters by letting them exchange data according to rules derived from the business process models developed by users. Integrate the front-office and back-office applications of an e-business, so they work together in a seamless,
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integrated way. This is a vital capability that provides real business value to an e-business enterprise that must respond quickly and effectively to business events and customer demands.

Transaction Processing Systems

Transaction processing systems (TPS) are cross-functional information systems that process data resulting from the occurrence of business transactions. Transactions are events that occur as part of doing business, such as sales, purchases, deposits, withdrawals, refunds, and payments. Transaction processing activities are needed to capture and process data. Therefore TPS play a vital role in supporting the operations of an e-business enterprise. Online transaction processing systems play a strategic role in electronic commerce. Many firms are using the Internet, extranets, and other networks that tie them electronically to their customers or suppliers for online transaction processing (OLTP). These real-time systems, which capture and process transactions immediately, can help them provide superior service to customers and other trading partners. OLTP systems add value to a companys products and services, and thus give them an important way to differentiate themselves from their competitors. The Transaction Processing Cycle: [Figure 7.6] Transaction processing systems capture and process data describing business transactions. Then they update organizational files and databases, and produce a variety of information products for internal and external use. A transaction processing cycle consists of several basic activities, which involve: Data entry activities Transaction processing activities Database maintenance activities Document and report generation Inquiry processing activities.

Data Entry The input activity in TPS involves a data entry process. In this process, data is captured or collected by recording, coding, and editing activities. Trend: Move from traditional (manual) data entry systems toward source data automation (automated systems). The reason for this trend is that direct methods are more efficient and reliable than manual systems. Examples of devices used in data automation include: Point-of-sale (POS) transaction terminals ATM (Automated Teller Machine) terminals Optical character recognition (OCR) scanners and wands PCs and network computers with cash drawers as intelligent POS terminals Portable digital radio terminals and pen-based tablet PCs for remote date entry PCs equipped with touch screens and voice recognition systems for data entry Bar coded tags Magnetic stripe cards Electronic website on the Internet.

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Transaction Processing Transaction processing systems process data in two basic ways: Batch Processing - transaction data are accumulated over a period of time and processed periodically. Real-time Processing - (also called online processing), where data are processed immediately after a transaction occurs. All online transaction processing systems incorporate real-time processing capabilities. Many online systems also depend on the capabilities of fault tolerant systems that can continue to operate even if parts of the system fail.

Database Maintenance: An organizations data must be maintained by its transaction processing systems so that they are always correct and up-to-date. Therefore, transaction processing systems update the corporate database of any organization to reflect changes resulting from day-to-day business transactions.

Document and Report Generation: Transaction processing systems produce a variety of documents and reports. Examples of transaction documents include: Purchase orders Paychecks Sales receipts Invoices Customer statements. Transaction reports might take the form of a transaction listing such as a payroll register, or edit reports that describe errors detected during processing.

Inquiry Processing: Many transaction processing systems allow you to use the Internet, intranets, extranets, and Web browsers or database management query languages to make inquiries and receive responses concerning the results of transaction processing activity. Typically, responses are displayed in a variety of prespecified formats or screens. Examples of queries include: Checking on the status of a sales order Checking on the balance in an account Checking on the amount of stock in inventory

Enterprise Collaboration Systems

Enterprise collaboration systems provide tools to help us collaborate - to communicate ideas, share resources, and coordinate our cooperative work efforts as members of the many formal and informal process and project teams and workgroups that make up many of todays organisations. The goal of enterprise collaboration systems is to enable us to work together more easily and effectively by helping us to: Communicate - sharing information with each other Coordinate - coordinating our individual work efforts and use of resources with each other Collaborate - working together cooperatively on joint projects and assignments

Enterprise collaboration systems (ECS) are cross-functional e-business systems that enhance communication,
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coordination, and collaboration among the members of business teams and workgroups.

Tools for Enterprise Collaboration: [Figure 7.8] Many industry analysts believe that the capabilities and potential of the Internet, as well as intranets and extranets, are driving the demand for enterprise collaboration tools in business. On the other hand, it is Internet technologies like Web browsers and servers, hypermedia documents and databases, and intranets and extranets, that are providing the hardware, software, data, and network platform for many of the groupware tools for enterprise collaboration that business users want.

Software tools that enhance enterprise collaboration: Electronic communication Electronic conferencing Collaborative work management Electronic communication tools include electronic mail, voice mail, faxing, Web publishing, bulletin board systems, paging, and Internet phone systems. These tools enable you to electronically send messages, documents, and files in data, text, voice, or multimedia form over computer networks. This helps you share everything from voice and text messages to copies of project documents and data files with your team members, wherever they may be. Electronic conferencing tools helps people communicate and collaborate while working together. A variety of conferencing methods enable the members of teams and workgroups at different locations to exchange ideas interactively at the same time, or at different times at their convenience. Electronic conferencing options also include electronic meeting systems, where team members can meet at the same time and place in a decision room setting. Electronic conferencing tools include: Data and voice conferencing Videoconferencing Chat systems Discussion forums Electronic meeting systems Collaborative work management tools help people accomplish or manage group work activities. This category of groupware includes: Calendaring and scheduling tools Task and project management Workflow systems Knowledge management tools.

