Chapter 2

E-Business: How Businesses Use

Information Systems

Copyright © 2007
2010 Pearson Education, Inc. Slide 1-1
 Learning Objectives
1. What are business processes? How are they related to
information systems?
2. How do systems serve the various levels of management in a
business?
3. How do enterprise applications, collaboration and
communication systems, and intranets improve organizational
performance?
4. What is difference between e-business, e-commerce, and e-
government?
5. What is the role of the information systems function in a
business?

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 Business Processes and Information
Systems
 Information systems help firms to manage their information,
make better decisions, and improve the execution of business
processes
 Business Processes
 Business processes refer to the manner in which work is
organized, coordinated, and focused to produce a valuable
product or service
 Business processes are concrete workflows of material,
information, and knowledge – set of activities
 Business processes also refer to the unique ways in which
organizations coordinate work, information, and knowledge,
and the ways in which management chooses to coordinate work

Slide 1-3
Business Processes and Information
Systems
 To a large extent, the performance of a business firm depends
on how well its business processes are designed and
coordinated
 A companies business processes can be a source of competitive
strength if they enable the company to innovate or to execute
better than its rivals
 Business processes can also be liabilities if they are based on
outdated ways of working that impede organizational
responsiveness and efficiency
 Every business can be seen as a collection of business processes
 Many business processes are tied to a specific functional area,
such as sales and marketing, while others cross many different
functional areas and require coordination across departments

Slide 1-4
 The Role of Information Systems in
Business Today
Functional Area
Manufacturing and production
Sales and marketing
Finance and accounting
Human resources
Business Process
Assembling the product
Checking for quality
Producing bills of materials
Identifying customers
Making customers aware of the product
Selling the product
Paying creditors
Creating financial statements
Managing cash accounts
Hiring employees
Evaluating employee’s job performance
Enrolling employees in benefits plan
Slide 1-5
The Role of Information Systems in
Business Today

Fig: The Order Fulfillment Process

Slide 1-6
 Business Processes and Information
Systems
 How Information Technology Enhances Business Processes
 Information systems automate many steps in business
processes
 New technology change the flow of information, making it
possible for many more people to access and share information
and eliminating delays in decision making
 Information technology can even transform the way the
businesses works and derive new business models; For
example, Amazon.com

Slide 1-7
 Types of Information Systems
 Because a business may have hundreds or even thousands of
different business processes, and because there are different
interests, specialties, and levels in an organization, there are
different kinds of systems
 No single system can provide all the information an
organization needs
 A typical business organization will have systems supporting
processes for each of the major business functions – systems
for sales and marketing, manufacturing and production,
finance and accounting, and human resources
 Functional systems that operate independently cannot easily
share information to support cross-functional business
processes
Slide 1-8
 Types of Information Systems
 Independent functional systems are being replaced with large-
scale cross functional systems that integrate the activities of
related business processes and organizational units
 A typical business firm will also have different systems
supporting decision making needs of each of the main
management groups
 Operational management, middle management, and senior
management each use a specific type of system to support
decision making
 Organization have executive support systems (ESS) at the
strategic level, management information systems (MIS) and
decision support systems (DSS) at the middle level, and
transaction processing systems (TPS) at the operational level

Slide 1-9
 Types of Information Systems
 Transaction Processing Systems
 Transaction processing systems (TPS) are the computerized
systems that perform and records the daily routine transactions
necessary to conduct business, such as, sales order entry, hotel
reservation systems, payroll, employee record keeping, and
shipping
 These systems serve the operational level of the organization
 Transaction processing systems are central to a business
 TPS failure for a few hours can cause a firm’s demise and
perhaps other firms linked to it
 Managers need TPS to monitor the status of internal operations
and the firm’s relations with external environment
 TPS are also major producers of information for the other types
of systems
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 Types of Information Systems
 Online transaction processing systems (OLTPS) is an interactive
data processing system that involves a direct connection
between TPS programs and users; As soon as a single
transaction is entered into a computer system, the program
interacts immediately with the user for that transaction; It is
often known as the live system where there is no time lag
between data creation and its processing; A good example of
this system is online ticket reservation system

