Management Information System

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MANAGEMENT INFORMATION SYSTEM

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TABLE OF CONTENTS
1. Introduction and Overview of Management Information Systems
 Definition of Management Information Systems
 Purpose of Management Information Systems
 Advantages of Management Information Systems
 Objectives of Management Information Systems
 Characteristics of Management Information Systems
 Models/Types of Management Information Systems
 Planning, Controlling and Limitations of Management Information
Systems
2. Development of Management Information Systems
 Steps of System Implementation
 Organization Evolution of MIS
 Pitfalls in MIS Development
 System Documentation
3. Functionality of Management
 Management Information Systems for Finance
 Management Information Systems for Marketing
 Management Information Systems for Production
 Management Information Systems for HRM
4. Management and Implementation of Enterprise Information Systems
 The concept of Enterprise Information Systems
 The use of Information Systems to achieve strategic goals and to
gain competitive advantages
 The impacts of Information Systems on business process
reengineering and management
 Managerial issues in developing Information Systems
 IS Project Management and other contemporary IS technologies
5. Overview of Enterprise Resource Planning System
 Definition of Enterprise Resource Planning
 Evolution of Enterprise Resource Planning
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 Characteristics of Enterprise Resource Planning

 Features of Enterprise Resource Planning
 Benefit of Enterprise Resource Planning
 Definition of Business Process Reengineering
 The concept of Business Engineering, Management and Modelling
Implementation of Enterprise Resource Planning and its methodology
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CHAPTER ONE
INTRODUCTION AND OVERVIEW OF MANAGEMENT
INFORMATION SYSTEM
DEFINITION OF MANAGEMENT INFORMATION SYSTEM
Management Information System can be defined as a formal method of collecting
timely information in a presentable form in order to facilitate effective decision
making and implementation, in order to carry out organizational operations for
the purpose of achieving the organizational goal. A management information
system is a system design to provide selected decision –orientation information
needed by management plan, control and evaluate the activities of the
corporation. It is designed within the frame work that emphasizes profit,
planning, performance planning and control at all levels. It complements the
ultimate integration of required business information sub system both financial
within the company.
According to Philip Kolter, A marketing information system consist of people,

equipment and procedures together, sort, analyze, evaluate and distribute the
needed timely and accurate information and marketing decision makers.
Professor Allen S. Lee states that research in the information system field
examines more than the technological system or just the social system or even
the two side by side; In addition, it investigates the phenomena that emerge
when the two interact.
An information system can be any organized combination of people, hardware,

software, communication network and data resources that collects, transforms
and disseminates information in an organization.
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PURPOSE OF MANAGEMENT INFORMATION SYSTEM
Information processing is a major social activity. A significant part of an

individual’s working and personal time is spent in recording, searching for, and
absorbing information, as much as 80% of a typical executive’s time is spent on
processing and communication information. Their duties involve the production
and use of information outputs documents, reports, analysis, plans, etc.
The system provides information on past, present, and project future and on
relevant events inside and outside the organization in the society. It may be
defined as planned and integrated system for gathering relevant data and
converting it in to right time. The main purpose of management information
system is to provide the right and correct information to the right people at right
time.
Another important purpose of management information system is that it is

needed by all business organization because of increased complexity and rate of
change of today’s business environment, for example, marketing manager needs
information about sales performance and trends financial manager needs
information on returns, production manager needs information analyzing
resources requirement and workers’ productivity, and personnel manager needs
information analyzing resources requirements and workers’ productivity and
personnel manager needs information concerning employee compensation and
professional development; thus, effective managers with the specific marketing,
financial, production and personnel information, and products they require to
support their decision-making responsibilities.
Management information system concept is vital to effective computer use in

business of two or major reason:
1. It serves as a system framework for organizing business computer

applications. Business application of computer should be viewed as interrelated
and integrated computer based information system and not as independent data
processing job.
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2 It emphasizes the management orientation of electronics information

processing in business the primary goal of computer based information should be
the processing of data generated by business operations.
ADVANTAGES OF MANAGEMENT INFORMATION SYSTEM

1 Management information system helps the managers to make planning
and control decision.
2. Facilitated planning: management information system improves the quality

of plants by providing relevant information for sound decision-making; Due to
increase in size and complexity of organization, Managers have lost personal
contact with the scenes of operations.
3. Minimizes information overload: management information system changes

the larger amount of data into summarized form and thereby, avoids the
confusion which may arise when managers are flooded with detailed facts.
4. Brings coordination: management information system facilities integration

of specialized activities by keeping each department aware of the problem and
requirement of their department. It connects all decision centers in the
organization.
5. Makes control easier: It serves as a link between managerial planning and

control. It improves the ability of management to evaluate and improve
performance. The use of computers has increased the data processing and
storage capability and reduces the cost.
6 Management information system assembles, processes, stores, retrieves,

evaluates, and disseminates the information.
7. It ensures that appropriate data is collected from the various sources,

processed, and sent further to all the needy destinations.
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8. Management information system helps in strategic planning, management

control, operational control and transaction processing.
9. It helps the clerical personnel in the transaction processing and answers

their queries on the data pertaining to the transaction the status of a particular
record and reference on a variety of documents.
OBJECTIVES OF MANAGEMENT INFORMATION SYSTEM
1. Management information system’s main objective is to attain the

transaction processing of data of an organization effectively. Transaction
processing is applied in conversion and analysis of raw data.
2. Management information system is the management of marketing, finance,

production, and the personnel becomes better trained which result in his
efficiency.
3. Management information system is in making the forecasting and long-

term prospective planning more effective.
4. It tries to create a structured database in knowledge base for all the people
in the organization.
CHARACTERISTICS OF MANAGEMENT INFORMATION SYSTEM
Management information system and Top Management: Management

Information System is a comprehensive and coordinated set of information
subsystems which are rationally integrated and which transform data information
in a variety of a ways to enhance productivity in conformity with the manager’s
style and characteristics on the basis of established quality.
1. Management-oriented: The system is designed from top to bottom. This

does not mean that the system will be geared to providing information directly to
top management; rather, it means that the system development starts from an
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appraisal of management needs and overall business objectives. It is possible that

top management is the focus of the system such that they are cornerstone on
which the system is built, for example - a marketing information system basic
sales order processing the shipment of goods to the customers and the billing of
the goods is fundamental operation control activities. However, if the system is
designed properly this transaction information can be traced by salesman, sales
territory, size of order, geography and product line furthermore if designed with
strategic management needs in mind external competition market and economic
data can be created to give a picture of how well the company’s product are
faring in their marketing environment and to serve as a basic of new product or
marketplace introduction the initial application can be geared to the operational
and management control areas but in such a way as not preclude its integration
into a strategic planning subsystem for upper management.
2 Management directed: Because of the management information system, it

is imperative that management actively directs the system development efforts to
determine what information is necessary to improve its control of operation. It is
rare to find management information system where the manager himself or a
high-level representative of his department is not spending a good deal of time in
system design. It is not a no-time involvement for continued review and
participation are necessary to ensure that the implemented system meets the
specification of the system that designed therefore management is responsible
for setting system specification, and it must play a major role in subsequent trade
off decision that inevitably occur in system development. An important element
of effective system planning is the process for determining the priority of
application development. Management must control this process if a
management information system is the objectives. A company without a formal
application approval cycle and a management steering to determine priorities will
never develop management information system.
3. Integrated: Integration is significant because of the ability to produce more

meaningful management information for example in order to develop an effective
production scheduling system we must balance such factors as:
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A. Set up cost.
B. Work force.
C. Overtime rates.
D. Production capacity.
E. Capital requirement
D. Customer service.
4. Common data flows: Because of the integration concept of management

information system, there is an opportunity to avoid duplication and redundancy
in data gathering storage and dissemination for example customer orders are the
basic for billing the customer for goods ordered setting up the accounts
receivable initiating production activity sales analysis sales forecasting and so on
it is prudent to capture this data closest to the source where the event occur and
use it throughout the functional area. It is also prudent to capture it once and
thus, avoid the duplicate entry of sources data into several systems.
5. Heavy planning elements: Management information system do not occur

overnight they take from three to five years and longer to get established firmly
within a company a heavy planning element must be present in management
information system development. The management information system designer
must have the future objectives and needs of the company firmly in mind. The
designer must avoid the possibility of system obsolescence before the system
planning is an essential ingredient to successful management information system.
The management information system provides meaningful direction towards
which one strives.
6. Sub-system concept: In tackling a project as broad and complex in scope as

a management information system, one just avoids losing sight both the forest
and the trees. Even though the system is viewed as a single entity, it must be
broken down into digestible sub-systems that can be implemented one at a time.
The breakdown of management information system into meaningful subsystems
set the stage for prioritized implementation. The sub-system analysis is essential
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for applying boundaries to the problem, thus enabling the designer to focus on
manageable entities that can be assigned and computerized by selected system
and programming team.
7. Flexibility and ease of use: Despite a careful analysis of the future

management information needs, it is impossible to predict what is desired in
three to five year. This is true in most industries and especially in industries with
rapid change patterns. It is naïve to think that if anyone possesses the
omniscience to predict the future with this premise, the next best thing a
management information system developer can do is to build in the flexibility to
incorporate as many manufacture nuances as possible.
8 Database: The data is the mortar that holds the functional system together.
Each system requires access to a master file or data-covering inventory,
personnel, vendors, customers, general ledger, work-in-progress and so on. If the
data is stored efficiently and with common usages in mind one master file can
provide the data needed by any of the functional system. It seems logical to
gather data once, properly validate it and place it on a central storage medium
that can be accessed by any system. However, it is not unusual to find a company
with multiple data files, one serving one functional system and another serving
another system.
9. Distributed data processing: The majority of the companies implementing

management information system have a geographic network of sale office,
distribution channel, manufacturing plants, division, sub-division and so on. Some
of these entities are operated in a completely independent fashion and therefore,
may not be part of the integrated management information system. More often
than not, the remote site is to have the connection with each other and with a
host of operation in order to create an effective management information system
with geographical boundaries, some form of distributed data processing is
necessary. Distributed data processing can be thought of as the delivery system,
placing information in the hands of those who need it when they need it.
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10. Information as a resource: Providing the entire organization must be a

concept that information is a valuable resource particularly in the management
control and strategic planning areas must be properly managed. This is a subtle
but important change in thinking. It was common in the past to view the data
processing.
MODELS/TYPES OF MANAGEMENT INFORMATION SYSTEMS
1. Accounting management information systems - All levels of accounting

managers share all accounting reports.
2. Financial management information systems - It provide financial

information to all financial managers within an organization include the chief
financial officer. The Chief Financial Officer analyzes historical and current
financial activity.
3. Manufacturing management information systems - More than any

functional area, great advance in technology have impacted operations, as a
result, manufacturing operations have changed. For instance, inventories are
provided just in time so that great amount of money are not spent for
warehousing huge inventories; In some instance, raw material are even proceeds
on rail load-cars waiting to be sent directly to the factory, thus, there is no need
for warehousing.
4. Marketing management information system - A marketing management

information system support managerial activity in the area of product
development, distribution, pricing decision, promotional effectiveness and sales
forecasting more than any other functional area.
5. Human resource management information system - It concerns with

activity related to workers, managers and other individual employed by an
organization, because the personnel functions relates to all other areas in
business. The human resource management information system plays a valuable
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role in ensuring organization system includes work-force analysis and planning,

hiring, training, and job assignment.
6. Structure of management information system - The management

information system has been described in terms of support for decision-making,
management activity and organization functions.
7. Conceptual structure - The conceptual structure of a management

information system is defined as a federation of functional subsystem each of
which is divided into four major information processing components, transaction
processing, operational control information system support, managerial control
information system, managerial control information system and strategic
planning information system which has some unique data files which are used by
only that sub-system.
8. Physical structure - The physical structure of a management information

system would be identical to the conceptual structure of all applications
consisting of completely separate programs used by only one function but this is
frequently not the case, substantial information can be achieved from
 Integrated processing
 Use of common modules
Integrated processing is achieved by designing several related applications as a
single system in order to simplify the interconnection and reduce the duplication
of input. A good example is an order entry system. The recording of an order
initiates a sequence of processing, each step using new data but also, most of the
data from prior processing. In other words, an integrated order entry system
crosses functional boundaries.
MANAGEMENT INFORMATION SYSTEM PLANNING, CONTROLLING AND LIMITATIONS
Planning - The top level management is mainly concerned with strategic planning
for example the strategic planning activities of top management involve future
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interaction between the organization and its external environment.
Computational support for planning:
1. An analysis of historical data to obtain relationship useful for projection.
2. Various projection and forecasting techniques to estimate future value.
3. Computations internal to the plan and computation required for outputs.
4. Output of the results in a meaningful planning format.
Historical data analysis techniques

