© Gabriele Piccoli

Information System Trends

What managers need to know about the emerging and enduring trends in Information Systems management

© Gabriele Piccoli

Course Roadmap

• Part I: Foundations• Part II: Competing in the Internet Age• Part III: The Strategic use of Information Systems• Part IV: Getting IT Done

– Chapter 10: Funding Information Systems– Chapter 11: Creating Information Systems– Chapter 12: Information System Trends– Chapter 13: Security, Privacy and Ethics

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Learning Objectives

1. Understand the genesis of the enterprise systems (ES) trend and why so many organizations employ them. Articulate their principal benefits and risks.

2. Define the term supply chain management and explain the role that supply chain management applications play in modern organizations.

3. Define the term best of breed and describe the benefits and drawbacks of this approach to systems integration.

4. Describe the term knowledge management, categorize the different types of knowledge commonly found in organizations, and explain why organizations feel the need to employ knowledge management applications.

5. Define the terms business intelligence (BI) and BI infrastructure. Be able to identify and describe the role of the technologies that comprise a modern BI infrastructure.

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Learning Objectives

7. Define the term customer relationship management (CRM) and articulate both its benefits and limitations.

8. Explain how the CRM and BI trends relate to one another.

9. Define the term open source software and be able to identify the primary commercial models that have been crafted around the open source movement.

10. Articulate the principal advantages and risks associated with the implementation of open source solutions in modern organizations.

11. Discuss the software as a service (SaaS) trend, identify its genesis, and understand its principal characteristics.

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Enterprise Systems

• In the early 1990s developers realized the limitations of the functional approach

• This led to a class of standardized software applications that would enable and support integrated business processes

• These applications are known as Enterprise Systems (ESs)

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Enterprise Systems

• Provide native integration• Attempt to support all components of the firm’s

IT infrastructure.• Defining characteristics:

– Modular– Integrated – Software applications – Span all organizational functions – Rely on one database at the core.

• Custom developed or purchased off-the-shelf

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Characteristics of ESs

• Modularity– Enables the organization to decide which

functionalities to enable and which ones not to– Allows for flexibility at the design stage– No need to pay for unnecessary components

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Characteristics of ESs

• Application Integration:– Events in one module automatically trigger

events in one or more separate modules

• Data Integration– Data is stored in one

central database

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Characteristics of ESs

• Configurable– Enterprise Systems are parameterized– Firms choose among a predefined set of

configuration options during the implementation of the application

– The firm can extend the capabilities of the standard application by creating “bolt-on modules”

– This customization process further tailors the ES to the specific needs of the organization

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Advantages of Enterprise Systems

• Efficiency– ESs are able to rein in complex, generally

hard-to-mange and support legacy IT infrastructures

– Potential to reduce direct costs• Example: No redundant data entry

– Potential to reduce indirect costs by streamlining business processes and operations

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Advantages of Enterprise Systems

• Responsiveness– ESs can deliver improvements in the firm’s

ability to respond to customers and market demands

• Knowledge Infusion– The application embeds the state of the art in

industry practice– ES can be used to update obsolete business

processes within the firm

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Advantages of Enterprise Systems

• Adaptability– Offer a degree of customizability rarely

offered by off-the-shelf applications– Achieved through the use of configuration

tables and bolt-on functionality

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Limitations of Enterprise Systems

• Standardization and Flexibility– Organizations are encouraged to implement as close

to a standard version of the software as possible.– So called “Vanilla” implementation ensure that firms

take advantage of the economies of scale created by the vendor

– But flexibility is sacrificed by this approach– ESs are often referred to as software concrete

• Much of the adaptability only occurs during the implementation process.

• Once set, ESs are difficult to change

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Limitations of Enterprise Systems

• Limitations of best practice software– It will force the firm to adapt– It is unclear how “best practices” are defined– The “best” practice may differ for different

firms – Its not enough to implement a software

program to enact a new practice– A firm’s own best practices may not be

supported by the new ES

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Limitations of Enterprise Systems

• Strategic Clash– A firm will have to choose amongst the set of

business processes supported by the software

– What if one of your unique and differentiating practices is not supported by the ES?