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 Types of Information Systems
 Management Information Systems
 Management information systems (MIS) provide middle
managers with reports on the organizations current
performance to aid in planning, controlling, and decision making
 Typically, these systems use internal data provided by the TPS
 MIS serve managers primarily interested in weekly, monthly,
and yearly results, although some MIS enable managers to drill
down to see daily or hourly data if required
 MIS generally provide answers to routine questions that have
been specified in advance and have a predefined procedure for
answering them
 MIS generally are not flexible and have little analytical capability
 Most MIS use simple routines, such as summaries and
comparisons
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 Types of Information Systems
 Decision Support Systems
 Decision support systems (DSS) support non-routine decision
making for middle management; They focus on problems that
are unique and rapidly changing, for which the procedure for
arriving at a solution may not be fully predefined in advance
 These systems use internal information from TPS and MIS, and
often information from external sources, such as current stock
prices or product prices of competitors
 These systems use a variety of models to analyze data, or they
condense large amounts of data into a form in which decision
makers can analyze them
 DSS are also called business intelligence systems because they
focus on helping users make better business decisions

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 Types of Information Systems
 Executive Support Systems
 Executive support systems (ESS) help senior managers addressing
strategic issues and long-term trends, both in the firm and in
external environment
 These systems are designed to address non-routine decisions
requiring judgment, evaluation, and insight because there is no
agreed-on procedure for arriving at a solution
 ESS presents graphs and data from many sources through an
interface that is easy for senior managers to use
 Often the information is delivered to senior executives through a
portal, which uses a Web interface to present integrated
personalized business content
 These systems incorporate data about external events such as new
tax laws or competitors, but they also draw summarized
information from internal MIS and DSS
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 Types of Information Systems
 Interrelationships Among Systems
 The various types of systems in the organization have
interdependencies
 TPS are typically a major source of data for other systems,
whereas ESS are primarily a recipient of data from lower-level
systems and external sources
 TPS are major producers of information that is required by
many other systems in the firm, which, in turn, produce
information for other systems
 These different types of systems are loosely coupled in most
business firms, but increasingly firms are using new
technologies to integrate information that resides in many
different systems

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Types of Information Systems

Fig: Interrelationships Among Systems

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 Systems That Span The Enterprise
 Using different kinds of systems in a company to work
together has proven to be a major challenge
 Enterprise applications are the best solutions to the
challenges of using different kinds systems
 Enterprise Applications
 Enterprise applications are the systems that span functional
areas, focus on executing business processes across the
business firm, and include all levels of management
 Enterprise applications help businesses become more flexible
and productive by coordinating their business processes more
closely and integrating groups of processes so they focus on
efficient management of resources and customer service

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Systems That Span The Enterprise

Fig: Enterprise Application Architecture

Slide 1-18
 Systems That Span The Enterprise
 Four major enterprise applications: enterprise systems, supply
chain management systems, customer relationship
management systems, and knowledge management systems
 Each enterprise application integrates a related set of functions
and business processes to enhance the performance of the
organization as a whole
 Enterprise applications encompass processes spanning the
entire organization and, in some cases, extending beyond the
organization to customers, suppliers, and other key business
partners
 Enterprise Systems
 Large organizations typically have many different kinds of systems
built around different functions, organizational levels, and
business processes that cannot automatically exchange
information
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Systems That Span The Enterprise

Fig: Enterprise Systems

Slide 1-20
Systems That Span The Enterprise
 This fragmentation of data in hundreds of separate systems
degrades organizational efficiency and business performance
 Enterprise systems, also known as enterprise resource planning
(ERP) systems, solve this problem by collecting data from various
key business processes from every business unit and storing the
data in a single central data repository
 Information can be easily shared across the firm to help different
parts of the business work more closely together
 Benefits of Enterprise Systems
 Companies can use enterprise systems to support organizational
structures that were not previously possible or to create a more
disciplined organizational culture
 Information supplied by an enterprise system is structured around
cross-functional business processes, and it can improve management
reporting and decision-making