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IV: LECTURE NOTES (cont) Section II: Functional Business Systems

Introduction
There are many ways to use information technology in business as there are business activities to be performed, business problems to be solved, and business opportunities to be pursued. As a business professional, you should have a basic understanding and appreciation of the major ways information systems are used to support each of the functions of business that must be accomplished in any company that wants to succeed. Functional business systems are composed of a variety of types of information systems (transaction processing, management information, decision support, etc.) that support the business functions of: Accounting Finance Marketing Productions/operations management Human resource management There is a strong emphasis in many organizations to develop such composite or cross-functional information systems that cross the boundaries of traditional business functions in order to reengineer and improve vital business processes. These organizations view cross-functional information systems as a strategic way to share information resources and improve the efficiency and effectiveness of a business, thus helping it attain its strategic objectives. Business firms are turning to Internet technologies to integrate the flow of information among their internal business functions and their customers and suppliers. Companies are using the World Wide Web and their intranets and extranets as the technology platform for their cross-functional and interorganizational information systems.

Analyzing GE Power and Corporate Express We can learn a lot from this case about the business value and challenges of implementing e-business systems from this case. Take a few minutes to read it, and we will discuss it (See GE Power Systems and Corporate Express: The Business Case for Enterprise Application Integration in Section IX). IT in Business [Figure 7.11] As a business professional, it is important that you have a specific understanding of how information systems affect a particular business function that is directly related to your career objectives. The information systems discussed in this section are analysed according to the business function they support to give you an appreciation of the variety of functional business systems that both small and large business firms may use.

Marketing Systems: [Figure 7.12]

The business function of marketing is concerned with the planning, promotion, and sale of existing products in existing markets, and the development of new products and new markets to better serve present and potential customers. Marketing information systems integrate the information flow required by many marketing activities. Marketing information systems provide information for: Internet/intranet websites and services make an interactive marketing process possible where customers can become partners in creating, marketing, purchasing, and improving products and services.

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Sales force automation systems use mobile computing and Internet technologies to automate many information processing activities for sales support and management. Other marketing systems assist marketing managers in product planning, pricing, and other product management decisions, advertising and sales promotion strategies, and market research and forecasting.

Interactive Marketing The explosive growth of Internet technologies has had a major impact on the marketing function. The term interactive marketing has been coined to describe a type of marketing that is based on using the Internet, intranets, and extranets to establish two-way interaction between a business and its customers or potential customers. The goal of interactive marketing is to enable a company to profitably use those networks to attract and keep customers who will become partners with the business in creating, purchasing, and improving products and services. Interactive marketing: Customers are not passive participants, but are actively engaged in a network-enabled proactive and interactive process. Encourages customers to become involved in product development, delivery, and service issues. Enabled by various Internet technologies, including chat and discussion groups, Web forms and questionnaires, and e-mail correspondence. Expected outcomes are a rich mixture of vital marketing data, new product ideas, volume sales and strong customer relationships. Targeted Marketing: [Figure 7.13] Targeted marketing has become an important tool in developing advertising and promotion strategies for a companys electronic commerce websites. Target marketing is an advertising and promotion management concept that includes five targeting components: Community companies can customize their web advertising messages and promotion methods to appeal to people in specific communities. These can be communities of interest, such as virtual communities of online sporting enthusiasts or arts and crafts hobbyists, or geographic communities formed by the websites of a city or other local organizations. Content advertising such as electronic billboards or banners can be placed on various website pages, in addition to a companys home page. These messages reach the targeted audience. Context advertising appears only in Web pages that are relevant to the content of a product or service. So advertising is targeted only at people who are already looking for information about a subject matter that is related to a companys products. Demographic/Psychographic marketing efforts can be aimed only at specific types or classes of people: unmarried, twenty-something, middle income, male college graduates. Online Behavior advertising and promotion efforts can be tailored to each visit to a site by an individual. This strategy is based on web cookie files recorded on the visitors disk drive from previous visits. Cookie files enable a company to track a persons online behavior at a website so marketing efforts can be instantly developed and targeted to that individual at each visit to their website.

Sales Force Automation Increasingly, computers and networks are providing the basis for sales force automation. In many companies, the sales force is being outfitted with notebook computers that connect them to Web browsers, and sales contact management software that connect them to marketing websites on the Internet, extranets, and their company intranets. Characteristics of sales force automation include:
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Increases the personal productivity of salespeople. Dramatically speeds up the capture and analysis of sales data from the field to marketing managers at company headquarters. Allows marketing and sales management to improve the delivery of information and the support they provide to their salespeople. Many companies view sales force automation as a way to gain a strategic advantage in sales productivity and marketing responsiveness.

Manufacturing Systems: [Figure 7.15]

Manufacturing information systems support the production/operations function, which includes all activities concerned with the planning and control of the processes that produce goods or services. The production/operations function is concerned with the management of the operational systems of all business firms. Information systems used for operations management and transaction processing support all firms that must plan, monitor, and control inventories, purchases, and the flow of goods and services.

