Chapter 7

Processes, Organizations and IS

Okay so lets shift gears and take a look at how IS can change the way a firm conducts business from top to bottom.  First, let's get some terms out of the way starting with what types of processes there are.  As we said in Chapter 3 a process is a network of activities that generate value by transforming inputs into outputs.  Those inputs and outputs can be almost anything in the context.  You shouldn't let your mind limit this to just manufacturing, think about data and information as well.  Also, processes are made up of activities, you can think of them as "steps" in the network.  Okay so there are two types of processes, and this is going to sound kind of familiar, structured and dynamic processes.  Structured processes, like decisions, have formally defined and standardized activities in their network.  Dynamic processes do not, they are often related to more complex situations where things are not always going to be static, think of the process that takes place when one firm acquires another.  Process not only vary by type but also scope in relation to the business itself.  Workgroup processes take place within a singular entity within a firm, an example would be how the accounts payable gets the day-to-day job done.  These processes are often supported by workgroup information systems or functional information systems which exist to support only one workgroup.  Payroll software would be a good example of this, its sole purpose is to provide a tool to pay employees.  Next you have enterprise processes, these occur across an entire organization and will support activities in many different departments.  An example of this would be the system used in a hospital to manage patient information.  These systems can include everything from health information, billing information all the way to dietary information.  Finally, we have inter-enterprise processes which span two or more independent organizations. A good example of this is the state healthcare exchanges set up under the Affordable Healthcare Act.  These exchanges support several different healthcare providers as well as the federal and state regulatory agencies that oversee the implementation of the law.  Inter-enterprise systems are often very complicated and maintenance on them is difficult as different firms will be affected in different ways by any changes that take place.  

IS Can Change Things

Okay so why does this matter to a modern firm?  Well these systems can and have completely change the way firms conducted business by changing their processes and improving their quality.  There are two dimensions to the way this can happen.  One way is to change the efficiency of processes.  This happens when an IS allows a firm to better use their resources.  If less resources are required to achieve the same or greater output then process efficiency has been improved.  You can also change the effectiveness of a process.  Effectiveness can be thought of as how well a process achieves the organizations strategy or goals.  One example would be improving the time it takes to process or fulfill a customer's order. These changes to a process can take place two ways.  First, you can change the structure of a process which can be as simple as reordering the activities that take place.  Adding or removing activities is another example.  Another way to change processes is to change the resources that are used.  Adding more personal to a bottleneck station in your manufacturing change would be one way to do that.  This has the potential to not only increase the effectiveness of that single station but to also improve the overall efficiency of your entire chain.  Often times both types of change will take place.  This is especially true when you change the structure of a process.  Oftentimes it isn't possible to do that without changing the resources as well.  There are several ways that IS can improve qualities through these types of changes.  An IS can be the sole entity to perform a processes.  An online business that replaces a phone bank with and automated ordering system can greatly improve the overall quality of their ordering process.  You can also use IS to augment humans in their work.  Providing new software and hardware to replace a paper filing system could greatly effect the overall quality of such a system.  Finally, IS can simply do a great job at controlling the flow of data in almost any process.  Using an IS system to manage data as opposed to say a paper system can do a great many things.  The IS can ensure that the data is complete, formatted correctly and entered in the most relevant order.

The Big Picture

Lets put it all together now and look at how this takes place in the modern world of business.  A huge problem that occurs when talking about systems is known as information silos.  Information silos exist when data is isolated in separated information systems.  This problem can cause redundant data to exist or prevent relevant parties that need the data from accessing it.  This can all be solved by implementing a modern enterprise information system as described above.  A firm wide single system  or one that includes many departments can allow one department to communicate and exchange information or even amended it with another department.  The scope of these systems are quite large but we let's tackle the simpler two and move on the the more complex one with detail.  CRM or customer relationship management system is focused only on the interactions of the customer with the firm.  Generally these will include marketing, customer acquisition or sales, relationship management or customer service and the process of loss and churn of customers.  Next there are EAI or enterprise application integration systems.  These are generally used when ERPs which we will talk about in detail aren't ideal or desired by firms.  EAIs are simply suites of software applications that integrate existing systems by providing layers of software that allow existing applications to communicate with each other.  Finally we come to ERPs which are the real big picture information systems.  Enterprise resource planning suites are applications called modules in conjunction with a new database and a set of known or inherent processes designed for consolidating business operations into a single, consistent computing platform.  In order to truly be an ERP a system has to incorporate processes from the supply chain, manufacturing if it exists, customer relationship management, human resources and accounting.  These systems exist solely to integrate all major aspects of a business and improve process quality across the board.  Implementing them is often expensive and difficult due to resistance to change but they payoff for a large modern firm can be huge.  These systems have often been hosted on in-house platforms in the past and this is still the case for many firms. However, with the advent of modern cloud computing as we have already discussed you now see firms selling them as platform as a service allowing firms to build their systems from the ground up or as software as a service.  SaaS is the most common now and for obvious reasons the easiest system to implement.  Modern ERPs are all encompassing and are constantly being improved by the firms that provide them so the SaaS model has many benefits over other forms of hosting.