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Systems That Span The Enterprise
 Enterprise systems provide firms with a single, unified, and all-
encompassing information systems technology platform that houses
data on all the key business processes
 The organization increases its business capability by responding
more efficiently to customer requests for products or information,
forecasting new products, and building and delivering them as
demand requires
 Challenges of Enterprise Systems
 These systems have proven very difficult and costly to build because
they require fundamental changes in the way the business operates,
and large technology investments
 Employees will have to take on new job and functions and
responsibilities
 These systems require complex pieces of software and large
investments of time, money, and expertise
 It is difficult to make a change in only one part of the business
without affecting other parts
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 Systems That Span The Enterprise
 Companies may fail to achieve strategic benefits from these systems
if we integrate business processes using generic methods
 These systems promote centralized organizational coordination and
decision making, which may not be the best way for some firms to
operate
 Supply Chain Management Systems
 Supply chain management (SCM) systems help businesses manage
relationships with their suppliers
 SCM systems help suppliers, purchasing firms, distributors, and
logistics companies share information about orders, production,
inventory levels, and delivery of products and services so that they
can make better decisions about how to organize and schedule
sourcing, production, and distribution
 The ultimate objective is to get the right amount of their products
from their source to their point of consumption with the least
amount of time and with the lowest cost
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Systems That Span The Enterprise
 SCM systems are one type of interorganizational system because
they automate the flow of information across organizational
boundaries
 Information systems for supply chain management can help
participants in the supply chain in the following activities:
 Decide when and what to produce, store, and move
 Rapidly communicate orders
 Track the status of orders
 Check inventory availability and monitor inventory levels
 Reduce inventory, transportation, and warehousing costs
 Track shipments
 Plan production based on actual customer demand
 Rapidly communicate changes in product design

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 Systems That Span The Enterprise
 Customer Relationship Management Systems
 Customer relationship management (CRM) systems help firms
managing their relationships with their customers
 CRM systems provide information to coordinate all of the business
processes that deal with customers in sales, marketing, and service to
optimize revenue, customer satisfaction, and customer retention
 CRM systems provide information to help firms identify, attract, and
retain the most profitable customers; provide better service to
existing customers; and increase sales
 CRM systems consolidate and integrate customer information from
multiple communication channels – telephone, e-mail, wireless
devices, retail outlets, or the Web
 Detailed and accurate knowledge of customers and their preferences
helps firms increase the effectiveness of their marketing campaigns
and provide higher-quality customer service and support

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 Systems That Span The Enterprise
 Knowledge Management Systems
 The value of a firm’s products and services is based not only on its
physical resources but also on intangible knowledge assets
 Some firms perform better than others because they have better
knowledge about how to create, produce, and deliver products
and services
 Firm knowledge is difficult to imitate, unique, and can be
leveraged into long-term strategic benefits
 Knowledge management systems (KMS) enable organizations to
better manage processes for capturing and applying knowledge
and expertise
 KMS collect all relevant knowledge and experience in the firm, and
make it available wherever and whenever it is needed to improve
business process and management decisions

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Systems That Span The Enterprise
 KMS also link the firm to external sources of knowledge
 KMS support processes for acquiring, storing, distributing, and
applying knowledge, as well as processes for creating new
knowledge and integrating it into the organization
 KMS include enterprise-wide systems for managing and
distributing documents, graphics, and other digital knowledge
objects; systems for creating corporate knowledge directories of
employees with special areas of expertise; office systems for
distributing knowledge and information; and knowledge work
systems to facilitate knowledge creation
 Other knowledge management applications use intelligent that
codify knowledge for use by other members of the organization
and tools for knowledge discovery that recognize patterns and
important relationships in large pools of data

