Course Code and Title: ADV01 – Enterprise System

Lesson 3: Week 3

Topic: System Integration

Introduction
In today's organization, integrating information systems (IS) is critical for their survival and growth.
Systems integration allows heterogeneous (hodgepodge) IS to communicate or integrate and share
Information (or data) seamlessly. It is important to understand that the keyword here is seamless because
systems have shared Information for a long time; however, they required a human link. Information
generated from one system had to be re-entered manually by users into other systems.
Learning Outcomes
At the end of the lesson, the students should be able to:
 Understand the impact of organizational structure on information systems.
 Find out about the types of functional silos in organizations.
 Learn about the evolution of information systems technology generations and architectures
and its influence on the silo environment.
 Appreciate the role of enterprise resource planning (ERP) systems in systems integration.
 Analyze what systems integration is.
Functional Silos
According to Webster's dictionary, silos are airtight pits or towers for preserving products. Silos are
compartmentalized operating units isolated from their environment. Look at the historical evolution of
modern organizations and the systems supporting their information requirements.

Historical Silos
The POSDCORB (Planning, Organizing, Staffing, Directing, Coordinating, Reporting, and Budgeting)
categorization by Luther Gulick led to a set of formal organization functions such as control,
management, supervision, and administration starting in the late 1930s
 Figure 3.1 Functional Model of Organization (POSDCORB) Source:
Adapted from Bernard, C. (1938). The Functions of the Executive. Cambridge: Harvard University Press.

Classification of organizations into departments like Accounting and Human Resources reflects the
breaking of complex tasks into smaller manageable tasks that could be assigned to a group of people
who could then be held responsible.

Vertical Silos
Organizations also divided roles into hierarchical layers from strategic planning to management control
and operation control.
CEOs and Presidents plan long-term strategy, midlevel management focuses on tactical issues and the
execution of organizational policy, whereas the lower-level management task is to focus on the day-to-
day operations of the company.
As organizations get big and complex, they tend to break functions into smaller units and assign staff the
responsibility for these activities allowing them to manage complexity and specialize in activities that
enhance productivity and efficiency.
 Figure 3.2 Hierarchical Model of Organization
(Enterprise System, J. Motiwalla)

Business Process and Silos

The cross-functional business process can involve people and resources from various functional
departments working together, sharing Information at any level of the organization. The cross-functional
organizational structure breaks the functional silos by opening up the informational flows from one
department to another.

Figure 3.3 Matrix Structure of Organization

(Enterprise System, J. Motiwalla)

Evolution of Information Systems in Organizations

The functions of an organization (e.g., sales, manufacturing, and HR) are important as they provide a
structure by which an organization functions smoothly. A silo information system is inefficient, inaccurate,
and expensive. The system creates bottlenecks for everyone, and Information is not available in real-
time. The evolution of IS suggests that its role has generally been to support evolving information needs
of the organization.

Figure 3.4 Functional Silos in Organization Source: Adapted from Oracle Inc. www.oracle.com
(Enterprise System, J. Motiwalla)

IS Architectures
Rapid advances in computer and networking technologies and changing organizational dynamics drive
new information system models.
Web-based systems today use a distributed architecture that allows the sharing of applications and data
resources between the client and the server computers. In this configuration, personal computers are
connected via a network to a Web server that provides a window to an application and database server, a
mainframe, or another type of computer.

IS Functionalization
In addition to serving the different management levels, IS also supports major business functions, such
as manufacturing, marketing, accounting, finance, and HR. Each functional area has different information
needs and report requirements. Each functional area in an organization also has multiple levels of
management, each requiring different levels of analysis and details of Information.
 Figure 3.5 Information System Architecture
(Enterprise System, J. Motiwalla)

Figure 3.6 IS as Categorized by Functional and Hierarchical Models

(Enterprise System, J. Motiwalla)

Systems Integration
Logical - Develop information systems that allow organizations to share data with all stakeholders based
on need and authorization. Management needs to change organizational structures, processes, and
employee roles and responsibilities.
Physical - Provide seamless connectivity between heterogeneous systems. Business process
reengineering involves changing the mindset of the employees in the organization, encouraging and
enabling them to do their tasks in a new way.

