Business Information Systems

About the Course

Business Information Systems - What?

• What is Business?
• Define Business in terms of Vision, Mission, Goal, Strategy, Tactics, Objectives
• Business Mantras
• What is Information?
• What is a System?
• What is Information Systems?
• What is Business Information Systems?

Business Information Systems - Why

• Why do businesses need Information Systems?

Business Information Systems - How

• How do businesses manage their Information Systems? Develop, Maintain, Improve, Transform, Secure, and so on

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REVIEW – VERY IMPORTANT Data (structured and
unstructured) + Information
Data (structured and
Data (mainly structured) Information Knowledge unstructured) + Knowledge

Data (structured and

Data (structured and unstructured) +
Data Management
Information Management Knowledge Management unstructured) Management Information Management +
Knowledge Management
Electronic Data Processing Contextual Computing –
Information Systems Knowledge-based System AI - Statistical Machine
System Third Wave of AI (Future) =
– 1st Wave of AI Learning – 2nd Wave of AI
1st Wave + 2nd Wave of AI

Information Knowledge Intelligence Intelligence Intelligence

Classical Business = Digitization and Digitalization

Modern Business = Digital Transformation

EDP, IS, KBS (Rule-Based System)

Past (Mature) – Efficiency and Effectiveness
AI-Based System
Future (Emerging) – Competitiveness and Sustainability
Automatic to Autonomous System
1950 Time Date
Note: Over the last 75 years, we have moved our focus from EDP, MIS, and KBS (Rule-Based System) to AI-Based
Systems. All of them are commonly known as Business Information Systems.

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Why do businesses need Information
Systems?
Despite the huge number of
software applications out there,
they mainly serve three key
purposes in business:
1. Support of business processes
and operations.
2. Support decision-making by
employees and managers.
3. Support of strategies for
competitive advantage.

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 Sustainability

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 CASE STUDY - ALLROAD

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Questions
▪ Why does the Allroad team
need to understand business
processes?
▪ How can business process
modeling help Allroad?
▪ How can information systems
and technology improve
process quality? Process
Quality means Efficiency and
Effectiveness.

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Questions
▪Why does the Allroad team need to understand business
processes?

▪How can business process modeling help Allroad?

▪How can information systems and technology improve process

quality? Process Quality means Efficiency and Effectiveness.

10
 Important
▪Process – Most Important Component of Business

▪BPMN - Language of Business

▪Verdict: You have no choice but to master BPMN

❖What is BPMN?

❖Why BPMN?

❖How to use BPMN?

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 Many ways of
modelling a
process…

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Please consider the description below and represent it in easy-to-
understand visual form (use text, figures, and symbols…)

Mark is going on a trip to Sydney. He decides to call a taxi from home to the
airport. The taxi arrives after 10 minutes and takes half an hour for the 20
kilometers to the airport. At the airport, Mark uses the online check-in
counter to get his boarding pass. Of course, he could have also used the
ticket counter. He does not have to check in his luggage, so he proceeds
straight to the security check, which is 100 meters down the hall on the
right. The queue here is short, and after 5 minutes, he walks up to the
departure gate. Mark decides not to go to the Frequent Flyer lounge, so he
walks up and down the shops for 15 minutes and buys a newspaper before
he returns to the gate. After ten minutes of waiting, he boards the plane.

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 Issues?
▪Different representation of concepts
▪Different levels of granularity
▪Different levels of scope
▪Different terminology

→ What is the right process model?

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What’s needed to create a model?
Modelling Language

Vocabulary

Syntax Semantics Notation

Model

Modelling Conventions

Modelling Tool

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 BPMN from 10,000 miles…
A BPMN process model is a graph consisting of four types of elements (among
others):

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Business Process Modeling Notation (BPMN) Tools
OMG Standard, supported by many tools:
◦ Bizagi Process Modeller
◦ Signavio (http://www.signavio.com/)
◦ TIBCO Business Studio (free download, quite large)
◦ IBM WebSphere Business Modeler
◦ ARIS
◦ Oracle BPA
◦ Business Process Visual Architect (Visual Paradigm)