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 Systems That Span The Enterprise
Organizational Process Role of Knowledge Management Systems
Acquiring knowledge Knowledge discovery systems can find patterns or
relationships in vast quantities of data, whereas other
intelligent techniques can find solutions to problems that are
too complex to be solved by humans. Knowledge work
systems provide knowledge workers with graphics, analytical,
communication, and document management tools, as well as
access to internal and external sources of data to help them
generate new ideas. Knowledge networks provide online
directories of employees with special areas of expertise.
Storing knowledge Knowledge repositories collect documents and digital media
containing knowledge from internal and external sources in a
single location. Expert systems elicit and incorporate expertise
from human experts and embed it in software systems that can
be accessed by other members of the organization

Table: Knowledge Management Systems in the Organization

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 Systems That Span The Enterprise
Organizational Process Role of Knowledge Management Systems
Distributing knowledge Office systems and communication tools distribute
documents and other forms of information among
information and knowledge workers and link offices to
other business units inside and outside the firm.
Group collaboration systems help employees access
and work simultaneously on the same document from
many different locations and coordinate their
activities
Applying knowledge Organizational knowledge can be incorporated into
management decision making through decision-
support systems and incorporate into important
business processes by being captured by key
application systems, including enterprise applications.

Table: Knowledge Management Systems in the Organization (Cont.)

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 Systems That Span The Enterprise
 Intranets and Extranets
 Enterprise applications create a deep-seated changes in the way
the firm conducts its business, and they are often costly to
implement
 Enterprise applications require changes the way many different
departments and employees work and use information
 Companies that do not have the resources to invest in
enterprise applications can still achieve some measure of
information integration by using intranets and extranets
 Intranets are internal networks built with the same tools and
communications standards as the Internet and are used for the
internal distribution of information to employees, and as
repositories of corporate policies, programs, and data

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 Systems That Span The Enterprise
 Extranets are intranets extended to authorized users outside
the company
 An intranet typically centers on a portal that provides a single
point of access to information from several different systems
and to documents using a Web interface
 Collaboration and Communication Systems: “Interaction”
Jobs in a Global Economy
 With globalization, firms have teams around the globe in different
time zones working on the same problem, so the need for
continuous interaction and communication around the clock has
greatly expanded
 Many jobs require sharing information and interacting with other
people
 There are many systems to support collaboration and
communication
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 Systems That Span The Enterprise
 Internet-Based Collaboration Environments
 Teams of employees work together from many different locations
around the world need tools to support workgroup collaboration
 These tools provide storage space for team documents, a space
for team communications, group calendars, and an audio visual
environment for video conference
 E-mail and Instant Messaging (IM)
 E-mail and instant messaging have been embraced by
corporations as a major communications and collaboration tool
supporting interaction jobs
 Cell Phones and Smartphones
 Mobile platforms have been emerged for coordinating and
running businesses, including cell phones and smartphones
 These are the basic part of firm’s telecommunications
infrastructure
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 Systems That Span The Enterprise
 Social Networking
 Social networking sites help people share their interests and
interact; E.g., Facebook, MySpace
 Users are able to set up profiles, blog, tag documents of interest,
and use online forums to communicate with other co-workers
about their interests and projects
 Social networking tools are quickly becoming a corporate tools for
sharing ideas and collaborating among interaction-based jobs in
the firm
 Wikis
 A type of Web site that makes easy for users to contribute and
edit text content and graphics without any knowledge of Web-
page development or programming techniques; E.g., Wikipedia
 Wikis are ideal tools for storing and sharing company knowledge
and insights

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 Systems That Span The Enterprise
 Virtual Worlds
 Real world people represented by avatars meet, interact, and
exchange ideas at virtual locations; E.g., Second Life
 E-Business, E-Commerce, and E-Government
 Electronic Business
 Electronic business, or e-business, refers to the use of digital
technology and the Internet to execute the major business
processes in the enterprise
 E-business includes activities for the internal management of the
firm and for coordination with suppliers and other business
partners
 It also includes electronic commerce, or e-commerce
 Electronic Commerce
 E-commerce is the part of e-business that deals with the buying
and selling of goods and services over the Internet
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 Systems That Span The Enterprise
 It encompasses activities supporting those market transactions,
such as advertising, marketing, customer support, security,
delivery, and payment
 E-Government
 E-government refers to the application of the Internet and
networking technologies to digitally enable government and
public sector agencies' relationships with citizens, businesses, and
other arms of government
 In addition to improving delivery of government services, e-
government can make government operations more efficient and
also empower citizens by giving them easier access to information

