CHAPTER 2

SYSTEMS INTEGRATION

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 Learning Objectives

• 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 silo environment.
• Know what systems integration is and why it is
important for organizations.
• Understand the role of Enterprise Resource Planning
(ERP) systems in systems integration.

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 Functional Silos
• Silos are basically compartmentalized operating units
isolated from their environment.

Horizontal 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 late 1930s.

• 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.

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Figure 2-1 Functional Model of Organization
(POSDCORB)

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 Functional Silos (Cont’d)
Vertical Silos
• Organizations also divided roles in 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 on 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 as well as specialize in activities that enhance
productivity and efficiency.
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Figure 2-2 Hierarchical Model of Organization

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 Business Process and Silos

• The problem of functional silos gave birth to business

process re-engineering (BPR).

• 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.

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Figure 2-3 Matrix Structure of Organization

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 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.

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 IS Architectures

• Rapid advances in computer and networking

technologies and changing organizational dynamics,
drive the emergence of new information system models.

• Web-based systems today use a distributed architecture

which 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, which could be a
mainframe or another type of computer.
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 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.

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Figure 2-5 Information Systems Architectures

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Figure 2-6 IS as Categorized by Functional and
Hierarchical Models

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 Systems Integration

Logical
• Develop information systems that allow organizations to
share data with all of its 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.
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 Steps in Integrating Systems

Step 1 Resource Instituting IT support for an integrated systems

categorization environment is necessary to avoid support and
maintenance problems with the integrated
system.
Step 2 Compliance and Develop a single sign-on policy because all
standards employees and external partners will need
access to an integrated system from anywhere,
anytime.
Step 3 Legacy systems Develop a policy in support of older legacy
support applications.

Step 4 Middleware tools Middleware tools are essential for integration in

the short term if existing applications must be
used by the organization.

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 Steps in Integrating Systems (Cont’d)

Step 5 Authentication Single sign-on policy for application and data

and authorization access because all employees and external
policies partners will need access to an integrated
system from anywhere, anytime.

Step 6 Centralized IT The IT staff needs to be able to support all

services and applications and platforms with a centralized IT
support help desk support.

Step 7 Back-up, A good back-up and recovery system is

recovery, and essential if there is a system failure or a major
security disaster.

Step 8 Hardware and Develop organization standards and policy on

software acquisition of new hardware and software which
standardization is aligned with organization IT strategy.

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 Benefits and Limitations of Systems Integration

Benefits Limitations
Increased Revenue and Growth High Initial Set-up Costs

Leveling the Competitive Environment Power and Interdepartmental Conflicts

(due to the sharing of information)

Enhanced Information Visibility Long-term and Intangible ROI (Usually

several years)

Increased Standardization Creativity Limitations (Restricts

Creativity and Independence)

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 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 collection and integration of
information related to various areas of an organization.

• ERP systems enable the organization to standardize

and improve its business processes to implement best
practices for its industry.

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 ERP’s Role in Logical Integration

• ERP systems require organizations to focus on business

process 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 terms
of:
– order entry.
– routing through departments.
– communication of output to various parties.

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 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 at the Application level.
• A good ERP implementation improves operational
efficiency with better business processes that focuses
on organizational goals rather than on individual
departmental goals.
• Improved efficiency with a paperless flow and electronic
data interchange (EDI) or business-to-business (B2B)
commerce environment with partners.

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 Implications for Management

• Silos do not work.

– Most organizations lose out in the long-term when information is
not shared in real time across the functional boundaries within
the company.

• System integration has many hidden benefits.

– Allows decision making to be cascaded to all departments
– Allows employees at lower-levels to make better decisions while
interacting with clients or partners.

• System integration has many challenges.

– Replacing old hardware and software
– Working with IT consultants
– Human challenges, such as impact on IT staff, department
heads losing control of data, and rumors of layoffs

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 Implications for Management (Cont’d)

• Systems integration raises many new ethical issues.

– Possibility of some employees exploiting information for
personal advantage and illegal access of information.

• Remedies can consist of:

– Develop policies on ethical usage of information.
– Install proper security software and hardware (like firewalls).
– Allocate resources for training and education on accessing
information.