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Why does the Allroad team need to understand business
processes?
Jason, Kelly, Drew, and others at AllRoad need to understand business
processes not just to evaluate the 3D printing opportunity but because such
processes are key to every business’s success. Business professionals need to
answer questions like:
◦ Can we change the way we work to better achieve our goals?
◦ Can we do our work with less cost?
◦ Why is it so hard to get something done?
◦ Why do we have so many forms to fill out?
◦ Can we improve processes by using information systems?
◦ Do our information systems need to be changed to more closely fit our
processes?
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 Insights
• The ability to create process models, discuss changes to
processes, and know-how information systems can
support processes are key parts of every business
professional’s skillset.
• In the case at hand, the AllRoad team needs to
understand business processes in order to evaluate the
3D printing opportunity.
• As Drew says, if they decide to print some of their own
parts, they’ll need to develop new business processes
and possibly information systems to support that activity.
• Drew can make generalized statements about processes
and systems to Addison and try to make them to Kelly
and Jason, but those statements won’t get him far.

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 Insights (Cont.)
• To have an informed and effective discussion, he needs
to create an abstraction or model of AllRoad’s current
processes and then use that model to demonstrate how
those processes must be altered to support 3D printing.
• Until he does so, the discussion about whether AllRoad
should pursue 3D printing will consist of hand-waving
and high-level opinions, and neither Kelly nor Jason will
put up with that for long.
• Further, the AllRoad team needs to understand the roles
that information systems play in supporting business
processes.
• If the company decides to pursue 3D printing and
develops the processes needed to support that activity,
can it use existing information systems effectively?
• If so, how? Would the benefits of developing the new
systems justify the costs?
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Questions
▪ Why does the Allroad team
need to understand
business processes?
▪ How can business process
modeling help Allroad?
▪ How can information
systems and technology
improve process quality?
Process Quality means
Efficiency and Effectiveness.

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BPMN
A business process is a network of
activities for accomplishing a business
function. Figure shows a diagram of the
existing AllRoad process. This diagram,
which is a model, or an abstraction, of
AllRoad’s activities, is constructed using
the symbols of Business Process Modeling
Notation or BPMN. This notation is an
international standard for creating
business process diagrams. A key to these
symbols is shown on the right side of the
slide.

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Existing AllRoad Business Process Using BPMN
• Figure 1 shows the roles of Vendor, Buyer, Website Sales, Operations, and Customer.
• Notice that we do not write people’s names, such as Addison or Drew, at the top of a swim
lane, but rather, we write the name of the role. This is because many people may fulfill a
given role and because a given employee may play many roles. Furthermore, over time, the
organization may change the people who are assigned a given role. In some cases, a role can
be fulfilled by an information system.
• According to the BPMN standard, the start of a business process is symbolized by a circle
having a narrow border. A circle with a thick border symbolizes the end of a business
process. So, in Figure 1, the process starts with the Buyer role, or we can also say that a Buyer
starts the process.
• Activities within a business process are shown in rectangles with rounded corners. The first
activity for the Buyer role is Select Vendor Product. According to Figure 1, buyers obtain
vendor and product data from the Vendor Data Repository.

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 • A repository is a collection of data that is stored within the
business process. Repositories can be computer databases,
collections of files in the cloud (think on the Internet for
now), or printed records stored in a file cabinet or a shoebox.
For the purpose of documenting a business process, the
particular medium in which repository data is stored is
unimportant.
• The Vendor Data Repository contains not only data from
prior purchases but also the results of vendor sales calls,
vendor mailings, prior Buyer searches of vendor and product
data on the Internet, and so forth.
• The labeled dashed lines in Figure 1 are called data flows.
They represent the movement of data from one activity to
another. The data can be delivered via email or text message,
over the phone, by fax, or by some other means. In a BPMN
diagram, the medium of data delivery is also unimportant.
For the level of our discussion, the format of the data item is
also not important. According to Figure 1, Buyers both read
and write Vendor and Product data from and to the Vendor
Data Repository.
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 • The solid line between the activities Select Vendor
Product and Negotiate Prices and Terms means that
after a Buyer finishes the Select Vendor Product
activity, the Buyer’s next action is to perform the
Negotiate Prices and Terms activity. Such solid lines are
called sequence flows.
• Another BPMN symbol used in Figure 1 is an activity
with a boxed plus sign inside it. This notation indicates
a subprocess and is used when the work to be done is
sufficiently complex to require a process diagram of its
own. In Figure 1, the setup of a product offering on the
website involves many activities and several different
roles. In the complete set of process documentation, it
would have a BPMN diagram of its own. Here, we will
not be concerned with those details.
• With the understanding of these symbols, you can
interpret the rest of Figure 1 on your own. One point to
note concerns the Receive Goods, Place in Inventory
sub-process performed by the Operations Role.
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 • When AllRoad receives a Vendor Shipment, it
compares the goods received to those ordered on the
original Vendor Order. It will notate that order with
the items received and place the Revised Vendor
Order back into the Vendor Order Repository. It will
also note the items that were missing or received in
damaged condition.
• To summarize, a business process is a network of
activities. Each activity is performed by a role. Roles
are taken by people, groups, departments,
organizations, and sometimes by information systems.
Repositories are collections of data. Data flows
between activities; when one activity follows directly
after another, the flow is shown with a sequence flow.
Complex activities are represented by a separate sub-
process diagram and denoted by a boxed plus sign in
the activity.

