Chapter 2 Understanding Organizational Style and Its Impact on Information Systems

Systems Analysis and Design Kendall & Kendall Sixth Edition

Major Topics
Organizational environment Nature of systems Context-level data flow diagram Entity-relationship diagram Levels of management Organizational culture

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Organizations
Organizations are composed of interrelated and interdependent subsystems. System and subsystem boundaries and environments impact on information system analysis and design.

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Organizational Environment
Community environment
Geographical Demographics (education, income)

Economic environment
Market factors Competition

Political environment
State and local government
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Open and Closed Systems

Systems are described as either
Open
Free-flowing information. Output from one system becomes input to another.

Closed with restricted access to information

Limited by numerous rules. Information on a need to know basis.

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Virtual Organizations
A virtual organization has parts of the organization in different physical locations. Computer networks and communications technology are used to work on projects.

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Virtual Organization Advantages

Advantages of a virtual organization are:
Reduced costs of physical facilities. More rapid response to customer needs. Flexibility for employees to care for children or aging parents.

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Enterprise Resource Planning

Enterprise Resource Planning (ERP) describes an integrated organizational information system. The software helps the flow of information between the functional areas within the organization.

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Enterprise resource planning (ERP) integrates internal and external management information across an entire organization, embracingfinance/accounting, manufacturing, sales and service, etc. ERP systems automate this activity with an integrated software application. Its purpose is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders
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ERP systems can run on a variety of hardware and network configurations, typically employing a database to store data ERP systems typically include the following characteristics: An integrated system that operates in real time (or next to real time), without relying on periodic updates A common database, which supports all applications. A consistent look and feel throughout each module.

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Functional areas
Finance/Accounting
General ledger, payables, cash management, fixed assets, receivables, budgeting, consolidation

Human resources
payroll, training, benefits, 401K, recruiting, diversity management

Manufacturing
Engineering, bill of materials, work orders, scheduling, capacity, workflow management, quality control, cost management, manufacturing process, manufacturing projects, manufacturing flow, activity based costing, Product lifecycle management

Supply chain management

Order to cash, inventory, order entry, purchasing, product configurator, supply chain planning, supplier scheduling, inspection of goods, claim processing, commissions

Project management
Costing, billing, time and expense, performance units, activity management

Customer relationship management

Sales and marketing, commissions, service, customer contact, call center support

Data services
Various "self service" interfaces for customers, suppliers and/or employees

Access control
Management of user privileges for various processes

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Process preparation
Implementing ERP typically requires changing existing business processes.[15] Poor understanding of needed process changes prior to starting implementation is a main reason for project failure.[16] It is therefore crucial that organizations thoroughly analyze business processes before implementation. This analysis can identify opportunities for process modernization. It also enables an assessment of the alignment of current processes with those provided by the ERP system. Research indicates that the risk of business process mismatch is decreased by: linking current processes to the organization's strategy; analyzing the effectiveness of each process; understanding exising automated solutionsERP implementation is considerably more difficult (and politically charged) in decentralized organizations, because they often have different processes, business rules, data semantics, authorization hierarchies and decision centers.[ This may require migrating some business units before others, delaying implementation to work through the necessary changes for each unit, possibly reducing integration (e.g. linking via or customizing the system to meet specific needs. A potential disadvantage is that adopting "standard" processes can lead to a loss of competitive advantage. While this has happened, losses in one area often offset by gains in other areas, increasing overall competitive advantage

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Configuration
Configuring an ERP system is largely a matter of balancing the way the customer wants the system to work with the way it was designed to work. ERP systems typically build many changeable parameters that modify system operation. For example, an organization can select the type of inventory accounting FIFO or LIFO to employ, whether to recognize revenue by geographical unit, product line, or distribution channel and whether to pay for shipping costs when a customer returns a purchase

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Customization
When the system doesn't offer a particular feature, the customer can rewrite part of the code, or interface to an existing system. Both options add time and cost to the implementation process and can dilute system benefits. Customization inhibits seamless communication between suppliers and customers who use the same ERP system uncustomized

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Key differences between customization and configurationinclude

Customization is always optional, whereas the software must always be configured before use (e.g., setting up cost/profit center structures, organisational trees, purchase approval rules, etc.) The software was designed to handle various configurations, and behaves predictably any allowed configuration. The effect of configuration changes on system behavior and performance is predictable and is the responsibility of the ERP vendor. The effect of customization is less predictable, is the customer's responsibility and increases testing activities. Configuration changes survive upgrades to new software versions. Some customizations (e.g. code that uses pre defined "hooks" that are called before/after displaying data screens) survive upgrades, though they require retesting. Other customizations (e.g. those involving changes to fundamental data structures) are overwritten during upgrades and must be reimplemented. Customization can be expensive and complicated, and can delay implementation. Nevertheless, customization offers the potential to obtain competitive advantage vis a vis companies using only standard features.

