Session 12 – An Introduction to Enterprise Information Systems

Introduction
With the Winter Gear Distributors case, you experienced the value of integrating all of the stand-alone
information systems within a company into one comprehensive system. As we saw, creating one central,
integrated information system can profoundly improve the core business processes of an organization,
such as filling orders and replenishing inventory. In fact, we agreed that it would be difficult to
effectively manage an organization if an integrated source of information were not available to support
operations, control and innovation. The larger and more complex the organization, the greater the need
is for information and therefore information system integration.

In almost the same breath, we have stressed the importance of alignment between the organization’s
core business processes and the information systems that enable those processes. This is because all
information systems are built around a formal work flow or process and if that work flow varies
significantly from the way the organization does its work, process mistakes and data entry errors are
bound to arise. For this reason, we have stressed the need to select information systems that
complement the way work is done. Where there is a difference in approach, we have recommended
reengineering the actual business process rather than customizing the software. Bear in mind that
information system software companies study related business processes in depth as they develop their
products and work to incorporate industry best practices into system workflows. Therefore, in many
instances by following the embedded business process in an information system, your organization may
find itself adopting industry best practices and an overall better way of doing its business.

Some companies purposely choose the very best application specific software that aligns with each of
their core business processes. We call this software acquisition strategy a “best in breed” approach. In
so doing, they take advantage of some of the best industry thinking but at the expense of information
system integration. Increasingly, organizations have come to recognize that systems and data
integration is the bigger challenge. Software manufacturers have responded by providing integrated
software suites called enterprise resource planning (ERP) systems. These suites typically include a series
of application specific software products (a.k.a. modules) that share a common look and fell (a.k.a.
human interface) and a common backend database. See the IT Checklist for examples of leading ERP
products. Though these ERP systems come with a steep price tag and are a challenge to implement, they
offer many advantages to willing users, including:

 a flexible body of information system capabilities – the company licensing the software can
choose which modules it wants and can implement modules in order of priority.
 significant processing power to handle lots of transactions and to provide enterprise views of the
data and underlying process or performance issues.
 a common look and feel among the different ERP modules, lowering barriers to staff learning the
system.
 back end data standards that provide consistency and uniformity in data definitions and use – an
absolutely critical capability as we have seen in the case of Hardrock Café.
 the ease with which different modules can access shared information, such as customer or
financial data
 a host of built-in measurement mechanisms that can easily roll-up aggregated data for
management and control purposes
 high level analytical capabilities that enable forecasting and more strategic uses of transactional
data residing in the ERP.

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 Session 12 – An Introduction to Enterprise Information Systems

Session 12 and many of the sessions that follow will engage you in the application of ERP systems to
enable enterprise-wide operations, management, and innovation. At the close of 2011 the world-wide
sales ERP systems stood at $288 billion for the year. This speaks to the realization by many companies
that their future success depends on the effective control of their information and that an ERP system is
an essential tool set to that end.

Getting to Know ERP Systems

We refer to information systems that integrate the processes and information flows of an entire
organization as “Enterprise Resource Planning” systems or ERP. ERP systems represent potentially one of
the most important and strategic uses of information technology.

An ERP is one example of a

category of software
applications referred to as
“Enterprise Information
Systems.” These systems are
used to integrate business
processes and information
across large parts of an entire
business enterprise. There are
three primary enterprise
information system
applications (see Figure),
covering the chain of
information flows from the
customer to the company to
the supplier and back. ERP sits in the middle and integrates the enterprise’s internal information flows
and stores. Customer Relationship Management (CRM) systems support and integrate all of the separate
processes and systems that companies use to support sales and marketing. You were first introduced to
CRM systems in the Hard Rock article. Supply Chain Management (SCM) systems support and integrate
all of the separate processes and systems that companies use to support purchasing. The Brose case
addresses the use of a SCM system.

Unlike ERPs, which operate primarily within the organization, CRM and SCM systems are used to link the
company to its customers and suppliers - both external to the organization. As such, these systems cross
the boundaries of the organization and are great candidates for using telecommunications and the
internet to connect a company’s information systems to those of its customers and suppliers. All three
systems accomplish essentially the same things: integrating processes, information flows, and
information stores to improve operations, control, and learning/innovation that ultimately providing the
company with a strategic advantage. You will find that the slides for Session 12 include a great deal of
information about ERP systems and their CRM and SCM cousins. Pay particular attention to the slide
narratives that go into detail about the workings of these complex information systems as well as the
challenges faced in successfully implementing them. Here again the Brose case will prove useful in
demonstrating best practices in taking on a new ERP system.

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 Session 12 – An Introduction to Enterprise Information Systems

Postscript (Boston Globe, 5/31/15, pp: G3):

According to a recent study emerging from MIT’s Sloan Management Review, the deployment
and use of ERP systems may be undermining employee productivity, innovation, and well being.
In some organizations the move to big, complex integrated systems and the associated efforts to
keep them current (regarding both legal compliance and functionality), dealing with the
information glut that occurs as a result of introducing these systems, and how to navigate through
these systems, staff training and IT support without diminishing time spent on assigned (real)
work. Some of the examples cited in the Sloan study show that employees resign from the stress
of having to cope with these additional challenges. In response, corporate management needs to
be more mindful of how ERP’s are implement and their impact on the work force. The human
resources function can also do more to ensure that employees are both well prepared and support
for the changes in the ERP as they arise.

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