Historical data analyzed to discover pattern or relation that will be useful in
projecting the future value of significance variables. Even when the quantitative
relations are not sufficiently stable to use in forecasting data analysis is useful for
input into the judgmental forecast.
Historical extrapolation techniques

Historical data describes the past planning that involve the future estimating is
generally based on analysis of past history combined with various technique to
generate data for planning purposes.
Financial planning computation

Models that involve financial plan need to provide for various computation and
analyses commonly required for measuring or evaluating profitability example are
depreciation computation rate of return analysis and break even analysis.
Depreciation is a significant computation in most financial planning. It affects
profit computation because it is an expense and it affects cash flow because of its
impact on taxes. There are several methods for computing deprecation all of
which should be available to the planner. These methods are straight line double
declining balance sum of the year digits and production or use basis.
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Controlling - At the middle level management, information is management

control. Middle level managers such as departmental heads are concerned with
the current and future performance of their units. Therefore, they need aggregate
information on the sales, profit etc. of their units such information is available
from both within the organization as well as outside the organization, for
example, financial data for budgets and ratio analysis are available from the
company’s records. However, market data can be collected through special
surveys and reports from outside the organization. Top-level managers also
require management control information. But this information must be more
detailed narrower in scope and more accurate than information required for
strategic planning. It should also generate at more frequent because the time
horizon of decision is shorter.
At the supervisory level of management, operational control is exercised.

Production scheduling, cost and credit control, etc. are examples of operational
control. Therefore, a detailed report on a daily and weekly basis is required;
inventory report, operating cost, production rate, etc. are examples of such
information. Such information are available from within the organization.
The control feedback loop is basic to system design. The computer can improve
the control process in several ways:
1 The standard can be complex. Computational simplifications are not

necessary.
2. The computation of deviation and identification of cause can be more

sophisticated.
3. Reporting with computers can use irregular time interval which is very
difficult with manual processing and can be done more frequently.
LIMITATION
1. Aggression - The people may hit back at the system and may even sabotage
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it by using equipment incorrectly by putting incomplete information into the

system or buy actual destruction of hardware or software.
2. Projection - It is a psychological mechanism of blaming difficulties on
someone or something else. When employees blame the management
information system for problems caused by human error or other factors
unrelated to the system, projection is taking place.
3. Avoidance - It occurs when individuals defend themselves by withdrawing

from or avoiding a frustrating situation. Managers may avoid the system by
ignoring its output, in favour of their own information sources.
Management Information System Planning - Management information system

general business planning initiates from the following concepts:
1. Mission of the corporate.
2. Objectives and goals for the corporate in all key performance areas. These
are in line with the mission of the corporate.
3. Strategic planning for general approach on how to achieve long term

objectives.
4. Operational planning for specific guideline on how to transverse short term

milestones.
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CHAPTER TWO
DEVELOPMENT OF MANAGEMENT INFORMATION SYSTEM
STEPS OF SYSTEM IMPLEMENTATION
There are four basic methods for system implementation:
 Install a system in a new operation or organization, one just formed.
 Cut off the old system and install new. This produces a time gap during
which no system is in operation.
 Cut over by segments, this method is also referred to as phasing-in. In the
new system, small parts or subsystems are substituted for the old.
 Operate in parallel and cut over. The new system is installed and operated
in parallel with the current system until it has been check out; then, the
current system is cut out.
Following are steps in system implementation:
(A) Plan the Implementation: The three main phases in implementation
take place in series; these are the initial installation; the test of the system
as whole; and the evaluation –maintenance and control of the system.
The first step is plan for implementation that having the following steps:
 Identify the Implementation Task: Before starting implantation system
analyst should identify the implementation tasks. The plans should list all
subtasks for each of these major tasks so that individuals in the
organization may be assigned specific responsibilities.
 Establish Relationship Among Task: In the small system, the order of
performance may be simply be descried in text form. In large project, many
concurrent and sequential activities are interrelated, so that a network
diagram must be employed in any good plan.
 Establish a Schedule: A first estimation of the schedule is prepared by
having a system designer estimate the times between the events in the
program network. The critical time should be calculated. Management may
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apply pressure or provide additional personnel to shorten the network

times.
 Prepare the Cost Schedule ties to Tasks and Time: The cost for completing
each milestone and possibly each task required to complete a milestone,
should be established as part of the plan, then, the rate of expenditure
should be budgeted.
 Establish a Reporting and Control System: Reporting and control of the
work in progress may be obtained by weekly meetings of the key people
involved or by brief written progress reports. The objective of the control
system is to minimize the confusion and the associated delays and costs.
(B) Acquire Floor Space and Plan Space Layout: The installation of a new
system to replace a current one may require a major revision of facilities as well
as completely new office, computer room and production layouts. The MIS
manager must prepare rough layouts and estimates of particular floor areas he or
she feels needed. The manager should prepare cost estimates for this.
(C) Organize the Implementation: Once the implementation tasks have been
defined in the planning phase, manager usually assigns a project manager to
guide the implementation. A manager of MIS may assume this responsibility by
virtue of a permanent assignment.
(D) Develop Procedures for Implementation: The project leader has available
the network plan for proceeding with the implementation. The leader must now
call upon key people in the project to prepare more detail procedure for system
implementation. The system analyst must develop the procedure for delivering
instructions and forms to supervisors, for coordinating and integrating this very
small portion of the MIS with other parts of the manufacturing system, and for
the working out the problem involved.
(E) Train the Operating Personnel: A program should be develop to support
management and personnel the nature and goals of the MIS and to training of
operating personnel in their new duties. Practical attention should be paid the
training of first –line supervisors, then to professional support personnel like
accounting and production personnel and then operational personnel like clerk
etc.
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(F) Computer-Related Acquisition: Computer related acquisition have the

following basic parts:
 Hardware: hardware can be purchased according to requirements of
system.
 Software: In small firm the software might be purchased. In large firm with
specialized forecasting, planning, operating and control models most
software must be developed internally and under contract.
 Personnel: Implementation of an MIS offers the company an opportunity to
upgrade and promotes the personnel after training. A personnel chart
should be prepared showing the number of individuals are required in
terms of skills, the source and the date they will be required to work.
 Materials: Forms and manuals are the principal materials to be ordered for
the MIS.
(G) Develop Forms for Data Collection and Information Dissemination: A vast
amount of detailed data, both external and internal to the company, must be
collected for input to the MIS. Forms are required not just for input and output
but also for transmitting data at intermediate stages. So the form should be
developed to collect data.
(H) Develop the Files: In the implementation stage, the actual data must be
obtained and recorded for the initial testing and operation of the system. This
requires a checklist of data, format of data, storage form and format, and remarks
to indicate when the data have been stored. The implementation also requires
the development of a procedure for updating each piece of the data and for
updating entire sections of the file s required. The translation of specifications for
files into computer programs is the function of computer specialists.
(I) Test the System: As each part of the system is installed, test should be
performed in accordance with the test specifications and procedures described
earlier. Tests during the installation stage consist of component tests, subsystem
tests, and total system acceptance tests. Components test may include;
equipment - old and new; new forms; new software; new data collection
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methods; new work procedures and new reporting formats.. As more subsystem
installed subsystem may be tested.
(J) Cut-over: Cut-over is the point at which the new component replaces the
old component or the new system replaces the old system. This usually involves a
good deal of last-minute physical transfer of the files, rearrangement of office
furniture and movement of work stations and people. Old forms, old files, and old
equipment are suddenly retired.
(K) Document the System: documentation of the system means preparation of
written descriptions of the scope, purpose, information flow components and
operating procedures of the system. Documentation is not a frill; it is a necessary
–for troubleshooting, for the replacement of the subsystems, for interfacing with
other system, for training new operating personnel and also for evaluating and
updating the system.
Organizational Evolution of MIS

After the MIS has been operating smoothly for a short period of time, an
evaluation of each step in the design and final system performance should be
made. Evaluating should not be delays beyond the time when the system analysts
have completed most of the debugging. The longer delay, it will be more difficult
for designer to remember the important details.
The evolution should be made by the customer as well as by the designers. It is
less important than the previous evaluation, the financial specialists should
evaluate the project in terms of planned cost verses actual cost of design,
implementation and operation. They should also attempt to identify cost savings
and increased profit directly attributable to the MIS.
Following structure is generally used to partial evaluation:

Structure: The measurements of the costs and benefits are the measurement of
the changes or differences between the old and new. The measurement of the
change must be related to the basic goals of the MIS, the principle activities that
further these goals, or the many minor activities that further these goals. In other
words, we may measure the changes in the total output of the system or measure
the many changes accomplished throughout the system. The former is obviously
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the most desirable. What we have is the hierarchy of levels at which we are
consider measuring costs and benefits.
Following table shows the hierarchy:
Level Hierarchy in the MIS Change that is Measured

1 Company Profit Dollars
(Return on Investment)
2 Company Costs & Revenues Dollars
3 Planning Specificity, quantification, degree
to which plans are achieved.
Control Degree of control by exception,

selection of activities to be
controlled, forwarding of activities
going beyond acceptable limits,
managerial time required for
control, automation of control of
repetitive situation
4 Decision Quality of decisions, frequency of
reversal of decision of decisions
superior in the organization.
5 Information Validity, accuracy, clarity,
distribution, frequency,
appropriateness of detail for each
level of management, timeliness,
format, availability on demand,
selectivity of content, disposition
method, retention time, cost.
6 System Characteristics Number of people required,

equipment and facilities, response
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time, frequency of breakdowns,

inputs, outputs, number of forms,
number of operations, size and
quality of data bank.
For a particular MIS, The designer may select the level at which measurement is
to take place based upon specific objectives of the MIS. It is probably rare that a
measurement of the total system is attempted at the system level. At the system
level, judgment of broad concepts might be employed:
 System Integrity: How well the subsystems integrated into the total system
without redundancy? How flexible is the system? How easily may the
system be explained?
 Operation Integrity: How skilled are the people operating the system?
What backup is there to prevent the system breakdown in the event of loss
of key personnel or equipment failure?
 Internal Integrity: How well does the system do what it is supposed to do?
How valid are the system outputs? How sources is the system against
human error, manipulation, sabotage, or theft.
 Procedural Integrity: How good is the documentation of the system and
procedures? Are procedures such that employee are motivated to follow
them? How well are procedures followed in practice? What controls ensure
that the procedures are followed?
Formulation of the Measurement: Once the variables of interest have been

identified, a table should be set up to formalize the measurement. Table can
contain the costs and benefits.
PITFALLS IN MIS DEVELOPMENT