Computer-Integrated Manufacturing (CIM): Computer-based manufacturing information systems use several major techniques to support computer-integrated manufacturing (CIM). CIM is an overall concept that stresses that the goals of computer use in factory automation must be to: Simplify - (reengineer) production processes, product designs, and factory organization as a vital foundation to automation and integration. Automate - Production processes and the business functions that support them with computers, machines, and robots. Integrate - All production and support processes using computers, telecommunications networks, and other information technologies. Overall goal of CIM: - Is to create flexible, agile, manufacturing processes that efficiently produce products of the highest quality. Thus, CIM supports the concepts of: Flexible manufacturing systems Agile manufacturing Total quality management Results of CIM: - Implementing such manufacturing concepts enables a company to quickly respond to and fulfil customer requirements with high-quality products and services. Uses of computers in manufacturing include Computer-aided engineering (CAE) Computer-aided design (CAD) Computer-aided process planning (CAPP) Material requirements planning (MRP) Manufacturing resource planning (MRP-II) Computer-aided manufacturing (CAM)

Computer-aided manufacturing - (CAM) systems are those that automate the production process. For example, this could be accomplished by monitoring and controlling the production process in a factory (manufacturing execution systems) or by directly controlling a physical process (process control), a machine tool (machine control), or machines with some humanlike work capabilities (robots).

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Manufacturing execution systems - (MES) are performance monitoring information systems for factory floor operations. They monitor, track, and control the five essential components involved in a production process: Materials Equipment Personnel Instructions and specifications Production facilities.

MES includes: Shop floor scheduling control systems Machine control systems Robotics control systems Process control systems

Some of the benefits of CIM are: Increased efficiency through: - work simplification and automation, - better production schedule planning - better balancing of production workloads in production capacity Improved utilization of facilities, higher productivity, better quality control through: - continuous monitoring - feedback and control of factory operations, equipment and robots. Reduced investments in production inventories and facilities through: - work simplification - just-in-time inventory policies - better planning and control of production - better planning and control of finished goods requirements Improved customer service through: - reducing out-of-stock situations - producing high-quality products that better meet customer requirements

Process Control is the use of computers to control an ongoing physical process. A process control computer systems requires the use of special sensing devices that measure physical phenomena such as temperature or pressure changes. These continuous physical measurements are converted to digital form by analog-to-digital converters and relayed to computers for processing. Machine Control is the use of computers to control the actions of machines. This is also popularly called numerical control. The computer-based control of machine tools to manufacture products of all kinds is a typical numerical control application used by many factories throughout the world.

Human Resource Systems: [Figure 7.16]

The human resource management (HRM) function involves the recruitment, placement, evaluation, compensation, and development of the employees of an organization. The goal of HRM is the effective and efficient use of the human resources of a company. Human resource information systems are designed to support:

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Planning to meet the personnel needs of the business Development of employees to their full potential Control of all personnel policies and programs

Traditionally, businesses used computer-based information systems to: Produce paychecks and payroll reports Maintain personnel records Analyze the use of personnel in business operations Many firms have gone beyond these traditional personnel management functions and have developed human resource information systems (HRIS) that also support: Recruitment, selection and hiring Job placement Performance appraisals Employee benefit analysis Training and development Health, safety, and security

HRM and the Internet: The Internet has become a major force for change in human resource management. For example, companies are: Recruiting for employees through recruitment sections of their corporate websites. Using commercial recruiting services and databases on the World Wide Web Posting messages in selected Internet newsgroups Communicating with job applicants by Internet e-mail.

HRM and the Corporate Intranet Intranet technologies allow companies to process most common HRM applications over their corporate intranets. For example: Intranets allow the HRM department to provide around-the-clock services to their customers the employees Intranets allow for the dissemination of valuable information faster than through previous company channels Intranets can collect information online from employees for input to their HRM files Intranets enable employees to perform HRM tasks with little intervention by the HRM department Intranets can serve as a superior training tool Intranets enable employees to produce automated paychecks, the online alternative to timecards

Accounting Systems: [Figure 7.18]

Accounting information systems are the oldest and most widely used information systems in business. Computer-based accounting information systems: Record and report the flow of funds through an organization on a historical basis and produce important financial statements such as balance sheets and income statements Produce forecasts of future conditions such as projected financial statements and financial budgets Operational accounting systems focus on transaction processing systems. They emphasize legal and historical record-keeping and the production of accurate financial statements. Typically, operational accounting systems include: Order Processing: Captures and processes customer orders and produces data for inventory control and accounts receivable.

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Inventory control: Processes data reflecting changes in inventory and provides shipping and reorder information. Accounts receivable: Records amounts owed by customers and produces customer invoices, monthly customer statements, and credit management reports. Accounts payable: Records purchases from, amounts owed to, and payments to suppliers, and produces cash management reports. Accounts payroll: Record employee work and compensation data and produces pay checks and other payroll documents and reports. General ledger systems: Consolidates data from other accounting systems and produces the periodic financial statements and reports of the business. Management accounting systems focus on the planning and control of business operations. They emphasize: Cost accounting reports Development of financial budgets and projected financial statements Analytical reports comparing actual to forecasted performance

Online Accounting Systems: Accounting information systems are being affected by Internet and client/server technologies. Using the Internet, intranets, extranets, and other network changes how accounting information systems monitor and track business activity. The online, interactive nature of such networks calls for new forms of transaction documents, procedures, and controls. Many companies are using or developing network links to their trading partners through the use of the Internet or other networks for applications such as order processing inventory control, accounts receivable, and accounts payable.