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The Hype Cycle

• Technology Trigger: When a new technology becomes available

• Peak of Inflated Expectations: When over enthusiasm and unrealistic expectations fuel rapid adoption

• Through of disillusionment: When failures become public

• Slope of Enlightenment: when the true benefits of the technology become apparent to the organizations

• Plateau of Productivity: the phase when the benefits and risks of the technology become widely understood and accepted

© Gabriele Piccoli

The Hype Cycle

• Technology Trigger: When a new technology becomes available

• Peak of Inflated Expectations: When over enthusiasm and unrealistic expectations fuel rapid adoption

• Through of disillusionment: When failures become public

• Slope of Enlightenment: when the true benefits of the technology become apparent to the organizations

• Plateau of Productivity: the phase when the benefits and risks of the technology become widely understood and accepted

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Supply Chain Management

• The set of coordinated entities that contribute to move a product or service from its production to its consumption– Upstream

Supply Chain– Downstream

Supply Chain

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Modern Supply Chain Management

• Tight linkages between upstream (i.e., suppliers) and downstream firms (i.e., customers)

• Inter-organizational systems increasingly supported by the Internet

• Integration with enterprise systems

• Increasing attention to IT-enabled supply chain management

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Supply Chain Management

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Supply Chain Management Trends

• Radiofrequency Identification (RFID)

• A new frontier in SCM:– No line of sight requirements– Embedding potential– Writing capabilities– Storage capacity– Speed up the receiving process– Improve monitoring and control of inventories

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Enterprise Application Integration

• “Re-architecting” existing programs so that an intermediate layer, termed middleware, is developed between the applications and the databases

• Designed to make calls to the middleware layer rather than the other applications

• Streamlines maintenance process because changes to an application will not affect all the interfaces connected to it

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Typical Systems Infrastructure

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The EAI Approach

ERP

Legacy Application

Database 1

Mid

dle

war

e

Database 2

Legacy Application

SCM

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Service Oriented Architecture

• A software design perspective focused on reusability of software components

• Enables the rapid creation of an application by the combination of pre-built services

• Built using separate but interoperable components

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Knowledge Management

“All the value of this company is in its people. If you burned down all out plants,

and we just kept out people and out information files, we should soon be as

strong as ever.”

--Thomas Watson, the CEO of IBM

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Knowledge

• Knowing What: Based on the ability to collect, categorize, and assimilate information

• Knowing How: Ability to recognize or create the sequence of steps that are needed to complete a task

• Knowing Why: Based on understanding of cause-effect relationships

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Knowledge

• Categories of Knowledge– Explicit Knowledge

• Can be articulated• Codified• Transferred with relative ease.

– Tacit Knowledge• The type of knowledge that individuals possess but

find difficult to articulate

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Knowledge Management

• Set of activities and processes used to:– Create– Codify– Disseminate knowledge in the organization

• IT is a key component and enabler• Aspects of knowledge management:

– Creating – Capturing– Storing– Disseminating

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Creating Knowledge

• Knowledge creation is the first stage in knowledge management:– Generate new information– Devise solutions to existing problems– Identify new explanations for events

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Capturing and Storing Knowledge

• Enables the organization to:– Codify new knowledge– Maintain an organizational memory

• Content Management Systems (CMSs):– Applications used to capture and store

knowledge– A knowledge repository is a central location

and search point for relevant knowledge

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Disseminating Knowledge

• The last phase in a knowledge management initiative

• When knowledge is formatted and easily accessible, dramatic improvements in effectiveness and efficiency can be achieved.