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 CHAPTER 3

ENTERPRISE SYSTEMS ARCHITECTURE

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 Components of the Enterprise Systems Architecture

• Functional
– Defines the ERP modules that support the various business
functions of the organization. Examples include:
• Accounting
• Human Resources
• Procurement
• Fulfillment
• Etc.

• System
– Defines the ERP architecture through the physical components
of hardware, software, and networking angle.

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Figure 3-1 Enterprise Systems Architecture (ESA)
Model

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 ERP Modules

• The key role of an ERP system is to provide support for

such business functions as accounting, sales, inventory
control, and production.

• ERP vendors, including SAP, Oracle, and Microsoft, etc.

provide modules that support the major functional areas
of a business.

• The ERP software embeds best business practices that

implement the organization’s policy and procedure via
business rules.

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Figure 3-2 Typical ERP Modules

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 ERP Modules From Three Vendors
Function SAP Oracle/ Microsoft
PeopleSoft Dynamics

Sales Sales and Marketing and Retail Point os

Distribution, Sales Sales, Supply Chain Sales (POS),
Opportunity Management Field Service
Management
Procurement Purchasing, Supplier Procurement and Supply Chain
Relationship Supplier Management
Management Relationship
Management

Production Material resource Manufacturing Manufacturing

Plannings(MRP),
Product Life Cycle
Management
Accounting Financial Accounting Financial Financial
Management Management

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 ERP Modules From Three Vendors (Cont’d)

Function SAP Oracle/ Microsoft

PeopleSoft Dynamics

Distribution Warehouse Supply Chain Distribution

Management Management Management
Customer Service CRM CRM CRM

Corporate Governance, Risk, Corporate Analytics

Performance & and Compliance Performance
Governance Management Management

Human Human Capital Human Capital HR

Resources Management Management Management

Miscellaneous Banking Campus Solutions E-commerce,

Portals

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 Overview of Modules
• Production
– Helps in the planning and optimizing of the manufacturing
capacity, parts, components, and material resources using
historical production data and sales forecasting.

• Purchasing
– Streamlines the procurement process of required raw materials
and other supplies.

• Inventory Management
– Facilitates the processes of maintaining the appropriate level of
stock in a warehouse.

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 Overview of Modules (Cont’d)
• Sales and Marketing
– Implements functions of order placement, order scheduling,
shipping, and invoicing.

• Finance
– Can gather financial data from various functional departments
and generate valuable financial reports.

• Human Resource
– Streamlines the management of human resources and human
capitals.

• Miscellaneous Modules
– Nontraditional modules such as business intelligence, self-
service, project management, and e-commerce.
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 Benefits of Key ERP Modules
• Self Services
– Flexible support for employees’ business functions.
– Simplified access to relevant information.

• Performance Management
– Delivery of real-time, personalized measurements and metrics.
– Provides executives with access to such information as business
statistics and key performance measurements.

• Financials
– Ensure compliance and predictability of business performance.
– Gain deeper financial insight and control across the enterprise.
– Automate accounting and financial SCM.
– Rigorous support for financial reporting—SOX Act.
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 Benefits of Key ERP Modules (Cont’d)
• HR Management
– Attract the right people, develop and leverage talents, align
efforts with corporate objectives, and retain top performers.
– Increase efficiency and help ensure compliance with changing
global and local regulations by using standardized and
automated workforce processes.
– Enable creation of project teams based on skills and availability,
monitor progress on projects, track time, and analyze results.
– Manage human capital investments by analyzing business
outcomes, workforce trends and demographics, and workforce
planning.

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 Benefits of Key ERP Modules (Cont’d)

• Procurement and Logistics Execution

– Sustain cost savings for all spending categories by automating
such routine tasks as converting requisitions into purchase orders
and by allowing employees to use electronic catalogs to order
products and services.
– Reduce costs through process automation, integration of
suppliers, and better collaboration.
– Improve resource utilization with support for cross-docking
processes and data collection technologies. (RFID and bar codes).
– Enhance productivity of incoming and outgoing physical goods
movements.
– Reduce transportation costs through better consolidation and
collaboration.
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 Benefits of Key ERP Modules (Cont’d)
• Product Development and Production
– Shorten time to market.
– Deliver higher quality products and ensure timely delivery.
– Real time visibility and transparency (availability check).