Financial Management Systems: [Figure 7.21]

Computer-based financial management systems support financial managers in decisions concerning: The financing of a business The allocation and control of financial resources within a business

Major financial information system categories include: Cash and investment management Capital budgeting Financial forecasting Financial planning

Capital Budgeting: The capital budgeting process involves evaluating the profitability and financial impact of proposed capital expenditures. Long term expenditure proposals for plants and equipment can be analyzed using a variety of techniques This application makes heavy use of spreadsheet models that incorporate present value analysis of expected cash flows and probability analysis of risk to determine the optimum mix of capital projects for a business Financial Forecasting and Planning A variety of financial forecasting packages provide analytical techniques that result in economic or financial forecasts of national and local economic conditions, wage levels, price levels, and interest rates. Financial Planning systems use financial planning models to evaluate the present and projected financial performance of a business or of one of its divisions or subsidiaries. Financial planning systems: Help determine the financial needs of a business and analyze alternative methods of financing the business
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Use financial forecasts concerning the economic situation, business operations, types of financing available, interest rates, and stock and bond prices to develop an optimal financing plan for the business Frequently use electronic spreadsheet packages and DSS generators to build and manipulate models. Are used to answer what-if and goal-seeking questions in order to evaluate financial and investment alternatives.

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IV: LECTURE NOTES (cont) Summary

Cross-Functional Enterprise Systems. Major e-business applications and their interrelationships are summarized in the enterprise application architecture of Figure 7.3. These applications are integrated cross-functional enterprise systems such as enterprise resource planning (ERP), customer relationship management (CRM), and supply chain management (SCM). These applications may be interconnected by enterprise application integrations (EAI) systems so that business professionals can more easily access the information resources they need to support the needs of customers, suppliers, and business partners. Enterprise collaboration systems (ECS) are cross-functional systems that support and enhance communication and collaboration among the teams and workgroups in an organization. Refer to Figure 7.4 and 7.8 for summary views of the e-business applications in EAI systems and enterprise collaboration systems. Transaction Processing Systems. Online transaction processing systems play a vital role in business. Transaction processing involves the basic activities of (1) data entry, (2) transaction processing, (3) database maintenance, (4) document and report generation, and (5) inquiry processing. Many firms are using the Internet, intranets, extranets, and other networks for online transaction processing to provide superior service to their customers and suppliers. Figure 7.7 illustrates the basic activities of transaction processing systems. Functional Business Systems. Functional business information systems support the business functions of marketing, production/operations, accounting, finance, and human resource management through a variety of e-business operational and management information systems summarized in Figure 7.11 Marketing. Marketing information systems support traditional and e-commerce processes and management of the marketing function. Major types of marketing information systems include interactive marketing at e-commerce websites, sales force automation, customer relationship management, sales management, product management, targeted marketing, advertising and promotion, and market research. Thus, marketing information systems assist marketing managers in electronic commerce product development and customer relationship decisions, as well as in planning advertising and sales promotion strategies and developing the e-commerce potential of new and present products, and new channels of distribution. Manufacturing. Computer-based manufacturing information systems help a company achieve computer-integrated manufacturing (CIM), and thus simplify, automate, and integrate many of the activities needed to quickly produce high-quality products to meet changing customer demands. For examples, computer-aided design using collaborative manufacturing networks helps engineers collaborate on the design of new products and processes. Then manufacturing resource planning systems help plan the types of resources needed in the production process. Finally, manufacturing execution systems monitor and control the manufacture of products on the factory floor through shop floor scheduling and control systems, controlling a physical process (process control), a machine tool (numerical control), or machines with some humanlike work capabilities (robotics). Human Resource Management. Human resource information systems support human resource management in organizations. They include information systems for staffing the organization, training and development, and compensation administration. HRM websites on the Internet or corporate intranets have become important tools for providing HR services to present and prospective employees. Accounting and Finance. Accounting information systems record, report, and analyze business transactions and events for the management of the business enterprise. Figure 7.20 summarizes six essential accounting systems including order processing, inventory control, accounts receivable, accounts payable, payroll, and general ledger. Information systems in finance support managers in decisions regarding the financing of a business and the allocation of financial resources within a business. Financial information systems include case management, online investment management, capital budgeting, and financial forecasting and planning.

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V. KEY TERMS AND CONCEPTS - DEFINED