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Business Intelligence

• The ability to gather and make sense of information about your business– A set of techniques– Processes– Technologies

• Designed to enable managers to:– Gain superior insight about the organization– Gain superior understanding of the business– Make better decisions

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Business Intelligence

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Components of BI

• Data Warehouse: – A data repository – Collects and consolidates data– Multiple sources

• Characteristics:– Large in size– Large in scope– Enabling data integration– Designed for analytics

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Components of BI

• Data Mart: – A scaled-down version of a data warehouse – Focuses on the needs of a specific audience– Smaller in scope, thus easier to build

• Online Analytical Processing (OLAP):– User-driven– Enables a knowledge worker to easily and

selectively extract and view data from analytical databases

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Components of BI

• Data Mining: – The process of automatically discovering non-obvious

relationships in large databases. – Used to analyze historical information– Machine-driven

• Possible Patterns:– Associations– Sequences– Classifications– Forecasting

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Customer Relationship Management

• CRM is a strategic initiative, not a technology• CRM relies on transactional data and is

designed to help the firm learn about customers• Designed to use data to make inferences about

customer:– Behaviors– Needs

• The objective is to create value for the firm by optimizing the relationship with each customer

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CRM Infrastructure

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The limitations of CRM

• CRM is firm centric– Only relies on transactional and behavioral

data pertaining to the interactions of the customer with the firm

• Limited predictive ability– Some events are unforeseeable and only the

customer knows about their occurrence

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Customer Managed Interactions

• In CMIs customer data is stored and managed by the customer

• CMI solves the limitations of CRM initiatives:– The customer’s personal data warehouse

holds complete historical information – Future events are more likely known– Inferences are more precise

• Infomediaries may maintain customers’ data warehouses

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Customer Managed Interactions

• CMI is not only about the lowest prices– CMI completion may depend on lower price– More likely will stem from the quality of the

recommendation

• CMI technology– The Internet provides the infrastructure for

data transfer– Falling costs of storage make personal data

warehouses a feasible alternative

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Open Source

• Closed Source – Proprietary software controlled by a software house– Prevent users from accessing and modifying the

source code– Example: Microsoft Windows

• Open Source license characteristics:– Free distribution– Available source code– Derived works– No discrimination– Technology neutrality

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Models of Open Source

• Sponsored Open Source: – Foundations provide support and coordination to open

source efforts

• Open Source Service: – Free licensing of the software, but charges for

installation, support, training, and other services

• Professional Open Source: – A software house maintains tight control over the

software programs that they sell

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Advantages of Open Source

• Robustness: More robust and more reliable than proprietary applications

• Creativity: Harnesses the creativity of thousands of developers

• Limited lock-in: Switching costs are lower than those with proprietary software

• Free License: Open source can generally be licensed for free

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Disadvantages of Open Source

• Unpredictable Costs: There are many potential costs along the way (TCO)

• Support Varies Widely• Security:

– Open source code may give an advantage to those who want to break its security since the code is available

– But more vulnerabilities may be identified and corrected for since the code is open

• Compatibility: There is no guarantee about compatibility with other software

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Software as a Service (SaaS)

• Focuses on the services (i.e., functionalities) being provided, not on the physical products (software) being sold

• Application Service Provision (ASP)– A provider hosts and manages a standard

application (e.g., Microsoft Word)– Clients access the application over a network

(e.g., the Internet)

© Gabriele Piccoli

What we Learned

1. Understand the genesis of the enterprise systems (ES) trend and why so many organizations employ them. Articulate their principal benefits and risks.

2. Define the term supply chain management and explain the role that supply chain management applications play in modern organizations.

3. Define the term best of breed and describe the benefits and drawbacks of this approach to systems integration.

4. Describe the term knowledge management, categorize the different types of knowledge commonly found in organizations, and explain why organizations feel the need to employ knowledge management applications.

5. Define the terms business intelligence (BI) and BI infrastructure. Be able to identify and describe the role of the technologies that comprise a modern BI infrastructure.

© Gabriele Piccoli

What we Learned

7. Define the term customer relationship management (CRM) and articulate both its benefits and limitations.

8. Explain how the CRM and BI trends relate to one another.

9. Define the term open source software and be able to identify the primary commercial models that have been crafted around the open source movement.

10. Articulate the principal advantages and risks associated with the implementation of open source solutions in modern organizations.

11. Discuss the software as a service (SaaS) trend, identify its genesis, and understand its principal characteristics.