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Data migration

Identify the data to be migrated Determine migration timing Generate the data templates Freeze the toolset Decide on migration-related setups Define data archiving policies and procedures
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Comparison to special purpose applications

The fundamental advantage of ERP is that integrating the myriad processes by which businesses operate saves time and expense. Decisions can be made more quickly and with fewer errors. Data becomes visible across the organization. Tasks that benefit from this integration include :

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Sales forecasting, which allows inventory optimization Order tracking, from acceptance through fulfillment Revenue tracking, from invoice through cash receipt Matching purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced)
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ERP systems centralize business data, bringing the following benefits: They eliminate the need to synchronize changes between multiple systems consolidation of finance, marketing and sales, human resource, and manufacturing applications They enable standard product naming/coding. They provide a comprehensive enterprise view (no "islands of information"). They make real time information available to management anywhere, anytime to make proper decisions. They protect sensitive data by consolidating multiple security systems into a single structure
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Disadvantages
Customization is problematic. Re engineering business processes to fit the ERP system may damage competitiveness and/or divert focus from other critical activities ERP can cost more than less integrated and/or less comprehensive solutions. High switching costs increase vendor negotiating power vis a vis support, maintenance and upgrade expenses. Overcoming resistance to sharing sensitive information between departments can divert management attention. Integration of truly independent businesses can create unnecessary dependencies. Extensive training requirements take resources from daily operations.

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PeopleSoft from Oracle Ramco e.Applications from Ramco Systems MAS 90, MAS 200 and MAS 500 from The Sage Group SAGE ERP X3 from The Sage Group SAP R/3 from SAP SYSPRO from Syspro mySAP from SAP JD Edwards EnterpriseOne & JD Edwards World from Oracle SoftPRO ERP for General & Manufacturing Business from Soft Product:softpro2000.com

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Context-Level Data Flow Diagram (DFD)

A context-level data flow diagram is an important tool for showing data used and information produced by a system. It provides an overview of the setting or environment the system exists within: which entities supply and receive data/information.

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Context-Level DFD Symbols

Entity, a person, group, department, or system that supplies or receives information. It is labeled with a noun.

Customer

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Context-Level DFD Symbols (Continued)

Process, representing the entire system. It is given the number 0.

0 C stomer System

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Context-Level DFD Symbols (Continued)

Data flow, represented by an arrow. It shows information that passes to or from the process. Data flow is labeled with a noun.
Travel Request

Passenger Reservation
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Data Flow Example

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Entity-Relationship Diagrams (E-R Diagrams)

Entity-relationship diagrams help the analyst understand the organizational system and the data stored by the organization. Symbols are used to represent entities and relationships.

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Entities
There are three types of entities:
Fundamental entity, describing a person, place, or thing. Associative entity, linking entities. Attributive entity, to describe attributes and repeating groups.

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Fundamental Entity
Describes a person, place, or thing. Symbol is a rectangle.

Patron

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Associative Entity
Joins two entities. Can only exist between two entities. Symbol is a diamond inside a rectangle. Also called a:
Gerund. Junction. Intersection. Concatenated entity.
Reservat on

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Attributive Entity
Describes attributes and repeating groups. Symbol is an oval in a rectangle.
Performance

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Relationships
Relationships show how the entities are connected. There are three types of relationships:
One to one. One to many. Many to many.

Relationship lines are labeled.

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Relationship Notation
One is indicated by a short vertical line. Many is indicated by a crows foot.

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Entity Relationship Example

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Attributes
Data attributes may be added to the diagram.
Patron Name Patron address Patron phone Patron credit card

Patron

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Creating Entity-Relationship Diagrams

Steps used to create E-R diagrams:
List the entities in the organization. Choose key entities to narrow the scope of the problem. Identify what the primary entity should be. Confirm the results of the above through data gathering.

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Levels of Management

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Managerial Control
The three levels of managerial control are:
Operations management. Middle management. Strategic management.

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Operations Management
Make decisions using predetermined rules that have predictable outcomes make decisions. Oversee the operating details of the organization. dependent on internal information.

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Middle Management
Make short-term planning and control decisions about resources and organizational objectives. Decisions may be partly operational and partly strategic. Decisions are dependent on internal information, both historical and prediction oriented.
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Strategic Management
Look outward from the organization to the future. Make decisions that will guide middle and operations managers. Work in highly uncertain decisionmaking environment. Define the organization as a whole. Often make one-time decisions.
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Managerial Levels
Each of the three levels of management have:
Different organization structure. Leadership style. Technological considerations. Organization culture. Human interaction. All carry implications for the analysis and design of information systems.
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Organizational Culture
Organizations have cultures and subcultures. Learn from verbal and nonverbal symbolism.

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Verbal Symbolism
Using language to convey:
Myths. Metaphors. Visions. Humor.

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Nonverbal Symbolism
Shared artifacts
Trophies, etc.

Rites and rituals

Promotions Birthdays, etc.

Clothing worn Office placement and decorations

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