Accounting Systems (236): Information systems that record and report business transactions, the flow of funds through an organization, and produce financial statements. This provides information for the planning and control of business operations, as well as for legal and historical record-keeping. Accounts Payable (236): A record of purchases from suppliers. Accounts Receivable (236): A record of amounts owed by customers. Batch Processing (221): A category of data processing in which data is accumulated into batches and processed periodically. Computer-Aided Manufacturing (233): The use of computers to automate the production process and operations of a manufacturing plant. Also called factory automation. Computer-Integrated Manufacturing (232): An overall concept that stresses that the goals of computer use in factory automation should be to simplify, automate, and integrate production processes and other aspects of manufacturing. Cross-Functional Enterprise Systems (214): Information systems that are integrated combinations of business information resources across the functional units of an organization. E-Business (214): e-business is the use of the Internet and other networks and information technologies to support electronic commerce, enterprise communications and collaboration, and web-enabled business processes both within an internetworked enterprise, and with its customers and business partners. Enterprise Application Architecture (216): Using the Internet and other networks for e-commerce, collaboration, and business process. Businesses use these technologies to establish interrelationships to each other and to customers, employees, business partners, and other stakeholders of an internetworked e-business enterprise. Enterprise Application Integration (218): A cross-functional e-business application that integrates front-office applications like customer relationship Enterprise Collaboration Systems (222): The goal of enterprise collaboration systems is to help us to work together more efficiently and effectively as members of the many process and project teams and workgroups that make up many organizations today. Collaboration technologies help us to share information with each other (communication), coordinate our work efforts and resources with each other (coordination), and work together cooperatively on joint assignments (collaboration). Financial Management Systems (238): Information systems that support financial managers in the financing of a business and the allocation and control of financial resources. Includes cash and securities management, capital budgeting, financial forecasting, and financial planning. Functional Business Systems (226): Information systems within a business organization that support one of the traditional functions of business such as
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marketing, finance, or production. Functional business systems can be either operations or management information systems. General Ledger (236): A collection of financial records of a firm. Human Resource Systems (234): Information systems that support human resource management activities such as recruitment, selection and hiring, job placement and performance appraisals, and training and development. Interactive Marketing (229): A dynamic collaborative process of creating, purchasing, and improving products and services that builds close relationships between a business and its customers, using a variety of services on the Internet, intranets, and extranets. Inventory Control (236): The activity of monitoring and controlling the inventory. Machine Control (233): The technology of controlling machine tools by computers. Manufacturing Execution Systems (233): MES are performance monitoring information systems for factory floor operations. They monitor, track, and control the five essential components involved in a production process: materials, equipment, personnel, instructions and specifications, and production facilities. Manufacturing Systems (231): Information systems that support the planning, control, and accomplishment of manufacturing processes. This includes concepts such as computer-integrated manufacturing (CIM) and technologies such as computer-aided manufacturing (CAM) or computer-aided design (CAD). Marketing Systems (228): Information systems that support the planning, control, and transaction processing required for the accomplishment of marketing activities, such as sales management, advertising and promotion. Online Accounting Systems (236): Online accounting information systems are using the Internet, intranets, extranets, and other networks to be directly involved in the processing of transactions between a business and its customers and suppliers. Online HRM Systems (235): Online HRM systems are using the Internet to actively recruit for employees through recruitment sections of their corporate websites and commercial recruitment services and databases on the World Wide Web. Online Transaction Processing Systems (220): A realtime transaction processing system. Order Processing (236): The activities involved in processing orders from customers. Payroll (236): A record of the employees to be paid and the amount due to each. Process Control (233): The use of a computer to control an ongoing physical process such as petrochemical production.

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Real-time Processing (221): Data processing in which data is processed immediately rather than periodically. Also called online processing. Sales Force Automation (230): The use of computers to automate sales recording and reporting by sales people, as well as communications and sales support. Targeted Marketing (229): Targeted marketing has become an important tool in developing advertising and promotion strategies for a companys electronic commerce websites. Targeted marketing includes five targeting components: community, content, context, demographic/psychographic, and online behaviour. Transaction Processing Cycle (221) A cycle of basic transaction processing activities including data entry, transaction processing, database maintenance, document and report generation, and inquiry processing.

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VI.
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 8 7 13 9 10 21 16 29 20 6 5 11 27 18 15 23

REVIEW QUIZ - Match one of the key terms and concepts

17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 1 22 25 17 3 2 26 14 12 19 30 31 4 28 24 Accounting systems Online accounting systems Order processing Inventory control Accounts receivable Accounts payable Payroll General ledger Financial management systems Manufacturing execution systems Targeted marketing Transaction processing cycle Batch processing Real-time processing Online transaction processing systems

E-business Cross-functional enterprise systems Functional business systems Enterprise application architecture Enterprise application integration Marketing systems Interactive marketing Sales force automation Manufacturing systems Computer-integrated manufacturing Computer-aided manufacturing Enterprise collaboration systems Process control Machine control Human resource systems Online HRM systems

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VII. ANSWERS TO DISCUSSION QUESTIONS

1. Refer to the Real World Case on Hilton Hotels Corporation in the chapter. What are several reasons why CRM software applications are so expensive? Why do they seem to take so long to implement? CRM applications are expensive because they cut across a number of functional areas and usually serve a large number of front-line representatives as well as in staff areas of the company. Because CRM applications require usually significant changes in both processes and mindsets, their cost and time to implement are not totally attributable to the technology alone. In the case of Hilton Hotels, the CRM suite needs to integrate data and provide information to more than 2,200 properties across the world. CRM initiatives should be strategic, enterprise-wide projects as opposed to just IT developments. Additionally, once built and put in place, CRM initiatives may take a certain amount of time before taking off and starting to show the benefits associated with improved management of customer relationships. 2. Why is there a trend toward cross-functional integrated enterprise systems in business?

The increasing complexity of conducting business in todays environment dictates that management be presented with a comprehensive picture of the company as a whole. Additionally, these cross-functional, integrated, systems put in evidence the interrelations between different functional areas and the effect they have on the organization. Functional-silo systems, while very effective in helping managers manage their specific area do not provide these capabilities. Integrated systems allow modern organizations to stay flexible to changes in their environment and react promptly across the board. It could be argued that functional integration within the organization is a necessary, but not sufficient, condition to stay competitive in the marketplace. 3. Which of the 14 tools for enterprise collaboration summarized in Figure 7.18 do you feel are essential for any business to have today? Which of them do you feel are optional, depending on the type of business or other factor? Explain.