• Sales and Service

– Higher number of sales orders processed and reduction in
administrative costs.
– Easy access to accurate, timely customer information.
– Cost-effective mobile access for field employees.
– Reduce travel costs by using online functions.
– Adhere to environmental, health, and safety reporting
requirements.
– Improve the management of incentives and commissions.
– Realize more effective real estate management.

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 ERP Architecture

• ERP system architecture is organized in layers or tiers

to manage system complexity in order to provide
scalability and flexibility.

• Three-layer architecture (the most reliable, flexible, and

scalable architecture) is the most prevalent today and
includes:
– Web Servers.
– Application Servers.
– Database Servers.

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 Layered Architecture Example (Info.Net)

• The Layered ERP architecture generalizes the

functional layers to allow it to change with newer
technologies.

• A Web-based user interface is provided.

– Users can access the application via the Internet.
– The PC needs to be capable of running a Java-enabled Web
browser.
– The PC is connected to both Intranet and Internet to be able to
use one of Info.Net’s servers.
– The user interacts with the Java Virtual Machine™ Interface
layer to establish a secure connection via a secure socket layer
(SSL) connection.
– The user is then communicating with the server through the
applications software layer (ASL).
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Figure 3-3 Example of Info.Net Architecture

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 Infrastructure Requirements
• Traditional networks require upgrading prior to the
deployment of ERP systems and must be a component
of the overall budget.
• A high-availability network is a requirement for a fully
functioning ERP system, one that grows with the user
population and supports continued expansion and
integration of a supply chain.
• Integration with partner and customer systems allows “a
company to manage important parts of the business
such as order tracking, inventory management etc.”
• Online analytical processing (OLAP) provides the ability
to access, present, and analyze data across dimensions.

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 Three-Tier Architecture
• Most of the current ERP implementations follow a three-
tiered architecture, which consists of a Web tier, an
application tier, and a data tier.
• Benefits
– Scalability - Easier to add, change, and remove applications.
– Reliability - Implementing multiple levels of redundancy.
– Flexibility - Flexibility in partitioning is very simple.
– Maintainability - Support and maintenance costs are less on
one server.
– Reusability - Easier to implement reusable components.
– Security - IT staff has more control system to provide higher
security.
• Limitations
– Can be very expensive and complex.

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 Tiers
• The Web Tier
– Web-based portal allows users the ability to access and analyze
information through their Web browser.
• The Application Tier
– Consists of a Web browser and reporting tool where business
processes and end-users interact with the system.
– It shields the business users from the inner workings of an ERP
system, but still provides the information relevant to their job
and business process.
• The Data Tier
– Focus is on structure of all organizational data and its
relationships with both internal and external systems.

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Figure 3-4 A Three-Tier ERP Architecture

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 Web Services Architectures

• Web-based architecture often described as a fourth tier

where the Web tier is split into Web Services tier and
Web Browser tier.
• The ERP systems focus on the Internet to provide a
powerful new functionality for Internet-based access and
integration.
• This functionality is primarily supported through the
following Internet access technologies:
– Web Server.
– ERP Portal.
– Back-end Server Integration.
– Browse Plug-ins or Applets.

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Figure 3-5 Example of PeopleSoft’s Server-Centric
Internet Architecture

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 Benefits and Drawbacks
• Benefits
– Large numbers of end-users have access to ERP applications
over the Web.
– Easily integrate ERP applications with existing systems.
– Server-centric—No complex, expensive client software
installation.
– The server-centric architecture enables secure end-user access
to ERP application.
– Client-centric—Architecture has better response time because
user requests are mostly processed on the client’s computer.
– Web-based architectures also allow better system-to-system
integration.
• Drawbacks
– Client-centric architectures lack security.
– Server centric is slower.

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 Service-Oriented Architectures

• Also known as object-oriented architectures for Web

platforms.
• Breaks the business tier into smaller, distinct units of
services, collectively supporting an ERP functional
module.
• Allows message interaction between any service
consumer and service provider.
• A consumer from a device using any operating system
in any language can use this service.