(A) Fundamental Weaknesses: Following are the fundamental weaknesses of the
MIS development:
 No Management System to Build Upon: The MIS must be built on top of a
management system that includes the organizational arrangements, the
structure and procedures for adequate planning and control, the clear
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establishment of objectives, and all the other manifestations of good

organization and management. The lack managerial and operational
application is serious because it implies that the process not being
performed well. If we can say that the information is the raw material of
decision making , and if information is not generated, disseminated and
used for management, then no system-manual or computer-is going to
solve the problem.
 What business are we in? : Not having the crispy stated mission and
purpose for the company is a common weakness. Since if it is not terrible
clear what business we are in, each major challenge the company must face
is a completely new challenge and must be analyzed from the ground up. If
there was a mission statement, some of these problem could be dealt with
routinely as opposed to their being major crises.
 Company Objectives: written objective are also often missing in the
company. A firm without objectives is much like a company without a
statement of mission and purpose –it is a ship without rudder. Without the
business objectives, the chances of the MIS satisfying management needs
are slight.
 Managerial Participation: MIS development has been viewed as
responsibility of management. This includes both top level management
and operating line management. The reasonable conclusion that manager
must reach is that MIS is too to be left to the computer technician.
 Organization of the MIS Functions: Another significant cause of computer
failure is the lack of proper organization of the EDP and MIS. The exact
location in the organization and the authority granted to the MIS manager
is, of course, a function of the type business the firm is in and how
important the information resource is to its operation.
 Reliance on Consultant of Manufacturer: Some computer manufacturer
and some consultant will try to sell the system, one that is designed and
debugged and ready to push the button or turn on the key. Consultants and
the manufacturers are concerned more with the machine than with the
management solutions. Before buying the “A”solution from a consultant or
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manufacturer, be sure that it is the whole solution, that you understand it

thoroughly, and that you understand you legal resources when things do
not work the way you expected.
 Communication Gap: It is unlikely that for the foreseeable future the
computer technician will be able to speak the language of management,
and managers for the most part are not prepared to speak the languages of
the computer. The result is a communication gap that sometimes causes a
design standoff.
 The People Involved: There is no substitute for competence. Good
performers of people will worth the price.
(B) Soft Spots in Planning:
 MIS Response to the Business Plans: The purpose of MIS group is to
support line management in the company‘s main business. As business
plans are made and modified, the corresponding MIS plans must be made
and changed. Each MIS plan must be a proper response to a business plan.
 A System View - A Master Plan: Another cause of computer failure is the
lack of a master plan to which hardware development and individual MIS
design can be related. The reasons for MIS planning are the same as for
planning in general.
 Setting Project and System Objectives: setting objectives for projects and
systems is not itself a planning activity. However not meaningful plans can
made until these objectives have at least been roughed in. These two
activities are co-requisite.
 Facing Constraints: Freedom from constraints on financial definition,
system performance, system cost, development schedule will leads to
enormous MIS problems. It is essential that both managers and technician
recognize the reality of those constraints and plan accordingly.
 Plan to Sale the MIS : Most system designers admit to the unpleasant
reality that the toughest part of the designing and implementation an MIS
is gaining acceptance of the user for whom the system is designed. So the
system should be designed in the manner that it can easily sale or accepted
by the users.
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 Detail Planning: It is only method that permits one successful MIS project
to follow another. All veteran MIS development managers know this and
plan in detail for every phase of the project.
(C) Design Problems:
 Consider Alternatives Designs: This is essential for the Manager to require
the key designer to lay out the several alternative designs and explain the
positive and negative features of each. Then he can select one
 Beware the User Interface: It is a technical problem. The user interface
should be according to user. User should be comfortable with the design or
interface of the system.
 The Real World - The acid Test: Business organizations are not research
institutes. The MIS is being implemented to support the firm‘s main line of
business, not to extend the state of art in MIS design.
 If It Moves Automate It: Some things could be automated but not all. Like
designer can easily design the computerized system for visitor. But people
want and expect human interaction to at least immediately available when
they enter the lobby of place of business.
 The Computer Obsession: Computer should not be obsession in system. It
is a tools and used as a tools only.
 Documentation: Documentation should include: All plans, Project and
system objective, specifications of functions and performance, user
interface specifications, user instruction and reference manuals and
maintenance guideline. These items are necessary to manage and use MIS
over time. Not documenting these things in detail is a guarantee of failure
in some part of the operation of MIS.
(D Implementation Problems:
Test It and Test It Again: The most common error made with regards to testing is
not planning to do enough of it. A good rule of thumb to use in project estimating
and planning is 1/3 planning and design, 1/3 implementation, 1/3 testing. For an
MIS project of any reasonable size, this figure for testing is by no means too
much. Testing must be done at the fictional level, the component level, and the
system level.
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Controlling the MIS Project: although controlling is the one of the four basic
management functions, it remains one of the preeminent cause of MIS
development project failure.
SYSTEM DOCUMENTATION
Documentation is any communicable material such as text, video, audio, etc., or

combinations thereof used to explain some attributes of an object, system or
procedure. It is often used to mean engineering documentation or software
documentation, which is usually paper books or computer readable files such as
HTML pages that describe the structure and components, or on the other hand,
operation, of a system/product. You probably immediately think of printed
training manuals when you think of "documentation" but there are several
different forms for different occasions.
CHARACTERISTICS OF GOOD DOCUMENTATION

Clear: Able to be understood by whomever it was created for. The language used
must be appropriate Terms that may not be understood by everyone need to be
explained either the first time they are used or in a glossary.
Concise: It should be as short as it can be while still being comprehensive. Using
pictures can replace hundreds of words and be much clearer at the same time.
Complete: It should not leave out important information especially key steps that
need to be completed, such as printing, and warnings about what not to do.
Current: It's no use if all the facts are out of date or superseded. Printed material
is harder to keep current than electronic versions are.
Correct: It must not contain errors.
Easy to Access: It must be available where and when it is needed.
Easy to Search: Users must be able to quickly find the required information.
Indexes or tables of contents are required, along with clear headings. Large
documentation may well need to be divided into sections.
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TYPES OF DOCUMENTATION
Printed: The traditional format for documentation, it is used much less now days.
Printing is expensive and books are heavy and bulky, which increase
transportation costs. Books are hard to keep up-to-date if their subject matter is
subject to change. Books can only be accessed by one person at a time.
On-screen Help: Most programs come with online help that can be accessed
immediately by user. It is readily accessible, searchable and can be very detailed.
Help can also be gained from online sources such as the internet and intranets.
Such sources can easily be kept up to date - even on a daily basis. They can be
accessed by any number of people simultaneously.
Audio-Visual: Videos, screen movies, audio narration etc. are colorful and
engaging but do not tend to carry a lot of detailed information. These types of
documentations are good for introductions or overviews of subjects.
Posters, Leaflets: Sometimes detailed information is not needed. A checkout
chick, for example, does not need wiring diagrams for the circuits of the register.
User may just need a little poster that quickly reminds her how to do basic tasks.
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CHAPTER THREE
FUNCTIONALITY OF MIS
MIS for Marketing
In order to pursue market opportunities as well as anticipate marketing problem,
manager need to collect comprehensive and reliable information. Managers
cannot carryout marketing analysis, planning, implementation and control
without monitoring and researching customers, competitors, dealers and their
sales and cost data. Every firm has many information flows of interest to
marketing management. Many companies are studying their executive‘s
information needs and design information system for marketing to meet these
needs. Instead of plethora of unrelated data, an MIS combines various inputs and
present integrated reports.
Definition: Marketing Information System is a continuing and interacting

structure of people, equipment and procedures to gather, sort, analyze, evaluate,
and distribute pertinent, timely and accurate information for use by marketing
decision makers to improve their marketing planning, implementation and control
activities.
Components of Marketing Information System: Trends in the marketing

environment are picked up and analyzed through four subsystems making up the
marketing information system- Internal Accounting System, Marketing
Intelligence System, Marketing Research System and Analytical Marketing System.
Internal Accounting System is the most basic information system used by

marketing executives. It is the system that reports orders, sales inventory levels,
receivable, and payable. By analyzing the information, marketing managers can
spot important opportunities and problems.
 The Order Shipping Cycle: Sales representatives, dealers and customers
dispatch orders to the firm. The order department prepares multi-copy
invoice and sends them to various departments. Out of stock items are
back ordered. Shipped items are accompanied and sent to various
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departments. The company wants to carry out these steps quickly and
accurately. The computer is harnessed to expedite the order shipping
billing cycle.
 Improving the Timeliness or Sales Reports: Marketing executives receive
sales reports sometimes, after the sales have taken place. Many companies
complain that sales are not reported fast enough in their company.
Marketing information system can improve these things rapidly.
 Designing a User Oriented Report System: In designing an advanced sales
information system, the company should avoid certain pitfalls.
The marketing information system should represent a cross between what
managers think they need, what managers really need and what is economically
feasible. Management information system should provide the reports for all
marketing departments. Information system can delete the unwanted system
from the survey and from other departments and prepare reports which are
required by different persons of marketing department.
MIS for Personnel Management

Personnel management has the primary objective of providing suitable
manpower in number and with certain ability, skills and knowledge, as the
business organization demands from time to time. Its goal is to control personnel
cost through continuous increase in manpower productivity resorting to the
following techniques:
 Motivation through Leadership and Job Enrichment
 Grievance Handling
 Structuring the Organization
 Promotion and Rewards through Performance Appraisal
 HRM through Training and Upgrading the Skills
The information and scope of personnel function have resulted in greater
complexity in field. There is need to cope with incredible volume of information
and maintaining it. There is need to classify, reclassify and cross this information.
This can be achieved by computerized personnel system which enables personnel
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management to manage more efficiently and effectively and to provide more

positive services to the organization.
Input for Personnel Development

The following documents serve as the input in personnel information system:
 Productivity Data on the Job
 Industry Data on Manpower, Skills, Qualification
 Bio-Data of Self and Family
 Personnel Application Form
 Attendance and Leave Record
 Appraisal Form
 Appointment Letter
 Wage/ Agreement
 Record Sources of Manpower, University, Institutes, and Companies
Components of Personnel Information
A computer based personnel information system is designed to support the
operational, managerial and decision-making functions of the personnel division
in an organization. Following are the components of the personnel management
information system:
 Establishment Records: Establishment relates to the setting up of budgets
for appropriate staff levels and grades throughout the organization. The
system should encompass these budgeted posts and report on variations
between actual staff numbers and the budget numbers.
 Recruitment Records: Details of all vacancies and applicants should be held
by the system. These should show the status of each vacancy and of each
applicant and should perform as much as possible of the administrative
process. This will generally mean that the system should interface with a
word processing system.
 Personnel Records: These relate to identification data, current and
historical salary and allowances data and various employees attributes such
as grades and key dates.
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 Pensions Records: The system maintains all details of service entitlements

of employees, contribution by both the employee and the organization to
pension scheme, details of dependents, spouse and children, data required
for actuarial purpose to verify the availability of the scheme and details and
entitlements of employees who have become pensioners.
 Training Records: These include data relating to each employees
qualification, skills and experience. The system would also hold details of
internal and external training courses and its relevant details.
 Absence records: The system should allow for the recording of various
absence types like sick leave, special leave etc. Input of this sub-system
should be automatically reflected in the establishment sub-system.
 Industrial relations records: The system should hold data to assist
management in negotiations and planning for alternative strategies. Much
of this would be held for normal administrative purpose. It is the facility to
extract the data in meaningful terms, to able to project forward and to test
the impact of applying various rules and scenarios.
MIS for Financial Management
Financial management function has a primary objective of meeting the financial

needs of the business. The second objective of FM is to meet the statutory
compliance by way of declaring the auditing financial result, submitting reports
and returns to the govt. and Tax authorities and fulfill the obligations to the
shareholders. FM uses variety of tools and techniques like Break Even Analysis,
ABC Analysis, Ratio Analysis, Management Accounting and Cost Analysis.
Input Documents
 Receipts from customers, authorities, employees, shareholders, financial
institution and others.
 Payment to suppliers, authorities, shareholders, financial institutions and
others.
 Data from stock exchange on the shares prices consolidated financial
results of the other companies etc.
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Transactions are payments and receipts and they are documented through
journal vouchers, bills, debit notes, credit notes, receipts and transfer documents.
Application of Financial Management Information System