The criteria used to separate technologies between essential and optional is a subjective one. On the essential list are included technologies which, by virtue of their pervasiveness currently in the work environment, would be very difficult for organizations to do without. They include communication and shared management tools which are important for any project size above medium. That a technology was included in the optional group does not diminish its importance. These technologies, however, depend on certain types of organizational culture and processes to support their usage, and thus the perception of need would vary depending on the organization. It would not be surprising that this classification would vary with industry type, particularly for very high or very low tech environments. Essential: Electronic mail Voice mail Faxing Web publishing Calendaring and scheduling Task and project management Voice conferencing Videoconferencing Optional: Instant messaging Data conferencing Discussion forums Chat systems

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Electronic meeting systems Workflow systems Knowledge management

4. Refer to the example of Dell Computer in the chapter. What other solutions could there be for the problem of information system incompatibility in business besides EAI systems? The lack of integration means that companies arent getting the seamless processing that would enable them to reduce costs and speeds up customer responsiveness. This is true whether you are talking about Dell Computer or any other company dependent on integrated systems. Dell Computer chose the WebMethods enterprise application integration (EAI) technology as a solution to their challenge of integrating a variety of software packages from a number of companies that they deal with. This technology acts as a software translator and creates a kind of hub that, using the Web, allows instantaneous communication among networked companies internal business systems. Dell could have chosen to develop their own in-house system or outsourced the contracting of a new system that their clients would buy into. They could also pursue such things as joint ventures, strategic alliances, licensing, etc. for a new system. 5. Refer to the example on Charles Schwab & Co. in the chapter. What are the most important HR applications a company should offer to its employees via a Web-based system? Why?

The most important HR applications that a company should offer to its employees via a Web-based system are by giving employees access to information that they need. The HR department can do this by ensuring that employees can easily find applicable information without spending a tremendous amount of time looking for it. Applications can include a multitude of things such as benefits, training, opportunities for advancement or career growth, scheduling of time, sick and dental benefits and forms, travel and hotel directives, learning centers and many other things. 6. How could sales force automation affect salesperson productivity, marketing management, and competitive advantage? Sales force automation is the use of computers to automate sales recording and reporting by sales people as well as communications and sales support. It improves productivity by saving time otherwise spent on manual creation of records, reports, and presentations; it improves communications and accessibility to information to support sales activities; and it may help in planning sales tactics. Increasingly, computers and networks are providing the basis for sales force automation. In many companies, the sales force is being outfitted with notebook computers that connect them to Web browsers, and sales contact management software that connect them to marketing websites on the Internet, extranets, and their company intranets. Sales force automation has resulted in increasing the personal productivity of salespeople, dramatically speed up the capture and analysis of sales data from the field to marketing managers at company headquarters, allows marketing and sales management to improve the delivery of information and the support they provide to their salespeople. Many companies view sales force automation as a way to gain a strategic advantage in sales productivity and marketing responsiveness. 7. How can Internet technologies be involved in improving a process in one of the functions of business? Choose one example and evaluate its business value. Students answers will vary. However, it will be relatively easy for them to choose from any of the various functions of business such as accounting, marketing, manufacturing, retailing, etc. For this answer, the accounting function will be given. For example, aaccounting information systems are being affected by Internet and client/server technologies. Using the Internet, intranets, extranets, and other network changes how accounting information systems monitor and track business activity. The online, interactive nature of such networks calls for new forms of transaction documents, procedures, and controls. Many companies are using or developing network links to their trading partners through the use of the Internet or other networks for applications such as order processing, inventory control, accounts receivable,

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and accounts payable. These advances in the accounting function have to vast improvements in the capturing, reporting, and the accuracy of company data. Thus, real-time processing of accounting information enables executives to make better and more informed decisions involving their firms resources. 8. Refer to the Real World Case on GE Power and Corporate Express in the chapter. Why is there a need for enterprise application integration systems in business? Will this continue to be the case in the future? Why or why not? Enterprise application integration systems are needed for the following reasons:

It is a critical part of the IT strategy in organizations looking to meld disparate systems and quickly deliver data to employees, customers and partners. Companies continue to have a need to integrate front- and back-office applications, Web services and legacy applications. The ability to send data in real-time from one system to another. The need to improve the quality and accuracy of the companys data. The need to cut costs both internally and for customers, so a company will remain attractive as a preferred supplier. The need to integrate various applications with enterprise resource planning systems.

9. What are several e-business applications that you might recommend to a small company to help it survive and succeed in challenging economic times? Why? e-business applications may take on many forms. For example data conferencing, digital information services, distance learning, facsimile, intranets, teleconferencing, videoconferencing, voice mail systems etc. It may also take on the form of applications dealing with procurement, marketing, manufacturing, financial, logistics, human resources, supplier and vendor integration applications and a multitude of other applications. What is important in the question is that a small company can use e-business applications to survive and succeed in challenging economic times by allowing it to carry out many functions more effectively. As well, as large corporations restructure and go back to concentrating on their core business there are a number of opportunities for small businesses to provide services to the larger companies. 10. Refer to the example on General Electric in the chapter. How do enterprise collaboration systems contribute to bottom-line profits for a business?

There is a growing organizational need to integrate functions and business processes to improve organizational control, coordination, and responsiveness by allowing data and information to flow more freely between different parts of the organization. Poorly integrated applications can create costly inefficiencies or slow customer service and become competitive liabilities. Enterprise collaboration system software consists of a set of interdependent modules for applications such as sales and distribution, financial accounting, investment management, materials management, production planning, plant maintenance, and human resources that allows data to be used by multiple functions and business processes for more precise organizational coordination and control. The modules can communicate with each other directly or by sharing a common repository of data. Vendors are rapidly enhancing their products to provide more capabilities for supply chain management, customer relationship management, and exchange of data with other enterprises. As such, these systems can greatly enhance the bottom-line profits for a business who knows how to use them effectively.