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 How AllRoad Works
• AllRoad negotiates with vendors to supply parts at given prices
and under certain terms.
• Once it has a commitment from a vendor to provide parts, it
places the parts’ descriptions, photos, prices, and related sales
data on its Web site.
• AllRoad then orders an initial quantity of parts, receives them
from the vendor, and places them in inventory.
• When customers order, operations personnel remove items
from inventory and ship them to the customer.
• From time to time, parts need to be ordered to restock
inventory, but we will not consider the reorder process in this
example.
• Of course, AllRoad must keep records of all these activities in
order to pay vendors, bill customers, check inventory levels,
pay taxes, and so forth.
• AllRoad’s business activities are typical of a small online retailer
with a relatively simple inventory. Even so, you will see there
are ways for AllRoad to improve what it’s doing, even if it
doesn’t pursue 3D printing.
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 ▪ Drew was tasked with investigating the 3D printing opportunity. To do so, he
created the process diagram in Figure 2, which shows the existing process
but with a new role for 3D printing.
▪ The diamond in this diagram represents a decision. For example, when
stocking a part, operations will need to decide whether the part is being
manufactured in-house using 3D printing. Figure 2 also includes
AllRoad annotations, which are just comments that Drew and others have about the

Processes Must diagram.

▪ The diagram in Figure 2 provides a basis for discussions with others. Drew
Change to can use it to document where the existing processes need to be altered and

Support 3D also to demonstrate the need for additional personnel. If AllRoad proceeds
with 3D printing, Drew or someone else will need to define the
Printing subprocesses further, such as making the product and checking product
quality. In this particular case, he never needed to do that; when Drew
presented this diagram to Jason and Kelly, they understood the large
commitment that they would need to make to pursue 3D printing and
decided to proceed in a different direction. From this example, though, you
can see how process diagrams provide a means to communicate with others
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Questions
▪ Why does the Allroad team
need to understand business
processes?
▪ How can business process
modeling help Allroad?
▪ How can information systems
and technology improve
process quality? Process
Quality means Efficiency and
Effectiveness.

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 What is Process Quality?
▪ Process quality can be measured in two dimensions:
process effectiveness and process efficiency.
▪ An effective business process is one that enables the
organization to accomplish its goals and objectives.
According to Jason, one element of AllRoad’s strategy is to
have the largest selection of parts in the industry. The
How can AllRoad team is investigating whether 3D printing will help
accomplish that goal. If so, its current processes are
Information ineffective because they do not support 3D printing. It will
need to implement processes like those called for Figure 3
Systems Improve instead.
Process Quality? ▪ The second dimension of process quality is efficiency.
Consider two versions of a business process for
accomplishing some function. If both versions create the
same benefit, but one costs more than the other, then the
higher-cost version is less efficient than the lower-cost
version. Or if both versions cost the same, but one
generates less benefit than the other, then the lower-
benefit one is less efficient.

