Summary Session 3-4

Systems Integration (Session 3-4)

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.

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.

  

Hierarchical Model of Organization

Matrix Structure of Organization

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.

Steps in Integrating Systems

Benefits and Limitations of Systems Integration

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.

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.

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.

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

•         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.