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 Service-Oriented Architectures

• SOA is a software development model based on a

contract between a consumer (client) and a provider
(server) that specifies the following:
– Functional description of the service.
– Input requirements and output specifications.
– Precondition environment state before service can be invoked.
– Post condition environment state after service has been
executed.
– Error handling when there is a breakdown.

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Figure 3-6 A SOA Architecture

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 Benefits of Service-Oriented Architectures
• Business-level software services across heterogeneous
platforms.
• Complete location independence of business logic.
• Services can exist anywhere (any system, any network).
• Loose coupling across application services.
• Granular authentication and authorization support.
• Dynamic search and connectivity to other services.
• Enhances reliability of the architecture.
• Reduces hardware acquisition costs.

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 Benefits of Service-Oriented Architectures (Cont’d)
• Accelerates movement to standards-based server and
application consolidation.
• Provides a data bridge between incompatible
technologies.
• Provides the ability to build composite applications.
• Creates a self-healing infrastructure that reduces
management costs.
• Provides truly real-time decision-making applications.
• Enables the compilation of a unified taxonomy of
information across an enterprise.

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 Business Value Benefits of SOA
• Increases the ability to meet customer demands more
quickly.
• Lower costs associated with the acquisition and
maintenance of technology.
• Empowers the management of business functionality
closer to the business units.
• Leverages existing investments in technology.
• Reduces reliance on expensive custom development.

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 Drawbacks of Service-Oriented Architectures

• SOA implementations are costly and time-consuming.

• Requires complex security firewalls in place to support
communication between services.
• Performance can be inconsistent.
• Requires enterprise-level focus for implementation to be
successful.
• Security system needs to be sophisticated.
• Costs can be high because services needs to be junked
very often.

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 SOA and Web Services
• Web services basically are interfaces that allow different
software application and components to be operated
together.
• According to IT industry standards, different applications
can interact with without communication problems.
• The only method of interaction by Web services is by
receiving and sending messages.
• Services are developed using open standards such as
WSDL (Web Services Description Language), UDDI
(Universal Description, Discovery, and Integration), and
SOAP (Simple Object Access Protocol).
• The protocols used in Web services are XML-based.

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 Enterprise Content Management and SOA

• Enterprise content management deals with enterprise

software products that usually store, preserve, manage,
and deliver content connected to business processes.

• Enterprise content management also about supporting

business goals, not just managing content.

• Vendors have come to an understanding that content

management takes advantage of technology and
information assets across the business and is no longer
application specific.

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 Cloud Architecture
• Cloud computing is basically a software service
provided over the Internet, securely, by a service
provider on a monthly or yearly lease.

• Companies leasing CC services save money by

replacing their purchased software that requires a
license fee per seat.
• Some cloud computing providers also let you build your
own applications using their engines and then they
would host those applications for you as part of the
service.

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 Cloud Architecture

• The cloud computing platform provides a great alternative

for organizations that do not want to:
– Purchase, install, or maintain software applications.
– Worry about security, privacy and legal issues associated with
data storage.

• The cloud computing platform is risky for organizations as

it forces them to rely on external vendors for reliability,
security, and continuity of enterprise applications.

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 Benefits of Cloud Computing
• Pay for subscription, not for licenses and upgrades.
• Reduced capital and operating expenditures for IT
equipment and support personnel.
• Accessed from everywhere, as long as you have an
Internet connection.
• No need to install anything on the user’s computer.
• Dynamic scalability available on demand.
• No maintenance fees for software or hardware.
• Promotes green computing environment as servers in
cloud run on clean energy.
• Guaranteed reliability.
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 Drawbacks of Cloud Computing

• Data security.
• Vulnerability.
• Possible conflict of interest, if the company who stores
your applications decides to create a similar application
to what you created on their servers.
• Not suited for all highly competitive industries like
biotech where intellectual property cannot be protected
easily.

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 Implications for Management
• Enterprise architecture is an important technology for
the long-term functioning of the organization.

• ERP architecture decisions are complex because their

impact goes beyond systems and technology to people,
organizational policy, and business processes.

• ERP architecture must be flexible to support a diverse

set of hardware and software platforms.

• Management must learn how to filter out the hyped

technologies that do not provide value to their
organization.

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