Slide 1-35
 The Information Systems Function In
Business
 Most organizations have information systems department, as a
formal organizational unit, responsible for information
technology services
 The information systems department is responsible for
maintaining the hardware, software, data storage, and networks
that comprise the firm's IT infrastructure
 The information systems department suggests new business
strategies and new information-based products and services,
and coordinates both the development of the technology and
the planned changes in the organization
 The information systems department consists of specialists,
such as programmers, systems analysts, project leaders, and
information systems managers
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 The Information Systems Function In
Business
 Programmers
 Programmers are highly trained technical specialists who write
the software instructions for computers
 Systems Analysts
 Systems analysts constitute the principal liaisons between the
information systems groups and the rest of the organization
whose job is to translate business problems and requirements
into information requirements and systems
 Information Systems Managers
 Information systems managers are the leaders of teams of
programmers and analysts, project managers, physical facility
managers, telecommunications managers, and heads of office
system groups
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 The Information Systems Function In
Business
 They are also managers of computer operations and data entry
staff
 External Specialists
 External specialists, such as hardware vendors and
manufacturers, software firms, and consultants frequently
participate in the day-to-day operations and long-term planning
of information systems
 Chief Information Officer
 In many companies, the information systems department is
headed by a chief information officer (CIO)
 The role of CIO is a senior management position that oversees
the use of information technology in the firm

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 The Information Systems Function In
Business
 Chief Security Officer
 The chief security officer (CSO) is in charge of information
systems security for the firm and is responsible for enforcing
the firm’s information security policy
 This position is also called chief information security officer
(CISO)
 The CSO is responsible for educating and trains users and
information systems specialists about security, keeping
management aware of security threats and breakdowns, and
maintaining the tools and policies chosen to implement security
 Chief Privacy Officer
 The chief privacy office (CPO) is responsible for ensuring that
the company complies with existing data privacy laws
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 The Information Systems Function In
Business
 Chief Knowledge Officer
 The chief knowledge officer (CKO) is responsible for the firms
knowledge management program
 The CKO helps design programs and systems to find new
sources of knowledge or to make better use of existing
knowledge in organizational and management processes
 End Users
 End users are representatives of departments outside of the
information systems group for whom applications are
developed and play an increasingly large role in the design and
development of information systems

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 The Information Systems Function In
Business
 In the past, firms generally built their own software and
managed their own computing facilities; Today, many firms
are turning to external vendors to provide these services and
are using their information systems departments to manage
these service providers
 Organizing the Information Systems Functions
 There are many types of business firms, and there are many
ways in which the IT function is organized within the firm
 A very small company will not have a formal information
systems group; It might have one employee who is responsible
for keeping its networks and applications running, or it might
use consultants for these services

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The Information Systems Function In
Business
 Larger companies will have a separate information systems
department, which may be organized along several different
lines, depending on the nature and interest of the firm
 Some companies use a decentralized arrangement where each
functional area of the business has its own information systems
department and management that typically reports to a senior
manager or chief information officer
 In other arrangement, the information systems function
operates as a separate department similar to the other
functional departments with a large staff, a group of middle
managers, and senior management group that fights for share
of the companies resources

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The Information Systems Function In
Business
 Very large firms with multiple divisions and product lines might
allow each division to have its own information systems group;
All of these divisional information systems groups report to a
high level central information systems group and CIO
 How the information systems department should be organized
is part of the larger issue of IT governance
 IT governance includes the strategy and policies for using
information technology within an organization

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