The major application of financial management information system includes
financial accounting system, which accounts for the financial transactions of the
company and produces financial results for the company. It produces balance
sheet for the company where the performance of the company is published in
standard format prescribed by the govt. The system is made so comprehensive
that it not only collects financial data but also collects data on different matters
such as job, department, and division and so on. It forms a basis for certain
reports which are required by the top level management. The users of the
financial data base are finance managers, cost controller, auditors, material
managers, marketing managers, company secretaries and the top management.
MIS for Production Management

The objective of production management function is to provide manufacturing
services to the organization. This involves the manufacturing of products of a
certain specified quality and within certain costs in a stipulated time, fulfilling the
promises given to the customer.
The production management function is supported by other functions like

production, planning and control, industrial engineering, maintenance and quality
control. It has a very strong interface with materials management function. The
organization of production management differs according to the types of
production i.e. job shop or continuous. It also varies with the production policy of
the organization, like whether the production is initiated against a customer order
or for stock.
The system methodology differs with respect to the manufacturing technology

the organization has adopted. The goals of the production management are fuller
utilization of the manufacturing capacity, minimal rejection, maximum uptime of
plants and equipment meeting the delivery promises. The function is of key
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importance when business strength is in technology and manufacturing, and the

market for product and services exist. The function is pegged with the
responsibility of managing high investment in plant, equipment and machinery. It
also has to control the large labour force at its disposal.
Inputs of Production Management Information System: The production

management is conducted through innumerable transaction. They relate to
planning, issuing and controlling the various task involved in the course of
production.
i) Process Planning Sheet
ii) Quality Assurance Rating Form
iii) Production Schedule
iv) Process Planning Sheet
v) Job Cards
vi) Finished Goods Advice
vii) Material Requisition
viii) Customer Order
ix) Breakdown Advice
x) Material requirement
xi) Production Programme
The production management also uses standards and norms extensively

developed over a period of time as input in the system. These are generally
known as production rate available capacity, labour components, material usage
standards, rejection norms etc.
Documents mentioned above are indicative and may be more or less different,
depending upon the type of production and nature of production of industry. The
input data in each transaction would also vary from industry to industry as would
the production methodology adopted by the organization. The system and
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procedures used by the organization in performing the production function also

vary respectively.
Components of Production Management Information System

The components of production management information system include:
 Sales department to find out what the customer wants and to compare this
with what the firm can provide.
 Design department to design new requirements and make modifications in
established items either to bring them up to date or to make them meet a
specific requirement of the customer.
 Purchasing department buys the material required at the best possible
price and on the most reliable delivery to make the various items either on
one off basis for individual job or replenish material held in the stores on
maximum and minimum levels
 Manufacturing process sees that the parts are produced as economically as
possible for delivery at the time required by the customer and to meet the
standards set by the design department.
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CHAPTER FOUR
MANAGEMENT AND IMPLEMENTATION OF ENTERPRISE
INFORMATION SYSTEMS
An Enterprise Information System (EIS) is any kind of information system which
improves the functions of an enterprise business processes by integration.
Frequently, the term is used only to refer to very large organizations such as
multi-national companies or public-sector organizations. This means typically
offering high quality of service, dealing with large volumes of data and capable of
supporting some large and possibly complex organization or enterprise. An EIS
must be able to be used by all parts and all levels of an enterprise.
The word enterprise can have various connotations. Frequently the term is used
only to refer to very large organizations such as multi-national companies or
public-sector organizations. However, the term may be used to mean virtually
anything, by virtue of it having become the latest corporate-speak buzzword.
Enterprise information systems provide a technology platform that enables

organizations to integrate and coordinate their business processes on a robust
foundation. An EIS is currently used in conjunction with customer relationship
management and supply chain management to automate business processes. An
enterprise information system provides a single system that is central to the
organization that ensures information can be shared across all functional levels
and management hierarchies.
An EIS can be used to increase business productivity and reduce service cycles,
product development cycles and marketing life cycles. It may be used to
amalgamate existing applications. Other outcomes include higher operational
efficiency and cost savings.
Financial value is not usually a direct outcome from the implementation of an

enterprise information system.
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Enterprise systems create a standard data structure and are invaluable in

eliminating the problem of information fragmentation caused by multiple
information systems within an organization. An EIS differentiates itself from
legacy systems in that it self-transactional, self-helping and adaptable to general
and specialist conditions. Unlike an enterprise information system, legacy systems
are limited to department wide communications.
A typical enterprise information system would be housed in one or more data

centers, would run enterprise software, and could include applications that
typically cross organizational borders such as content management systems.
INFORMATION SYSTEM IN THE ENTERPRISE

Kinds of Information Systems
 Organizational Hierarchy
 Organizational Levels
 Information Systems
Operational-level systems
 Support operational managers by monitoring the day-to-day’s elementary
activities and transactions of the organization. e.g. TPS.
Knowledge-level systems
 Support knowledge and data workers in designing products, distributing
information, and coping with paperwork in an organization. e.g. KWS, OAS
Management-level systems
 Support the monitoring, controlling, decision-making, and administrative
activities of middle managers. e.g. MIS, DSS
Strategic-level systems
 Support long-range planning activities of senior management. e.g. ESS
TRANSACTION PROCESSING SYSTEMS (TPS)
Computerized system that performs and records the daily routine transactions
necessary to conduct the business; these systems serve the operational level of
the organization
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• TYPE: Operational-level
• INPUTS: transactions, events
• PROCESSING: updating
• OUTPUTS: detailed reports
• USERS: operations personnel, supervisors
• DECISION-MAKING: highly structured
Examples are: payroll, accounts payable.
OFFICE AUTOMATION SYSTEMS (OAS)
Computer system, such as word processing, electronic mail system, and scheduling
system, that is designed to increase the productivity of data workers in the office.
• TYPE: Knowledge-level
• INPUTS: documents, schedules
• PROCESSING: document management, scheduling, communication
• OUTPUTS: documents; schedules
• USERS: clerical workers
An example is: Document Imaging System
Knowledge Work Systems (KWS)
Information system that aids knowledge workers in the creation and integration of
new knowledge in the organization.
•TYPE: Knowledge-level
• INPUTS: design specifications
• PROCESSING: modelling
• OUTPUTS: designs, graphics
• USERS: technical staff; professionals
An example is: Engineering workstations
DECISION SUPPORT SYSTEMS (DSS)
Information system at the management level of an organization that combines

data and sophisticated analytical models or data analysis tools to support semi-
structured and unstructured decision-making.
•TYPE: Management-level
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• INPUTS: low volume data

• PROCESSING: simulations, analysis
• OUTPUTS: decision analysis
• USERS: professionals, staff managers
• DECISION-MAKING: semi-structured
An example is: Sales Region Analysis
CHARACTERISTICS OF DECISION-SUPPORT SYSTEMS

1. DSS offer users flexibility, adaptability, and a quick response.
2. DSS operate with little or no assistance from professional programmers.
3. DSS provide support for decisions and problems whose solutions cannot be
specified in advance.
4. DSS use sophisticated data analysis and modelling tools.
EXECUTIVE SUPPORT SYSTEMS (ESS)
Information system at the strategic level of an organization that address

unstructured decision-making through advanced graphics and communications.
• TYPE: Strategic level
• INPUTS: Aggregate data; internal and external
• PROCESSING: Interactive
• OUTPUTS: Projections
• USERS: Senior managers
• DECISION-MAKING: Highly unstructured
An example is: 5 years’ Operating Plan
CLASSIFICATION OF IS BY ORGANIZATIONAL STRUCTURE
 Departmental Information Systems

 Enterprise Information System
 Inter-organizational Systems
 NYCE
 SABRE or APOLLO
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Classification of IS by Functional Area

 The accounting information system
 The finance information system
 The manufacturing (operations, production) information system
 The marketing information system
 The human resources information system
SALES & MARKETING SYSTEMS
Systems that help the firm identify customers for the firm’s products or services
develop products and services to meet customer’s needs, promote products and
services, sell the products and services, and provide on-going customer support.
EXAMPLES
System Description Organizational Level
Order Processing Enter, process, and track Operational
orders
Market Analysis Identify customers and Knowledge
markets using data on
demographics, markets,
consumer behaviour and
trends
Pricing Analysis Determine price for Management
products and services
MANUFACTURING AND PRODUCTION SYSTEMS
Systems that deal with the planning, development, and production of products
and services and with controlling the flow of production.
EXAMPLES
Machine Control Control the actions of Operational
machines and equipment
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Computer-Aided Design Design new products Knowledge

(CAD) using the computer
Production Planning Decide when and how Management
many products should be
produced
facilities Location Decide where to locate Strategic
new production facilities
FINANCE AND ACCOUNTING SYSTEMS

Systems that keep track of the firm’s financial assets and fund flows.
EXAMPLES
Accounts receivable Track money owed the Operational
firm
Portfolio Analysis Design the firm’s Knowledge
portfolio of investments
Budgeting Prepare short-term Management
budgets
Profit planning Plan long-term profits Strategic
HUMAN RESOURCES SYSTEMS
Systems that maintain employee records; Track employee skills, job performance,
and training; support planning for employee compensation and career
development.
EXAMPLES
Training and Track employee training, Operational
Development skills and performance
appraisal
Career Pathing Design career path for Knowledge
employee
Compensation Analysis Monitor the range and Management
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distribution of employee
wages, salaries and
benefits
Human Resources Plan the long-term labour Strategic
Planning force needs of the
organization
Examples of Business Processes

Functional Area Business Process
Manufacturing and Production Assembling the product
Checking for quality
Producing bills of materials
Sales and Marketing Identifying customers
Making customers aware of the
product
Selling the product
Finance and Accounting Paying creditors
Creating financial statements
Managing cash accounts
Human Resources Hiring employees
Evaluating employees’ job performance
Enrolling employees in benefits plans
CUSTOMER RELATIONSHIP MANAGEMENT
 Customer relationship management: Business and technology discipline to

coordinate all of the business processes for dealing with customers.
 Supply chain management: Integration of supplier, distributor, and
customer logistics requirements into one cohesive process.
 Supply chain: Network of facilities for procuring materials, transforming
raw materials into finished products, and distributing finished produce to
customers.
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HOW INFORMATION SYSTEMS CAN FACILITATE SUPPLY CHAIN MANAGEMENT

Information systems can help participants in the supply chain:
 Decide when and what to produce, store, and move
 Rapidly communicate orders Track the status of orders
 Check inventory availability and monitor inventory levels
 Track shipments
 Plan production based on actual customer demand
 Rapidly communicate changes in product design
Enterprise Systems
Firm wide information systems that integrate key business processes so that
information can flow freely between different parts of the firm.
Benefits and Challenges of Enterprise Systems