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 • Examine Figure 1 closely, and you’ll see that there are two different
repositories of vendor data. One is used by Buyers to select vendors,
and another is used by Operations to store order data. Such separated
data may be appropriate, but more likely, it is creating process
inefficiencies. For example, what happens when a vendor moves? The
vendor’s address needs to be updated in two places; duplicate updating
isn’t difficult, but it is unnecessary. Further, consider the confusion if
the vendor address is changed in one place but not the other.
• Figure 3 shows an alteration of Figure 1 in which vendor data is stored
in a single repository. Most likely, this second process will be less costly,
generate fewer errors, and still be as effective as the first version.
Hence, the quality of the process in Figure 3 is improved because the
process will be more efficient.
• By the way, if you look at the business processes in Figures 1, 2, and 3,
you won’t see any costs, not directly anyway. So, where are they? One
major source of cost is the labor of the employees who perform the
process activities. If it takes someone 10 hours to perform the Select
Vendor Product activity, then the cost of that activity is the cost of
those 10 labor hours. Behind the scenes, there are also infrastructure
costs. Data doesn’t just flow automatically from one activity to another.
Some type of computer network, email, or other system needs to exist
to support those data flows. The cost of that infrastructure is part of
the costs of the business process.
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Using Information Systems to Improve Process Quality
• To understand how information systems improve process quality,
consider Figure 4, which shows the five components of an
information system.
• Notice the symmetry of these components; the outermost
components, hardware and people, are both actors—they take
action.
• The software and procedure components are both sets of
instructions. Software is instructions for hardware, and procedures
are instructions for people.
• Finally, data is the bridge between the computer side on the left and
the human side on the right.
• When an activity in a business process is automated, activities
formerly done by people following procedures are moved to
computers that perform the work by following instructions in
software.
• Thus, the automation of a process activity consists of moving work
from the right-hand side of Figure 4 to the left.

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 Use an Information System to Store Vendor Data
• To understand this, consider the Select Vendor Product
activity in Figure 1. That process could be entirely manual.
The buyer could use the Internet (for this example, ignore
the fact that she is using a computer system to access the
Internet), gather data about vendors and products, make
analyses of costs and margins by hand, and store the
results of those analyses on paper in a file folder in her
desk. When she wants to access past records for a
particular vendor, she would manually search through her
desk to find those records.
• One way to use information systems in this process would
be for buyers to store the results of vendor analyses in an
Excel file. If this were done, the buyer would have a faster
and more reliable means of finding relevant data. The time
required to perform the analysis and locate past analyses
would be reduced, the cost of the process would decrease,
the process would be more efficient, and hence, process
quality would increase.
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 Store Vendor Product and Performance Data in a Database
• For another example, suppose AllRoad implements the improved
process shown in Figure 3 and stores the Vendor Data Repository
in a computer database that combines both product
specifications as well as vendor performance data.
• Now, buyers can not only use their own data about vendors and
products, but they also can view past vendor performance data
to choose among vendors when parts are available from several
vendors.
• Figure 5 shows an example display of such performance data. A
process that uses this new information system saves buyer labor
and, on the surface, is more efficient. However, the new
information system will cost something to develop and operate.
Those costs must also be considered before the organization can
decide if making such a change makes the process more efficient.
• By the way, you can see from this simple example why it is vital
that business professionals be involved in the development of
information systems. If systems development is left solely to
technical personnel, they may develop a system that is
technically elegant but with costs that cannot be justified.

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 • In addition to improving process efficiency, information
systems can also improve process effectiveness. If the
buyers, for example, share vendor data, they may be able
to identify new parts for AllRoad to carry. By doing so, they
are helping achieve Jason’s goal of having the largest
availability of off-road vehicle parts in the industry.
• Furthermore, consider the performance data in Figure 5.
General Sports frequently ships fewer items (Quantity
Received) than were requested (Quantity Ordered), and in
one case, it shipped too many parts. In addition, AllRoad
received many items in damaged condition.
• If AllRoad can find another vendor to supply these or
equivalent parts, its parts availability will increase, and it
will better achieve its strategy. Therefore, the information
system that produces the display in Figure 5 makes
AllRoad’s buying process more effective. Of course, we are
assuming that the data in Figure 5 is correct.

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 PART 5

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Case Study Questions
How does organizational strategy determine
information systems requirements?
1. What five forces determine industry
structure?
2. What is the current value chain?
3. What is competitive strategy?
4. How does competitive strategy
determine improved value chain
structure?
5. How do value chains determine business
processes and information systems?
6. How do information systems provide
competitive advantages?

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How does organizational strategy determine
information systems requirements?
Kelly assigned the AllRoad team the task of investigating 3D printing so the company can better achieve its goal of having
the largest selection of parts in the off-road vehicle industry.

The team is attempting to identify parts that AllRoad could manufacture itself. That sensible and appropriate task starts in
the middle of the story.