VIII. ANSWERS TO ANALYSIS EXERCISES

1. Application Service Provider Marketplace

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a. Would you use or recommend any of Intuit's online application services (www.intuit.com) to a small business? Why or why not? Students' answers will vary. However, students may readily agree that many small businesses simply cannot afford the resources to provide this service in-house. For a monthly fee or per-user fee, application service providers can eliminate significant overhead expenses such as installations, upgrades, and maintenance. By taking advantage of an ASP's economies of scale, small businesses are able to participate in the new economy. b. America Online provides a free instant messaging service (AIM). This service enables instant messaging, file sharing, and voice and video conferencing through a free application anyone can download and install. Is AOL operating as an ASP? How so? Yes. AOL provides a thin client that updates automatically with new additions. AOL provides the messaging backbone. Users need only store their address books on their hard drives. However, AOL's AIM is not entirely internet based. If AOL allowed address book storage on their network, then users could access them from any machine. c. Visit AOL's "Enterprise AIM services" website (enterprise.aim.com). What additional features does AOL provide to enterprises? Why do you suppose AOL moved away from the ASP model for their enterprise solution? AOL's AIM Enterprise Service provides additional security and monitoring capabilities. Security includes end-to-end encryption so intercepted messages remain indecipherable. It also supports Lightweight Directory Access Protocol (LDAP). This allows the product to link to LDAP compliant corporate directories. As a result, users can tap directly into their corporate directories rather than manually build their own address books from scratch. AOL probably moved away from the ASP model for their enterprise services because corporations that don't require additional security can simply use AOL's free service. Those who find the additional security strategically important probably want to take full responsibility for management and administration. This is something the ASP model does not support.

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2. eLance.com and Others: Online Job Matching and Auctions a. Check out eWork Exchange, eLance, and other online job sites on the Web. No answer required. b. Evaluate several sites based on their ease of use and their value to job seekers and employers. The two sites listed in this exercise were visited (eLance.com and eWorkExchange.com). Both sites were relatively easy to use and there is no doubt that their value to both job seekers and employers are definitely beneficial. Once an employer has determined their human resource needs, they can quickly and inexpensively check out potential candidates through websites such as the two mentioned in the exercise. Once they have identified the potential candidates, it is simply a matter of further contact to determine their suitability, or potential for interview. The same benefits can be said about the job seeker. They can easily submit their resume and list their qualifications. c. Which website was your favorite? Why? Students' answers will vary. The eLance site is well designed and easy to use. The home page lists a variety of choices, and once a user selects a choice from the offerings, it is easy to navigate the areas that are of interest to the person.

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3.

Job Search Database a. Create a database table to store key characteristics of these job opportunities. Include all of the job characteristics show in the list that follows as fields in your table, but feel free to add fields of interest to you. If data are not available for some fields (such as salary range) for a particular job, leave that field blank. Write a query that sorts jobs by region and then business function. Create a report that groups jobs by region and sorts jobs within each region by business function. [See Database Ch 07 - Solutions.mdb]

b. c.

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4.

Performing an Industry Financial Analysis a. Go to the websites of at least three firms you identified in the problem above. Obtain information about their financial operations including net sales (or net revenue), after tax income, and any current information affecting the organization or industry. b. Using the same database you created in the problem above create a new table that includes the fields described below. Add fields that interest may interest you as well. c. Add a field called OrganizationID to the Jobs table you created in the previous problem. Make its field type Number (long integer). Write an update query that populates this new field with the appropriate values from the Organizations table's OrganizationID field. To do this, join the Jobs table and the Organizations table using the Employer/Organization Name fields. This join will only work if the names used are identical, so be sure you've typed them in that way. Execute the query to complete the update. Since the tables already join using the Employer/Organization Name fields, why would you want also join them on the OrganizationID field? Is the Employer field in the Jobs table still necessary? Since we want to associate job opportunities with the organizational research, we need to join them by primary/foreign keys. If we use the name of the organization and misspell it, or if the organization's name changes even by one character, then we will lose the link between these records. So long as we properly maintain the primary and foreign key fields, the Employer field is unnecessary. d. Create a report that shows job opportunities by Industry. Within each industry, sort the records by the organization's name. Include Job Title, Globalization, Net Income, Competitors in each record. Be sure to join the Jobs table and the Organizations able using the OrganizationID field. [See Database Ch 07 - Solutions.mdb]

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IX. ANSWERS TO REAL WORLD CASES