Benefits
 Firm structure and organization: One Organization
 Management: Firm wide Knowledge-based
 Management Processes
 Technology: Unified Platform
 Business: More Efficient Operations and Customer-driven Business
Processes
Challenges
 Daunting Implementation
 High Up-front Costs and Future Benefits
 Inflexibility
Extended Enterprises
 Extended Enterprises: Networks linking systems of multiple firms in an
industry. Also called extended enterprises.
 Vertical industrial networks: Networks for integrating the operations of a
firm with its suppliers.
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 Horizontal industrial networks: Networks for linking firms across an entire

industry.
THE MULTIPLE CONCERNS OF THE INFORMATION SYSTEMS DEVELOPMENT

PROJECTS
The information systems development project should be understood as the
parallel construction and introduction in the operations of an organisation of
many different technical artefacts and organizational changes. In general, the
development process is made up of developing and implementing the following:
• A software application. Central position in the information systems life cycle

model is given to software development. Indeed, most descriptions of
information systems projects concentrate on this. The construction of software is
a complex technical task and, as you will see in the next chapter, the most widely-
used model of IS development, the life cycle model, accommodates several
techniques for getting it right. But this is an impoverished view of information
systems development. Software development is not equivalent to the
development of an information system. Even if an information systems
development project uses ready-made software, bought as a package, there is
plenty of other work left for the project to do. In such cases, the life cycle model,
in a modified form, continues to be useful for organizing the development of
various technology development components and organizational change tasks
from the conception of a new information system until it is in operation.
• Hardware configuration. The development of information systems, that is,

systems processing information in business firms and government organizations,
rarely requires the construction of new hardware. However, hardware
components must be carefully specified according to the requirements of the
particular information system under development. This is often done in parallel
with a market search to find out what computer products are available, their
prices and their performance.
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• Telecommunications network. An important feature of information systems is

the connectivity they support to allow users to communicate within and across an
organization’s boundaries. This involves developing a network infrastructure
within an organisation as well as the use of telecommunications services such as
voice mail, mobile voice mail, broadband, wireless email and data services. For
example, a travel agent developing a new system for customer support will need
to give its customers the option to communicate with them from all over the
world through various means of communication, such as the telephone, internet,
SMS and social networking platforms, such as Twitter or Facebook. An important
aspect of designing an organization’s network and choosing telecommunication
services vendors for the purposes of a new information system is
‘interoperability’, which means the ability of different technologies with different
operating systems to exchange information and work together.
In the case of a travel agent’s customer support system, they will need to handle
communication with and through PCs, laptops, handheld devices from different
manufacturers with different operating systems, and Voice-over-IP (internet
telephony), such as Skype.
• Change management. One of the most fundamental lessons you need to

understand as a student of information systems and later as a professional is that
the implementation of new technology-based information systems leads to
‘modern’ organizational features, such as ‘leaner’, more efficient production or
customer-friendly services only if it is accompanied by sustained effort by the
management of the organisation for re-organisation. New work arrangements will
almost certainly need to be designed, and employees will need to be trained
accordingly. The re-design of work and business processes is so important that it
is likely to be a parallel project in its own right.
When it is not, working out necessary organizational change has to be included in

the IS development project.
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• Facilities for changing over from the existing information system to the new
information-handling procedures. It may be necessary to develop special
applications to convert existing data records to a form amenable to the new
information system’s hardware and software. Also, special publications, videos
and training material may need to be developed to inform employees and
customers about the new system and to introduce them to using it.
• Security and integrity arrangements. These need to be designed and

incorporated both into the technical components software, hardware, and
telecommunications – as well as in the work procedures of the organisation. It is
necessary to design backup and recovery procedures to cope with the risk of
accidents or fraudulent actions. A backup system will allow the organisation to
continue functioning in case any component of the new information system
breaks down or has, for some reason, to be abandoned. It is particularly
important to plan and develop backup procedures which will take over the
operations from the computer and telecommunications systems if they break
down from power failure, software errors or sabotage. A backup system may be
manual or may run on another computer system.
• Arrangements for the effective management of the resulting system. The

organisation must be able to continue to manage effectively its information and
information-processing resources after the new system begins operating.
The development of new information systems involves management decisions

and actions, to make sure that the new system is sustainable and that its use can
be effectively supported and controlled within the overall management of the
organisation. For example, it is important to plan for and secure the necessary
skills for its maintenance and to make sure there are clear responsibilities for data
administration.
Pre-project initiation: Identifying a portfolio of information systems development

projects.
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The question of how we decide to start developing a new information system may
seem to have obvious answers. Consider the following examples of various
pressures or opportunities that seem to present clear needs for an information
system development project:
• Conforming to services and procedures that have become industry standard in
the organization’s sector. For example, the introduction of social networking
services is becoming a common feature in the travel industry. Customers of online
travel agents can read travellers’ comments and ratings on the quality of holiday
resorts, hotels, etc, and can contribute their own comments.
• Pressure from external sources. These include business partners such as

suppliers or customers and mandatory requirements springing from changes in
regulations and changes in the law or its interpretation.
• Coping with a problem, such as overcoming the scarcity of skilled personnel for
certain jobs by introducing computer support for helping people do these jobs.
• Uncertainty about the capacity of existing information systems to cope with

continuing adjustments or with external events. Such was the case in the late ‘90s
with the worries about the ‘millennium bug’ – the fear that program code of old
legacy systems would crash with the change of date from 19XX to 20XX. This led
to many projects to replace legacy systems.
• Exploiting opportunities offered by advances in new technology, such as

introducing handheld devices that link to the organizational databases and
perform transactions remotely to support the work of insurance salespeople
visiting customers.
Yet, there are two problems with initiating projects by spotting pressures and
opportunities. The first is that an organisation may be swamped by requests for IS
projects, spend a great deal of money, and yet the innovative systems may not
serve its business objectives well. What is needed, IS research has suggested, is
systematically linking IS innovation projects with business strategy. The second
problem is that pressures and opportunities – and even business objectives – may
45
not be clear enough to suggest unambiguously the need for a specific information
system.
There may be conflicting views among stakeholders about the desirability of

launching an IS innovation project. In such cases, additional effort is required to
reach a decision about the desirability and feasibility of an IS project. I explore
each of these efforts, strategic planning and structuring the decision for a new
project against vague or conflicting views in the following sections.
Aligning the IS project with Organizational Strategy

A major concern in IS research and practice has been that too often information
systems projects have only a minor or no impact on overall business success.
From a business point of view many IS projects are seen as a waste of valuable
financial resources. To overcome this problem it has increasingly become
imperative to link plans for IS development projects with business objectives. This
is known as ‘business and IT alignment’. Organisations must carefully work out
business strategies and then work out plans for information systems aligned with
those business plans.
The basis for this alignment is the organization’s strategic plan, which they see as
‘a road map that suggests directions for resources and activities for the future’
(p.42), answering three fundamental questions:
 Where are we now?

 Where do we want to be?
 How can we get there?
It is useful to distinguish between strategic and operational business objectives.

Strategic objectives should state overall aims, such as increasing efficiency and
productivity, improving customer services, entering a new market and
decentralizing the organizational structure.
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Operational objectives derive from strategic objectives and are much more
specific in terms of action and limited in timespan. For example, the strategic
objective to increase efficiency may be translated to the operational objective to
cut down administration costs and this may lead to a specific effort to redesign
some aspects of the work of a department as well as appropriate information
communication and procedures. Note that, McNurlin et al. (2009) p.133 also
include ‘tactical planning’ as an intermediate category of planning for resource
allocation and project selection. The main lessons you need to learn from the
literature about this discussion is that planning for IS projects should seek to
identify and allocate resources and initiate action for IS innovation that
contributes to an organization’s objectives. Planning takes place at several levels
of management; starting from the setting of overall strategic business and IS
innovation objectives by the executives and senior managers, and gradually
working out more specific action plans for projects involving middle managers
and operations staff.
The organizational strategic plans, as well as the more specific tactical and
operational plans, help managers to identify projects that support organizational
goals and objectives. In the light of an organizational strategy, IS managers can
develop an overall plan for a portfolio of information systems development
projects, taking a long-term perspective and avoiding duplication of effort by
individual departments and redundancy of information resources. They can
develop criteria for prioritizing projects and measuring their success. If somebody
proposes the development of a new IS, to introduce, for example, some new
technology that has become available, the merits of the proposal should be
judged in relation to business strategy.
Does the proposed system help to realize business objectives?
Such a planning exercise is essential to win support from top management, which
is considered important for project success3. It is also important because it
identifies how big a change a proposed information system requires in terms of
business processes and people’s jobs. In this way a project manager can align a
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systems development project with other projects pursuing business process

redesign and can prepare employees for new jobs by giving them early
information about changes to their jobs and appropriate training.
Forming the information systems development project, this idea of aligning an

organization’s overall business strategy with a portfolio of information systems
and technologies is clearly depicted in ‘Traditional Strategy Making’ in McNurlin
et al. (2009),
We must ask, however, whether this approach misses opportunities for strategic
change that ICT may enable. The idea that business strategy should precede
information systems plans became widely accepted in the 1980s.The problem
with this idea is that it risks wasting opportunities for innovation and new
business that information systems developments may provide. Information
systems developments tend to be reactive to business strategies, missing the
possibility of proactive information systems-based business success. If an
organisation decides its IS projects on the basis of thinking how to serve its
existing business strategy, it may miss new strategic possibilities of new ICT. It
may never form visions for new, IT-enabled business models. In other words,
instead of separating the planning of business strategy from IS innovation, a more
effective alignment of IT and business objectives is achieved by considering
business strategy and IS innovation simultaneously at all levels of planning, and
increasingly this is what happens. Executives responsible for IS and IT – the CIO
and CTO – should be involved in developing business strategy.
Think about some of the most successful companies whose business crucially
depends on continuous IS innovation, such as Amazon and Google. In these highly
successful companies, as well as in many other organizations that do business
electronically (e-business, e-commerce, e-government) planning for their business
strategy is inseparable from planning IS innovation.
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IS planning
Various methods have been proposed and used to help managers and IS
professionals spot the strategic opportunities offered by new ICTs and align IS
development projects to business strategies and judge the merits of IS project
proposals. McNurlin et al. (2009) outline eight planning techniques on pp.145–69
which you must read and fully understand.
Some of these techniques were first developed in the 1970s and ‘80s, when many
organizations introduced their first systems based on mainframes and stand-
alone personal computers. They were useful tools for practitioners and continue
to be used, particularly by consultants who have to make sense of a client’s
business and IS quickly and to communicate with them in a simple and clear way.
This is the case with the methods of Critical Success Factors (CSF), and scenario
planning, which are generic techniques that prompt managers to structure their
thinking about information requirements that will be crucial for the future
survival and success of their various business areas. Some old techniques have
been extended over the years to address the planning needs of organizations that
are already equipped with a plethora of hardware and software applications and
are preoccupied with the challenges of internet-based systems. For example,
Nolan’s model of stages of growth was originally devised to help managers
balance the extent to which they encouraged projects that diffused computer-
based information systems and databases with the control they had to exert to
contain expenditure and achieve standardization. As McNurlin et al. (2009) Figure
4-5 on p.146 shows, this model has been extended to help managers map their
position regarding proliferation of innovation and required level of control for
internet-based projects.
Other techniques have been modified more substantially to address the planning
needs for the current technology and business context, which we outlined in
Chapter 2. This is the case with Michael Porter’s competitive forces model4 and
value chain analysis.
Porter’s model suggests five competitive forces that affect an organisation:
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• The existing competitors in an industry