We understand how Jason (Project Owner), Kelly (Reports to Jason and having a team), and AllRoad arrived at that
assignment.

Figure 7 summarizes a planning process used by many organizations. In short, organizations examine the structure of
their industry and, from that, develop a competitive strategy. That strategy determines value chains, which, in turn,
determine business processes. As we saw, the nature of business processes determines the requirements and functions
of information systems.

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Figure 6

Strategy Execution Monitoring and Evaluation

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Case Study
Questions
How does organizational
strategy determine
information systems
requirements?
1. What five forces
determine industry
structure?
2. What is the current value
chain?
3. What is competitive
strategy?
4. How does competitive
strategy determine
improved value chain
structure?
5. How do value chains
determine business
processes and information
systems?
6. How do information
systems provide
competitive advantages?
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1. What five forces determine industry structure?
◦ Porter developed the five forces model, which
has been applied for understanding
organizations’ competitive environments. That
understanding is then used to formulate a
competitive strategy.
◦ Porter’s five competitive forces can be grouped
into two types: forces related to competition
and forces related to supply chain bargaining
power.
◦ Competitive Forces (Competition from vendors
of substitutes, Competition from new
competitors, Competition from existing rivals
◦ Bargaining Power Forces (Bargaining power of
suppliers, Bargaining power of customers)

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Case Study
Questions
How does organizational
strategy determine
information systems
requirements?
1. What five forces
determine industry
structure?
2. What is the current value
chain?
3. What is competitive
strategy?
4. How does competitive
strategy determine
improved value chain
structure?
5. How do value chains
determine business
processes and information
systems?
6. How do information
systems provide
competitive advantages?
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2. What is current value chain

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 § Porter’s model of business activities includes linkages, which are
interactions across value activities. For example, manufacturing
systems use linkages to reduce inventory costs. Such a system
uses sales forecasts to plan production; it then uses the
production plan to determine raw material needs and then uses
the material needs to schedule purchases. The end result is just-
in-time inventory, which reduces inventory sizes and costs.
§ Value chain analysis has a direct application to manufacturing
businesses like the bicycle manufacturer. However, value chains
Value Chain also exist in service-oriented companies. The difference is that
Linkage most of the value in a service company is generated by the
operations, marketing and sales, and service activities. Inbound
and outbound logistics are not typically as important.
§ Note: Production and operations management are more similar
than different: if manufacturing products is a prime concern, then
it is called production management, whereas management of
services is somewhat broader in scope and called operations
management (because manufacturing services sounds absurd,
right?).
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Case Study
Questions
How does organizational
strategy determine
information systems
requirements?
1. What five forces
determine industry
structure?
2. What is the current value
chain?
3. What is competitive
strategy?
4. How does competitive
strategy determine
improved value chain
structure?
5. How do value chains
determine business
processes and information
systems?
6. How do information
systems provide
competitive advantages?
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3. What is competitive strategy?
Porter’s Four Competitive Strategies
Consider competitive strategy at AllRoad. Its
primary competitive threat is from local
manufacturing.

Similarly, customers with access to 3D

printing technology have strong bargaining
power.

In order to maintain a strategy that is

competitive, AllRoad must understand this
technology and be prepared to address the
change in these forces.

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 • To identify sources of strong competition and use that
knowledge to create a competitive strategy to combat
those strong forces.
• Apply this technique to AllRoad and see that Kelly’s
assignment to the team was exactly right
• Each of the three competitive forces concerns the
danger of customers taking their business elsewhere
• As shown in the first column of Figure 8, two strength
factors that relate to all three of these forces are
switching costs and customer loyalty. If the costs of
switching to another vendor are high, then the
strength of the competitive forces is low.
• Similarly, if customers are loyal to the company or
brand, then the strength of the competitive forces is
low.