Steps in Integrating System

1. Resource Categorization - instituting IT support for an integrated systems environment is
necessary to avoid support and maintenance problems with the integrated system.
2. Compliance and Standards - Develop a single sign-on policy because all employees and
external partners will need access to an integrated system from anywhere, anytime.
3. Legacy Software Support - Develop a policy in support of older legacy applications.
4. Middleware Tools - Middleware tools are essential for integration in the short term if the
organization must use existing applications.
5. Authentication and authorization policies - Single sign-on policy for application and data
access because all employees and external partners will need access to an integrated system
from anywhere, anytime.
6. Centralized IT services and support - the IT staff needs to support all applications and
platforms with centralized IT help desk support.
7. Back-up, recovery, and security - good backup and recovery system is essential if there is a
system failure or a major disaster.
8. Hardware and software standardization - Develop organization standards and policy on
acquiring new hardware and software aligned with organization IT strategy.

Benefits and Limitation of System Integration

Benefits
 Increased Revenue and Growth - In general, one of the biggest benefits is a reduction in inventory
and personnel costs due to integrated systems. For example, Uvex Sports, Inc., a sports gear
company, saw sales grow from $1.2 million to $5.2 million without additional costs and with the
addition of only two extra employees.
 Leveling the Competitive Environment - Systems integration can make a small company behave
like a big player because, with the help of integrated business-to-business (B2B) software, many of
them can now compete with big companies to get orders from giant retailers like Walmart, Target,
and others because they can provide the same level of service with enterprise systems.
 Enhanced Information Visibility - The increased availability of Information enables managers and
 employees to make informed decisions in a timely manner. For example, customer service
representatives of American Express can now make credit approval decisions on the spot while
talking with their customers due to better access to customer credit profiles.
 Increased Standardization. - A side benefit of integration is that it forces organizations to
standardize their hardware, software, and IT policy. This may initially cost some money, but in the
long run, companies easily recoup those costs
Limitation of Integration
 High Initial Setup Costs - The initial implementation of integrated systems is high in terms of
hardware and software costs and human costs due to the reengineering of business processes.
Although these cannot be avoided, their negative influence on the implementation can be minimized
by a long-term resource allocation plan and commitment from top management.
 Power and Interdepartmental Conflicts. Systems integration often involves sharing of Information
across departments and interdepartmental teams. This often creates power conflicts among the
functional departments if they have not bought into the integration. Educating employees with a good
change management strategy that communicates the long-term benefits from systems integration
can minimize these conflicts.
 Long-Term and Intangible ROIs. The return on investments (ROI) from systems integration often
does not show up until several years after the implementation, and many of these returns come in the
intangible form and are therefore not recognized on the bottom line of the organization. Financial
managers get very upset with this situation and can create pressures that will ruin the long-term
impact of systems integration; therefore, top management's understanding and support for the long
term are key ingredients for the success of systems integration.
 Creativity Limitations. One of the drawbacks of standardization is that it restricts creativity and
independence in the functional areas; however, a better integration policy can minimize this. In
addition, it provides flexibility and better communication from top management.

ERP and Systems Integration

Enterprise Resource Planning (ERP) systems are integrated, multi-module application software packages
designed to serve and support several business functions across an organization. ERP systems are
typically commercial software packages that facilitate the collection and integration of Information related
to various areas of an organization. In addition, ERP systems enable the organization to standardize and
improve its business processes to implement best practices for its industry.

ERP’s Role in Logical Integration

ERP systems require organizations to focus on business processes rather than on functions. ERP
systems come with built-in processes for a wide variety of common business functions. An ERP system
implements best practices via specific built-in steps for processing a customer order in order entry. –
routing through departments. – communication of output to various parties

ERP’s Role in Physical Integration

Before installing the ERP system, an organization may have to upgrade or install middleware or get rid of
their legacy system's hardware and software. Integration is also required at the Data level, Client level,
and Application level. A good ERP implementation improves operational efficiency with better business
processes focusing on organizational goals rather than individual departmental goals. Improved
efficiency with a paperless flow and electronic data interchange (EDI) or business-to-business (B2B)
commerce environment with partners.
Summary
Before installing the ERP system, an organization may have to upgrade or install middleware or get rid of
their legacy system's hardware and software. Integration is also required at the Data level, Client level,
and Application level.
A good ERP implementation improves operational efficiency with better business processes focusing on
organizational goals rather than individual departmental goals.
Improved efficiency with a paperless flow and electronic data interchange (EDI) or business-to-business
(B2B) commerce environment with partners. In order for systems integration to be successful,
organizations have to focus both on the human or logical level and the physical or systems level. ERP
systems thus make systems integration easier, but they are expensive and often require organizations to
start from scratch. System integration involves the whole organization, requiring top-management support
and resources for a long-term period. Management must be ready to face the human and ethical
challenges in a systems integration project.
References:
Motiwalla, L.et.al (2012). Enterprise System, Second Edition

Information Silos
https://www.youtube.com/watch?v=QrkhlsH0Axw