• The potential new entrants into an industry
• Substitute products and services that customers might use
• Suppliers of raw material and inputs
• Consumers of products or services.
These five competitive forces define the context within which business policy and
information systems plans have to deliver value. Thus, Porter’s model takes its
starting point from an analysis that sets business objectives and then identifies IS
projects that can serve these objectives. It misses the opportunities for new
radically different ways of altering the game of competition, such as Google’s
business model that provides its primary products – information – for free, and
earning income from advertising. Thus we can see the three emerging forces
model by Downes, introduced by McNurlin et al. (2009), pp.151–52, as an
extension of Porter’s model to direct managers’ attention to addressing the
strategic opportunities provided by digitalization, globalization and deregulation.
Porter’s ‘value chain’ analysis has also been extended to address the needs and
opportunities of the internet era. In its original version, the value change model
identified the sequence of key activities that a firm performs to deliver a product
or service that is valued by the customer.
This concept proved useful for information systems planning, because it provides
a framework to relate information systems to the key activities of the
organization and their linkages. More recently, McNurlin et al. (2009) suggest, this
analysis has been extended with techniques helping managers to consider ‘virtual
value chains’. Adding value by gathering, organizing, selecting, synchronizing and
distributing information (which is what
internet-based information systems can do) needs to be considered with regard
to global marketplaces, because with internet-based information systems
organizations can overcome physical restrictions of space.
Thinking in terms of virtual value chains, organizations can make physical

operations, no matter where they are located, visible through systems that
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provide detailed information of their production processes. They can then start
managing them without the need to have all production and management
activities being physically present at the same place, that is, virtually meaning that
their geographic location is not important. The development of information
systems that allow organizations to manage their activities remotely allows them
to rethink what the most effective ways of offering value services to their
customers are and whether they can introduce new services and products.
McNurlin et al. (2009) also outline two techniques – e-business value matrix and
linkage analysis planning – that are designed to address the planning needs of the
contemporary IS innovation setting. The e-business value matrix, while rooted in
the same idea of exploring the possibility of adding value through better ways of
collecting and handling information, encourages the search for innovative IS
projects that exploit the potential of the internet. The result of this technique is a
portfolio of projects, which need to be assessed in terms of their degree of
‘newness’ and criticality for the organization. The technique suggests four
categories for classifying projects of the portfolio:
• Relatively short projects (three-to-six months) aiming to deliver systems

supporting fundamentally new ways of working in narrow areas of work, which
are not very risky and aim at localized benefits, mainly cost savings.
• Projects aiming to promote operational excellence, that is, to improve some

aspect of an organization’s performance, such as management control or
customer satisfaction, and require not only the introduction of some new ICT
tools, but also re-engineering of work processes. They are somewhat expensive,
long (about 12 months) and risky, and have high visibility. Such projects should
not be experimental and use untested new technology.
• Projects experimenting with new technologies and ways of organizing in

specific, limited areas of activities; these projects should be understood as having
a high risk of failure, but are important to explore innovation possibilities for
staying ahead of the competition.
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• High risk and highly innovative large-scale projects that may make a
breakthrough for an organisation. Obviously such projects cannot be decided
frivolously because they can make or break a company.
Their decisions will need to involve top management and require careful
consideration of the market context of the organization and the technologies
involved in the innovation.
Finally, the linkage analysis planning technique helps managers to realize that
their business extends beyond their organizational boundaries and devise a plan
for projects aiming at developing electronic channels of communication and
collaboration with the other organizations they do business with. The starting
assumption of this technique is that modern organizations are not isolated but
meshed in relationships with suppliers, buyers and strategic partners. Therefore,
successful business firms control the electronic interconnections of such inter-
organizational business. It therefore guides managers of a company to identify
who are the most important organizations they do business with and what is their
power to determine threats and opportunities for the company. Managers should
trace an ‘extended enterprise diagram’, which depicts their supply chain and
value added network that includes the organizations they do business with. The
extended enterprise map can then be used to identify what inter-organizational
electronic channels are of strategic importance for the company and take action
to make sure that they have adequate information systems in place.
Three routes for IS planning

You will have realized that IS planning is a complex process that identifies areas of
IS innovation that will contribute, either modestly or radically, to a future success
of an organisation. Clearly no single method or technique covers all relevant
aspects for the successful development of an IS infrastructure to provide for
future organizational needs.
Drawing from Earl (1989) we can distinguish three different planning routes, each
supported by different methods:
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1. The first route aims at aligning information systems objectives with

business strategy. The planning process begins with the determination of
significant business concerns and proceeds to specify appropriate information
systems to address them. The CSF method and Porter’s models and value chain
analysis, as well as their recent extensions, are suitable for this route.
2. The second route aims at linking plans for future information systems
development with the current information systems infrastructure capacity of the
organisation, which is particularly important to avoid making unrealistic plans.
Nolan’s stages of growth method can be used to do this.
3. The third route allows for pro-active thinking, giving the opportunity to
raise innovative ideas that may lead to new business strategies. E-business value
matrix and linkage analysis planning encourage such thinking for technology-
driven innovation.
RECONCILING THE DYNAMIC NATURE OF IS INNOVATION WITH PLANNING
Belief in methodical information systems planning, which has prevailed in the

literature in the last decade, has not gone unchallenged. There are many who
doubt that strategic decisions can be structured through methodical practices.
They voice concern that emphasis on method and form misdirects organizations
into stifling their truly creative human resources. Information systems planning
methods, they claim, at best can lead following the leaders of a business sector,
but they cannot generate the innovation that is needed to become a leader.
McNurlin et al. (2009), while suggesting that IS planning is good practice, point
out (at the beginning of Chapter 4) that detailed long-term planning is unlikely to
be useful in the contemporary fast-changing technological and business world. A
closer link between planning and action is required. Instead, they suggest a
‘sense-and respond’ planning approach, which requires managers to be alert and
spot new opportunities in business and technology and try quick responses with
experimental projects. However, such an approach, which will lead to many
different IS innovation strategies being tested simultaneously, may create
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confusion and waste. The various experimental plans should still need to be
placed within an overall business and innovation strategy.
Tinkering, improvisation, care and cultivation, rather than planning

A more radical critique of IS planning is presented by Ciborra (1994), who rejects
the notion of business and IT strategic alignment. He argues that the notion of
strategic alignment, which is heavy in planning, misrepresents the way
organizations go about IS innovation. Instead, he highlights the importance of
those decisions and actions that are not formally or rationally planned, but are
taken spontaneously, on the spur of the moment, as an actor experiences the
situation arising from the progress of an innovation. Ciborra advises managers to
rely more on tinkering and improvisation and do little formal planning.
Improvisation relies on an actor’s past experience and ability to comprehend the
situation and spontaneously deploy relevant competent behaviour. His critique
on the emphasis that has been given to formal, methodical, planned action and
his efforts to shift emphasis towards improvisation is based on a
‘phenomenological’ perspective of human behaviour. Roughly speaking, this is a
philosophical concept regarding the way people come to understand and act in
the world that emphasizes our ability to make sense of the world on the basis of
everyday experience rather than abstract, rational thinking. Rather than trying to
discover theories and models to capture the way people and organizations should
behave and then expect that they should be followed to achieve expected
organizational outcomes,
Ciborra suggests that IS managers should try to understand how people behave in
the particular situations they are faced with. This approach emphasizes the
experience people have in the environment they are familiar with and the way
they have learned to perceive and respond to their immediate environment.
From such a perspective, Ciborra argues, the general models for rationally
calculated action and methodical organization of systems development rarely
work. Instead, IS innovation involves a great deal of spontaneous action and
idiosyncratic decision-making. Rather than having preconceived views of
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successful outcomes and expecting managers to control activities and supervise

methodical tasks to achieve them, organizations should recognize that innovation
is a process that addresses the unknown and requires ability to respond to
unforeseen circumstances. It also requires empathy and caring for the
technologies that are put together to form new information systems. This is a
very different attitude from that of pre-determining objectives, and subsequently
developing technical mechanisms to fulfill them through formal thinking and
activities. Notice the contrast in the language used by Ciborra (1997). Rather than
talking about planning, correct formal design and successfully meeting business
objectives, he suggests that we think in terms of ‘caring’, ‘hospitality’ and
‘cultivation’ of technology to construct infrastructures that assist people to
communicate, make sense of what they do and act effectively.
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CHAPTER FIVE
ENTERPRISE RESOURCE PLANNING SYSTEM
From a technology perspective, ERP is the software infrastructure that links an
enterprise’s internal applications and supports its external business processes.
ERP applications are modular, and the modules are integrated with each other to
expand capabilities.
An ERP helps managers run the business from front to back. Departments can
easily stay informed of what’s going on in other departments that impact their
operations or performance. Being informed of potential problems and having the
ability to work around them improves the company’s business performance and
customer relations. For example, an ERP enables a manufacturer to share a
common database of parts, products, production capacities, schedules,
backorders, and trouble spots. Responding quickly and correctly to materials
shortages, a spike in customer demand, or other contingency is crucial because
small initial problems are usually amplified down the line or over time.
• Bring silos of information together to enable managers to really understand

what is going on
• Provide the information access, integrated business processes, and modern

technology platform necessary to become and remain competitive
• Support all, or a great majority, of a company’s business functions and

processes
• Expand a company’s reach beyond its internal networks to its suppliers,

customers, and partners.
An Enterprise resource planning system is a fully integrated business

management system covering functional areas of an enterprise like Logistics,
Production, Finance, Accounting and Human Resources. It organizes and
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integrates operation processes and information flows to make optimum use of

resources such as men, material, money and machine.
Enterprise resource planning promises

 one database,
 one application,
 one user interface for the entire enterprise, where once disparate systems
ruled manufacturing, distribution, finance and sales.
EVOLUTION OF ERP
In the ever-growing business environment, the following demands are placed on

the industry:
 Aggressive cost control initiatives
 Need to analyze costs/revenues on a product or customer basis
 Flexibility to respond to changing business requirements
 More informed management decision making
 Changes in ways of doing business.
One or more applications and planning systems have been introduced into the
business world for crossing some of hurdles and achieving growth. They are:
 Management Information Systems (MIS)

 Integrated Information Systems (IIS)
 Executive Information Systems (EIS)
 Corporate Information Systems (CIS)
 Enterprise Wide Systems (EWS)
 Material Resource Planning (MRP)
 Manufacturing Resource Planning (MRP II)
 Money Resource Planning (MRP III)
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ERP has evolved from the system known as MRPII (Manufacturing Requirement
planning) system with the integration of information between Vendor, Customer
and Manufacturer using networks such as LAN, WAN and INTERNET etc.
MRPII system again evolved from MRP (Material Requirement Planning) system.
MRP is a technique that explodes the end product demands obtained from
Master Production Schedule (MPS) for the given product structure which is taken
from Bill of Material (BOM) into a schedule of planned orders considering the
inventory in hand.
MRPII has a number of drawbacks. The main problem is that it has not been able
to effectively integrate the different functional areas to share the resources
effectively.
 The traditional application systems, which the organizations generally
employ, treat each transaction separately
 They are built around the strong boundaries of specific functions that a
specific application is meant to cater.
For an ERP, it stops treating these transactions separately as stand-alone activities

and considers them to be the part of the inter-linked processes that make up the
business.
Enabling Technologies:
 It is not possible to think of an ERP system without sophisticated
information technology infrastructure.
 It is said that, the earlier ERP systems were built only to work with huge
mainframe computers.
 The new era of PC, advent of client server technology and scalable
Relational Database Management Systems (RDBMS)

 Most of the ERP systems exploit the power of Three Tier Client Server
Architecture.
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 The other important enabling technologies for ERP systems are Workflow,
Work group, Group Ware, Electronic Data Interchange (EDI), Internet,
Intranet, Data warehousing, etc.
CHARACTERISTICS OF ERP
Any system has to possess few key characteristics to qualify for a true ERP
solution.
These features are:
1. Flexibility: An ERP system should be flexible to respond to the changing
needs of an enterprise. The client server technology enables ERP to run
across various database back ends through Open Database Connectivity
(ODBC).
2. Modular & Open: ERP system has to have open system architecture. This
means that any module can be interfaced or detached whenever required
without affecting the other modules. It should support multiple hardware
platforms for the companies having heterogeneous collection of systems. It
must support some third party add-ons also.
3. Comprehensive : It should be able to support variety of organizational
functions and must be suitable for a wide range of business organizations.
4. Beyond The Company : It should not be confined to the organizational
boundaries, rather support the on-line connectivity to the other business
entities of the organization.
5. Best Business Practices : It must have a collection of the best business
processes applicable worldwide. An ERP package imposes its own logic on a
company’s strategy, culture and organization.
FEATURES OF ERP
Some of the major features of ERP and what ERP can do for the business system
are :
 ERP provides multi-platform, multi-facility, multi-mode manufacturing,
multi-currency, multi-lingual facilities.
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 It supports strategic and business planning activities, operational planning

and execution activities, creation of Materials and Resources..
 ERP covering all functional areas like manufacturing, selling and
distribution, payables, receivables, inventory, accounts, human resources,
purchases etc.
 ERP performs core activities and increases customer service, thereby
augmenting the corporate image.
 ERP bridges the information gap across organizations.
 ERP provides complete integration of systems not only across departments
but also across companies under the same management.
 ERP is the solution for better project management.
 ERP allows automatic introduction of the latest technologies like Electronic
Fund Transfer (EFT), Electronic Data Interchange (EDI), Internet, Intranet,
Video conferencing, E-Commerce etc.
 ERP eliminates most business problems like material shortages,
productivity enhancements, customer service, cash management, inventory
problems, quality problems, prompt delivery etc.
 ERP provides intelligent business tools like decision support system,
Executive information system, Data mining and easy working systems to
enable better decisions.
Why Companies Undertake ERP