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Case Study
Questions
How does organizational
strategy determine
information systems
requirements?
1. What five forces
determine industry
structure?
2. What is the current value
chain?
3. What is competitive
strategy?
4. How does competitive
strategy determine
improved value chain
structure?
5. How do value chains
determine business
processes and information
systems?
6. How do information
systems provide
competitive advantages?
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 ◦ Organizations analyze the structure of their industry,
and, using that analysis, they formulate a
competitive strategy. They then need to organize and
structure the organization to implement that
4. How does strategy.
◦ If, for example, the competitive strategy is to be a
competitive cost leader, then business activities need to be
developed to provide essential functions at the
strategy lowest possible cost.
determine ◦ A business that selects a differentiation strategy
would not necessarily structure itself around least-
improved value cost activities. Instead, such a business might choose
to develop more costly systems, but it would do so
chain only if those systems provided benefits that
outweighed their costs.
structure? ◦ Jason at AllRoad Parts knows his large inventory is
expensive, and he judges the extra costs as
worthwhile. He may judge 3D printing to be
worthwhile, too.
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 • A value chain is a network of value-creating
activities.
• That generic chain consists of five primary
activities and four support activities.
• Primary activities are business functions that
relate directly to the production of the
organization’s products or services.
• Support activities are business functions that
assist and facilitate the primary activities.
• Value chain analysis is most easily understood in
the context of manufacturing, so we will leave
the AllRoad case for now and switch to the
example of a bicycle manufacturer.
• To understand the essence of the value chain,
consider AllRoad has a subsidiary business of
bicycle manufacturing called Allroad Bicycle (see
Figure 9)
• Allroad Bicycle has another subsidiary business
Allroad Rental
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 Current Value Chain

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 Current Value Chain

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 Improved Value Chain

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Case Study
Questions
How does organizational
strategy determine
information systems
requirements?
1. What five forces
determine industry
structure?
2. What is the current value
chain?
3. What is competitive
strategy?
4. How does competitive
strategy determine
improved value chain
structure?
5. How do value chains
determine business
processes and information
systems?
6. How do information
systems provide
competitive advantages?
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 5. How do ◦ A business process is a network of
activities, resources, facilities, and
value chains information that accomplish a business
determine function.
business ◦ Now, we can be more specific and say
that business processes implement value
processes and chains or portions of value chains.
information ◦ Thus, each value chain is supported by
systems? one or more business processes.

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 Business Process
and Information
Systems for All
Road High-Service
Bike Rental

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 VERY IMPORTANT
• For example, Figure 10-1 shows a portion of a bike
rental value chain for a bicycle rental company. The
top part of this figure shows how a company having a
competitive strategy of providing low-cost rentals to
college students might implement this portion of its
operations value chain.
• The bottom part of Figure 10-2 shows how a
company with a competitive strategy of providing
high-quality rentals to business executives at a
conference resort might implement this portion of
that same value chain.
• Note that the value chain activities are the same for
both companies. Both greet the customer, determine
the customer’s needs, rent a bike, and return the
bike. However, each company implements these
activities in ways that are consistent with its
competitive strategy.

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 VERY IMPORTANT
• The low-cost vendor has created bare-bones,
minimum processes to support its value chain.
The high-service vendor has created more
elaborate business processes (supported by
information systems) that are necessary to
differentiate its service from that of other
vendors.
• As Porter says, however, these processes and
systems must create sufficient value that they
will more than cover their costs. If not, the
margin of those systems will be negative. If a
value chain’s margin is negative, the company
must make some changes. Either the value must
be increased, or the costs of the value chain need
to be reduced (Figure 11 and Figure 12).

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 Three Examples of Business Processes
• Notice activities get data resources from databases and put data
into databases.
• Business processes vary in cost and effectiveness. Streamlining
business processes to increase margin (add value, reduce costs,
or both) is key to competitive advantage.
• Business processes are related by linkages to improve process
margin. For example: Querying multiple databases allows
purchasing department to access data on raw materials
quantities and customer demand. This data can enable
purchasing to reduce size of raw materials inventory, reduce
production costs, and add margin to value chain.

Improved Material Ordering Process

• Changing process design usually requires people to work in new
ways and follow different procedures. Employees often resist
such changes.
• Employees who perform purchase-bicycle-parts activity need to
learn to adjust their ordering processes to use customer
purchase patterns.
• Data stored in finished goods database likely will need to be
redesigned to keep track of customer demand data.

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Case Study
Questions
How does organizational
strategy determine
information systems
requirements?
1. What five forces
determine industry
structure?
2. What is the current value
chain?
3. What is competitive
strategy?
4. How does competitive
strategy determine
improved value chain
structure?
5. How do value chains
determine business
processes and information
systems?
6. How do information
systems provide
competitive advantages?
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 6. How do information systems provide competitive advantages?

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