RWC 1: Hilton-Hotels Corporation: Data-Driven Hospitality 1. What are the benefits and drawbacks of the OnQ system at Hilton? Benefits could include: a. Prompt resolution of problems b. Matching customers with their profiles, and thus provide personalized services and accommodations c. Supports brand and loyalty building d. Differentiates customers in terms of their value to the franchise (measured in frequency of stay, duration, revenue per customer, past complaints, etc.) Drawbacks could include: Company could become exposed to legal issues concerning privacy rights regarding the information it is storing and its usage While very useful to the franchise, the OnQ system does not have a direct impact on the bottom line and thus may be subject to questions about whether its benefits outweigh its costs Being custom-developed, the system requires the maintenance of a large IT staff to support and modify it, without relying on outside vendors 2. What does Hilton have to do to create a competitive advantage through OnQ? Provide some specific examples. A competitive advantage exists when a firm is able to deliver the same benefits as competitors but at a lower cost (cost advantage), or deliver benefits that exceed those of competing products (differentiation advantage). OnQ is most likely intended to produce a competitive advantage of the second kind. Examples could include: Automatic accommodation assignment (room type, special needs, etc.) based on past experiences Self-service check-in with prior reservation (similar to what Hertz does with car rentals in certain programs) 3. 4. Is it possible to have too much information about a customer? Explain. For the marketing department, it is never possible to have too much information about a customer. And that is probably true at the aggregate level, i.e. for grouping or segmenting, planning and forecasting, etc. However, at the point of contact with the customer, in this case most likely the front desk or the call center, providing too much of that information to service representatives can impede efficient and effective communication. There are two reasons why this might happen: representatives would need to process a significant amount of data in a very short period of time, and then, also in a very short time, decide which pieces to use to form a decision and how. In this sense, it would be better to provide representatives with a distilled set of facts that would directly enhance their decision making rather than flood them with all the available data.

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RWC 2: GE Power Systems and Corporate Express: The Business Case for Enterprise Application Integration 1. Why has EAI recently become a critical part of the IT strategy at many organizations, and a high-ranking project of top IT executives? Use GE Power and Corporate Express as examples. Discussion points would include: 2. The need to meld disparate systems together such as the integration of front- and back-office applications. The need to quickly deliver data to employees, customers and partners. Corporate Express needed to dramatically improve customer service. The need for complex corporations such as General Electric Co. to connect the independent operations of various business units. To reduce costs internally as well as for its customers.

What is the major difference in the business value of the EAI projects at GE Power and Corporate Express? Major differences would include: The business value at GE was to connect a collection of business units running as independent operations to have the ability to send data in real time from one system to another, and to improve the quality and accuracy of data. Corporate Express business value was not directed toward connecting business units but focused on dramatically improving customer service while reducing costs to remain highly competitive.

3.

What are some of the challenges in developing and implementing EAI systems? How can companies meet these challenges? Challenges would include: Need for specific IT skills Need for extensive coordination among multiple departments. Cost of EAI ($200,000 to $400,000).

Challenges could be met by: Consultants and training of in-house IT personnel. Planning and continual monitoring of the EAI project. Shifting of costs to various functional users (if they want the benefit then they have to absorb some of the costs).

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RWC 3: Bruswick Corporation.: Improving Supply-Chain Results 1. What is the business value of SCM systems for Brunswick? Business value could be captured through the following: a. Reduction of inventory arising from a pulled demand focus b. Integration and replacement of a disparate number of homegrown systems, with a reduction in support, maintenance and development costs, as well as increased data integrity and sharing c. Integration of the manufacturing environment into broader corporate applications such as forecasting, planning and budgeting d. Streamlining of manufacturing operations, resulting in cost savings 2. Does the business value of SCM depend upon what type of business a company is in? Explain. SMC has a greater impact in certain types of organization, and there are environments where it would be counterproductive. The key to a successful SCM implementation is that it matches the operational focus of the organization. For instance, manufacturing environments with well-defined final products and parts stand to gain the most from this type of technology. Custom-manufacturing, one-of-a-kind environments, on the other hand, are ill-suited to profit from the benefits of increased supplier, manufacturing process, and customer, integration. Organizations in the services sector would be unlikely to adopt SCM since they lack a manufacturing process at all. 3. How does Brunswicks approach to SCM differ from that of the other companies explored in this chapter? Is one approach superior to all others? Why or why not? All three approaches explored in this case focus on the integration of different parts or stages of the supplier-to-customer chain. However, they differ in that each company chose to approach the issues focusing on those aspects that were more salient to them. For instance, Casual Male focused on the ability to integrate point-of-sale equipment with inventory management and purchase systems, while Electronic Arts was more concerned with the accuracy of the number and mix of products in each container that left their premises. Brunswick is focused on data integration across processes, global operations and warranty data. The strategy chosen by these different organizations is superior to others in the sense that matches their needs and capabilities. Following from this, it would be unlikely that a one-fits-all approach would be successful in any company.

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RWC 4: Lowe and HP: The Business Case for Swarming Collaboration 1. What are the business benefits of swarming collaboration? Use Lowe Worldwide and HP as examples. Business benefits would include: 2. Companies such as Lowe Worldwide are discovering resources they didnt know existed resulting in faster completion of projects. HP through swarming collaboration can bring the right people into the team space quickly to plan and then execute what needs to be done. Swarming collaboration enables companies such as Lowe Worldwide to match the agility of smaller competitors (creative hot shops). Savings in international couriers, faxing and travel costs.

What are some possible limitations of swarming? Limitations of swarming would include: Connectivity problems. Keeping employees on track with the higher priority internal tasks and not devoting too much time and talent to collaborative efforts that hurt their own company.

3.

Visit the website of Groove Networks and experience their demo of a working in a shared workspace. Would this support workgroup collaboration? Swarming collaboration? Why or why not? Discussion points would include: Students developing their understanding of support workgroup collaboration. Students developing their understanding of swarming collaboration. Students discussing the advantages and disadvantages of group collaboration using their experiences from classes in which they have been a member of a group working on a project.

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