1. Integrate financial information: As the CEO tries to understand the
company’s overall performance, he may find many different versions of the
truth. ERP creates a single version of the truth that cannot be questioned
because everyone is using the same system.
2. Integrate customer order information: ERP systems can become the place
where the customer order lives from the time a customer service
representative receives it until the loading dock ships the merchandise and
finance sends an invoice. By having this information in one software system
companies can keep track of orders more easily, and coordinate
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manufacturing, inventory and shipping among many different locations

simultaneously.
3. Standardize and speed up manufacturing processes: Manufacturing
companies -especially those with an appetite for mergers and
acquisitions—often find that multiple business units across the company
make the same transaction / recording / report using different methods
and computer systems. ERP systems come with standard methods for
automating some of the steps of a manufacturing process.
4. Reduce inventory: ERP helps the manufacturing process flow more
smoothly, and it improves visibility of the order fulfillment process inside
the company. That can lead to reduced inventories of the materials used to
make products (work-in-progress inventory), and it can help users better
plan deliveries to customers, reducing the finished good inventory at the
warehouses and shipping docks.
5. Standardize HR information: Especially in companies with multiple business
units, HR may not have a unified, simple method for tracking employees’
time and communicating with them about benefits and services. ERP can fix
that.
BENEFITS OF ERP
Following are some of the benefits they achieved by implementing the ERP
packages:
 Gives Accounts Payable personnel increased control of invoicing and
payment processing and thereby boosting their productivity and
eliminating their reliance on computer personnel for these operations.
 Reduce paper documents by providing on-line formats for quickly entering
and retrieving information.
 Improves timeliness of information by permitting posting daily instead of
monthly.
 Greater accuracy of information with detailed content, better presentation,
satisfactory for the auditors.
 Improved cost control.
 Faster response and follow-.up on customers.
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 More efficient cash collection, say, material reduction in delay in payments

by customers.
 Better monitoring and quicker resolution of queries.
 Enables quick response to change in business operations and market
conditions.
 Helps to achieve competitive advantage by improving its business process.
 Improves supply-demand linkage with remote locations and branches
indifferent countries.
 Provides a unified customer database usable by all applications.
 Improves International operations by supporting a variety of tax structures,
invoicing schemes, multiple currencies, multiple period accounting and
languages.
 Improves information access and management throughout the enterprise.
 Provides solution for problems like Y2K and Single Monetary Unit (SMU) or
Euro Currency.
BUSINESS PROCESS REENGINEERING (BPR)
ERP is a result of a modern Enterprise’s concept of how the Information System is

to be configured to the challenging environments of new business opportunities.
However merely putting in place an information system is not enough. Every
company that intends to implement ERP has to reengineer its processes in one
form or the other. This process is known as Business Process Reengineering (BPR).
Some Typical processes with descriptions

Process Description
· Forecasting Shows sales, Fund Flows etc. over a
long period of time say next two years
· Fund management The necessity of funds and the way to

raise these funds.
· Price Planning Uncertainty and Risk factors to be
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considered.
Simulation with “What if” type analysis
Determines the price at which products
are offered. Involves application of
technology to pricing support such as
commercial database services. Also
feedback and sensitivity analysis
· Budget Allocation Using computerized algorithms to

estimate
desirable mix of funds allocated to
various functions.
· Material requirement Process of making new products from

· planning raw materials and include production
scheduling, requirement planning. Also
activities for monitoring and planning of
actual production.
· Quality control Takes care of activities to ensure that

the products are of desired quality.
DEFINITION OF BPR
BPR is the fundamental rethinking and radical redesign of processes to achieve
dramatic improvement, in critical, contemporary measures of performance such
as cost, quality, service and speed,”
 Dramatic achievement means to achieve 80% or 90% reduction (in say,
delivery time, work in progress or rejection rate) and not just 5%, 10%
reduction.
 Radical redesign means BPR is reinventing and not enhancing or improving.
In a nutshell, a “cleansiate approach” of BPR says that “Whatever you were
doing in the past is all wrong”, do not get biased by it, use new system to
redesign it afresh.
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 Fundamental rethinking means asking the question “why do you do what

you do”, thereby eliminating business process altogether if it does not add
any value to the customer.
BUSINESS ENGINEERING
Business Engineering has come out of merging of two concepts

1 Information Technology
2. Business Process Reengineering.
 Business Engineering is the rethinking of Business Processes to improve
speed, quality and output of materials or services.
 The main point in business engineering is the efficient redesigning of
company’s value added chains.
 Value added chains are a series of connected steps running through a
business which when efficiently completed add value to enterprise and
customers.
 Information technology helps to develop business models, which assist in
redesigning of business processes.
Business Engineering is the method of development of business processes

according to changing requirements.
BUSINESS MANAGEMENT
 ERP merges very well with common business management issues like
Business Process Reengineering, total quality management, mass customization,
service orientation, and virtual corporation etc.
 The basic objective of implementing an ERP program is to put in place the
applications and infrastructure architecture that effectively and completely
support the Enterprise’s business plan and business processes.
 When an enterprise does not have optimized business processes, the ERP
implementation needs a process reengineering which enable to capture
knowledge of the experts into the system thus gaining considerable
benefits in productivity.
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 The first step in implementation of ERP is the development of a Business

process model showing business process as one large system and the
interconnection and sequence of business subsystems or processes that
drive it.
BUSINESS MODELLING
First of all, a model consisting of core business processes or activities of the

business is to be developed. This is the diagrammatic representation of Business
as a large system with interconnection of subsystems or processes that it
comprises of.
The Data model consists of two elements.

1. A diagram describing various Business processes and their interactions.
2. An underlying Data Model.
Business modeling in practice

 Most of the ERP packages available today enable flow charting business
processes using standard flow chart symbols.
 By connecting symbols used for users, events, tasks/functions, and other
organizational information, complex business information can be analysed .
 For example SAP which is a popular ERP package uses event driven process
chain (EPC) methodology to model Business Process.
 Business Modeling is the basis by which one can select and implement a
suitable ERP package.
THE IMPLEMENTATION OF ERP
The success of an implementation mainly depends on how closely the

implementation consultants, users and vendors work together to achieve the
overall objectives of the organization.
The implementation consultants have to understand the needs of the users,

understand the prevailing business realties and design the business solutions
keeping in mind It is the users who will be driving the implementation and
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therefore their all these factors active involvement at all stages of

implementation is vital for the overall success of implementation.
It is worthwhile to remember that ERP is an enabling tool, which makes one do his
work better, which naturally needs additional efforts.
During the course of implementation the standard package may undergo changes
which may be a simple one or a major ‘functionality’ change.
Implementing such changes is known as Customization.

 The contents of the package are known as modules and the modules are
further divided into Components.
 The roles and responsibilities of the employees have to be clearly
identified, understood and the employees will have to accept new
processes and procedures configured in the system laid down in the ERP
system.
 At the same time these processes and procedures have to be simple and
user friendly.
 A well-managed and implemented ERP package can give a 200 percent
return on investment where as a poorly implemented one can yield a
return on investment as low as 25 percent.
Key Planning and Implementation decisions: A number of the key decisions that
need to be made when this discussion looks at considering an enterprise
integration effort.
ERP or Not to ERP?

The decision to implement an ERP should be based on a business case rational.
 Technology justifications include the need to address the Y2K problem (in
most cases, this is no longer applicable), integrate the functions of
disparate systems, merge acquisitions with new capabilities such as web
accessibility into the business environment.
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 Process improvements address actions that result in personal and IT cost

reductions.
 Productivity improvements include the need to close the financial cycle and
increase the overall production from an enterprise standpoint.
 Strategic considerations to implement new strategies not supported by the
current software, improve customer service and satisfaction, respond to
competitive responsiveness.
Follow Software’s Processes or Customize?

 This key decision may determine the success or failure of the ERP effort.
 If the organization decides to follow the process of the software, this will
result in the organization following Best practices within its sector, thereby
giving it a chance to improve and standardize their processes.
 However, this processes approach can create significant turmoil by
requiring employees to change their ways of doing business.
 If the organization decides to stick with its current processes and customize
the software to fit these processes, the organization obviously will not have
to experience the pain and stress
 However, it will be very costly to customize and maintained the software
over time.
In-house or Outsource?
Outsourcing
 IT has the advantage of allowing the organization to continue to focus on its
core the mission,
 Avoid a relative substantial financial commitment (in some cases) and
minimize impact on the MIS department.
 On the downside, providing opportunities to those external to the
organization may poorly impact employee morale and may give rise to
security issues.
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In-house
 Implementation include: a better match between the software and the
business, applications optimized for the organization and better maintained
security.
 However, an in-house approach cannot be accomplished if there is a lack of
internal expertise and personnel to support such an effort.
“Big Bang” or Phased Implementation?

A “big bang” implementation involves having all modules at all locations
implemented at the same time. Characteristics of this approach include no need
for temporary interfaces, limited requirement to maintain legacy software, cross-
module functionality and overall cost if no contingencies arise.
Phased implementation, one or a group at a time, often a single location at a

time. Benefits of approach include: a smoothing of resource requirements, an
ability to focus on a particular module, avail-ability of existing legacy systems, as
fall-back, reduced risk, the knowledge gained with each phase and the usefulness
of demonstrable working system.
The wave approach: This approach involves the application of different waves of
change to different business units or regions.
Parallel implementation: This approach involves both ERP and an existing system
running together for a period of time.
Instant cut-overs (flip-the-switch): This approach is lower in cost motivates users

to convert to the new system and reduces the need for redundant systems,
however it tends to be risky, stressful to users and requires a high level of
contingency planning.
ERP Implementation Methodology

Several steps are involved in the implementation of a typical ERP package.
These are:
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1. Identifying the Needs: Some of the basic questions, which are to be

answered, are
 Why should an ERP package be implemented?
 Will it improve profitability?
 Can the delivery times of products be reduced?
 How does it improve customer satisfaction in terms of quality, cost,
delivery time and service?
 Will it help to reduce cost of products?
 How can it help to increase business turnover and at the same time reduce
manpower?
 Will it be possible to reengineer the business processes?
2. Evaluating the “AS IS” situation of the business:

To understand the present situation of the business, the various functions should
first be listed.
 Total time-taken by the business processes.
 Number of decision points existing in the present scenario.
 Number of Departments/Locations of businesses process.
 The flow of information and its routing.
 The number of reporting points currently available.
3. ‘Would Be’ situation:

Deciding the desired ‘Would Be’ situation: The concept of ‘Benchmarking’ is used
to see that processes achieved are the best in industry. Benchmarking is done on
various factors like cost, quality, service etc. This concept enables to optimize the
processes to gain overall benefits.
4. Reengineering the business process: Reengineering of business processes is

done to
 Reduce the business process cycle time.
 To reduce the number of decision points to a minimum.
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 Streamlining the flow of information and eliminating the unwanted flow of

information.
5. Evaluation of various ERP packages: Evaluation of ERP packages are done

based on the following criteria:-
Flexibility: It should enable organizations to respond quickly by leveraging

changes to their advantage, letting them concentrate on strategically expanding
to address new products and markets.
Comprehensive: It should be applicable across all sizes, functions and industries. It

should have in-depth features in accounting and controlling, production and
materials management, quality management and plant maintenance, sales and
distribution, human resources management and plant maintenance, sales and
distribution, human resources management, and project management.
Beyond the company: It should support and enable inter-enterprise business

processes with customers, suppliers, banks, government and business partners
and create complete logistical chains covering the entire route from supply to
delivery, across multiple geographies, currencies and country specific business
rules.
Best business practices: The software should enable integration of all business
operation in an overall system for planning, controlling and monitoring and offer
a choice of multiple ready-made business processes including best business
practices that reflect the experiences, suggestions and requirements of leading
companies across industries. In other words, it should intrinsically have a rich
wealth of business and organizational knowledge base.
New technologies: It should incorporate cutting-edge and future-proof

technologies such as object orientation into product development and ensure
inter-operability with the Internet and other emerging technologies. It should be
Y2K and Euro compliant, group up.
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Other factors to be considered are:

• Global presence of package.
• Local presence.
• Market Targeted by the package.
• Price of the package.
• Obsolescence of package.
• Ease of implementation of package.
• Cost of implementation.
• Post-implementation support availability.
6. Finalization of the ERP package: Finalization of the ERP package can be

done by making a comparison of critical factors through a matrix analysis.
7. Installation of Hardware and Networks: This work is carried out in a phased

manner depending on the schedule of implementation and need of the hardware
components.
8. Finalizing the Implementation Consultants: The factors of selection for

consultants are:
 skill set
 industry specific experience
 cost of hiring consultants
9. Implementation of ERP package

 formation of team
 preparation of plan
 mapping of business process to package
 gap analysis
 customization
 development of user specific reports and transaction
 uploading of data from existing system
 test run
71
 user training
 Parallel run.
 Concurrence from user
 Migration to the new system
 User documentation.
 Post-implementation support.
 System monitoring and fine tuning
Implementation Guidelines For ERP: There are certain general guidelines, which
are to be followed before starting the implementation of an ERP package.
1. Understanding the corporate needs and culture of the organization and
then adopt the implementation technique to match these factors.
2. Doing a business process redesign exercise prior to starting the
implementation.
3. Establishing a good communication network across the organization.
4. Providing a strong and effective leadership so that people down the line are
well motivated.
5. Finding an efficient and capable project manager
6. Creating a balanced team of implementation consultants who can work
together as a team.
7. Selecting a good implementation methodology with minimum
customization.
8. Training end users.
9. Adapting the new system and mating the required changes in the working
environment to make effective use of the system in future.
POST IMPLEMENTATION
To start at the beginning, many post implementation problems can be traced to

wrong expectations and fears. The expectations and fear that corporate
management has from an ERP have been greatly published. Of course, some of
the blame for this is on the ERP vendors and their pre-implementation sales hype.
A few of the popular expectations are:
72
• An improvement in processes
• Increased productivity on all fronts.
• Total automation and disbanding of all manual processes.
• Improvement of all key performance indicators.
• Elimination of all manual record keeping.
• Real time information systems available to concerned people on a need
basis.
• Total integration of all operations.
ERP implementation also engenders a host of fears. Some of them are:

• Job redundancy.
• Loss of importance as information is no longer an individual prerogative.
• Change in job profile.
• An organizational fear of loss of proper control and authorization.
• Increased stress caused by greater transparency.
• Individual fear of loss of authority.
Balancing the expectations and fears is a very necessary part of the

implementation process.
RISK AND GOVERNANCE ISSUES IN AN ERP
Organizations face several new business risks when they migrate to real-time,
integrated ERP systems. Those risks include:
 Single point of failure: Since all the organization’ data and transaction
processing is within one application system and transaction processing is
within one application system. Structural changes significant personnel and
organizational structures changes associates with reengineering or
redesigning business processes.
 Job role changes: transition of traditional user’s roles to empowered-based
roles with much greater access to enterprises information in real time.
 Online, real-time: An online real-time system environment requires a
continuous business environment capable of utilizing the new capabilities
73
of the ERP application and responding quickly to any problem requiring of

re-entry of information.
 Change management: It is challenging to embrace a tightly integrated
environment when different business processes have existed among
business units for so long. The level of user acceptance of the system has a
significant influence on its success. Users must understand that their
actions or inaction have a direct impact upon other users and, therefore,
must learn to be more diligent and efficient in the performance of their
day-today duties. Considerable training is therefore required for what is
typically a large number of users.
 Distributed computing experience: Inexperience with implementing and
managing distributed computing technology may pose significant
challenges.
 Broad system access: Increased remote access by users and outsiders and
high integration among application functions allow increased access to
application and data.
 Dependency on external assistance: Organization accustomed to in-house
legacy systems may find they have to rely on external help. Unless such
external assistance is properly managed, it could introduce an element of
security and resource management risk that may expose the organizations
to greater risk.
 Program interfaces and data conversions: Extensive interfaces and data
conversions from legacy systems and other commercial software are often
necessary. The exposures of data integrity, security and capacity
requirements for ERP are therefore often much higher.
 Audit expertise : Specialist expertise is required to effectively audit and
control an ERP environment. The relative complexity of ERP systems has
created specialization such that each specialist may know only a relatively
small fraction of the entire ERP’s functionality in a particular core module,
More recently, some of the additional risks and good governance issues
introduced by the enabled ERP environments concern:
74
Single sign on: It reduces the security administration effort associated with
administrating web-based access to multiple systems, but simultaneously
introduces additional risk in that an incorrect assignment of access may result in
inappropriate access to multiple systems.
Data content quality: As enterprise applications are opened to external suppliers

and customers, the need for integrity in enterprise data becomes paramount.
Privacy and confidentiality: Regularity and governance issues surrounding the

increased capture and visibility of personal information, i.e. spending habits.
Why do ERP projects fail so often?

 If the people in the different departments that will use ERP don’t agree
that the work methods embedded in the software are better than the ones
they currently use, they will resist using the software or will want IT to
change the software to match the ways they currently do things. This is
where ERP projects break down.
Political fights erupt over how or even whether the software will be installed. IT
gets bogged down in long, expensive customization efforts to modify the ERP
software to fit with powerful business barons’ wishes.
 Customizations make the software more unstable and harder to maintain
when it finally does come to life. Because ERP covers so much of what a
business does, a failure in the software can bring a company to a halt,
literally.
 The mistake companies make is assuming that changing people’s habits
will be easier than customizing the software. If people are resistant to
change, then the ERP project is more likely to fail.
How does ERP fit with e-commerce?

 It assumes that the only people handling order information will be your
employees, who are highly trained and comfortable with the tech jargon
embedded in the software. But now customers and suppliers are
75
demanding access to the same information your employees get through the
ERP system - things such as order status, inventory levels and invoice
reconciliation, except they want to get all this information simply, without
all the ERP software jargon, through your website.
 E-commerce means IT departments need to build two new channels of
access into ERP systems,
 one for customers (otherwise known as business-to-consumer)
 one for suppliers and partners (business-to-business).
These two audiences want two different types of information from your ERP
system.
Life after implementation

 Change integration has to be necessarily embedded in the task list for any
ERP implementation. The main tool for this is the process of
communication in all forms-written, oral, workshops, meetings, etc.
 Also, at the start of the project, the critical success factors (CSFs) for the
company as a whole should be listed.
 These should be drilled down to CSFs for respective functionalities or
departments.
 From these CSFs, performance measures required to address these CSFs
should be culled out.
 The numeric figures against these performance measures can be classified
as the Key performance Indicators (KPIs). The process of firming up the
above is usually done through workshops.
 The KPIs derived from the organizational goals & CSFs should be kept in
mind too.
 Having evolved the processes while the configuration, construction and
implementation are in progress, the organization needs to ready itself for
the post-implementation period.
76
Some of the tasks that are to be performed are:

 Develop the new job descriptions and organization structure to suit the
post ERP scenario.
 Determine the skill gap between existing jobs and envisioned jobs.
 Assess training requirements, and create and implement a training plan.
 Develop and amend HR, financial and operational policies to suit the future
ERP environment
 Develop a plan for workforce logistics adjustment.
POST-IMPLEMENTATION BLUES
The major task is to monitor the KPIs and take the correct business decisions to
improve them. Certain KPIs, though existing in the system, are better monitored
and controlled after the ERP system attains maturity.
Even with all the preparations during the implementation, during post
implementation, there will be need for course correction many times. It may be
because of the following reasons:
 A change in the business environment requires a change in the CSFs,
resulting in a new or changed set of KPIs necessitating reconfiguration.
 A review indicates a need for change in some process.
 Vision changes in the ERP and improvements in hardware and
communication technology necessitate changes.
 New additions to the business require extra functionality.
77

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2, Tokunbo Alli Street, Ikeja, Lagos

MANAGEMENT INFORMATION SYSTEM

 Characteristics of Enterprise Resource Planning

Implementation of Enterprise Resource Planning and its methodology

According to Philip Kolter, A marketing information system consist of people,

An information system can be any organized combination of people, hardware,

PURPOSE OF MANAGEMENT INFORMATION SYSTEM

Information processing is a major social activity. A significant part of an

Another important purpose of management information system is that it is

Management information system concept is vital to effective computer use in

1. It serves as a system framework for organizing business computer

2 It emphasizes the management orientation of electronics information

ADVANTAGES OF MANAGEMENT INFORMATION SYSTEM

2. Facilitated planning: management information system improves the quality

3. Minimizes information overload: management information system changes

4. Brings coordination: management information system facilities integration

5. Makes control easier: It serves as a link between managerial planning and

6 Management information system assembles, processes, stores, retrieves,

7. It ensures that appropriate data is collected from the various sources,

8. Management information system helps in strategic planning, management

9. It helps the clerical personnel in the transaction processing and answers

OBJECTIVES OF MANAGEMENT INFORMATION SYSTEM

1. Management information system’s main objective is to attain the

2. Management information system is the management of marketing, finance,

3. Management information system is in making the forecasting and long-

CHARACTERISTICS OF MANAGEMENT INFORMATION SYSTEM

Management information system and Top Management: Management

1. Management-oriented: The system is designed from top to bottom. This

appraisal of management needs and overall business objectives. It is possible that

2 Management directed: Because of the management information system, it

3. Integrated: Integration is significant because of the ability to produce more

4. Common data flows: Because of the integration concept of management

5. Heavy planning elements: Management information system do not occur

6. Sub-system concept: In tackling a project as broad and complex in scope as

7. Flexibility and ease of use: Despite a careful analysis of the future

9. Distributed data processing: The majority of the companies implementing

10. Information as a resource: Providing the entire organization must be a

MODELS/TYPES OF MANAGEMENT INFORMATION SYSTEMS

1. Accounting management information systems - All levels of accounting

2. Financial management information systems - It provide financial

3. Manufacturing management information systems - More than any

4. Marketing management information system - A marketing management

5. Human resource management information system - It concerns with

role in ensuring organization system includes work-force analysis and planning,

6. Structure of management information system - The management

7. Conceptual structure - The conceptual structure of a management

8. Physical structure - The physical structure of a management information

MANAGEMENT INFORMATION SYSTEM PLANNING, CONTROLLING AND LIMITATIONS

interaction between the organization and its external environment.

Computational support for planning:

1. An analysis of historical data to obtain relationship useful for projection.

2. Various projection and forecasting techniques to estimate future value.

3. Computations internal to the plan and computation required for outputs.

4. Output of the results in a meaningful planning format.

Historical data analysis techniques

Historical extrapolation techniques

Financial planning computation

Controlling - At the middle level management, information is management