Nabila Nur Amalina Luthfi

Syabilla Maryam Sunaryo

Rois Ichsanul Amal

Chapter 5
Enterprise systems
Information technology (IT) is a crucial tool for organizations of all sizes, both public and
private. As organizations become more complex, have fewer management layers, offer
customized products and services, and are increasingly international, they rely heavily on
accurate and timely information flow. As a business manager, you must be aware of ITs
potential impact on your job, career, and organization. You must conceptualize ways IT can
improve performance, serve as a consultant to IS specialists, manage organizational change
accompanies new IT applications, use technology applications to enhance them, and
facilitate successful implementation of new IT applications. Awareness of IT applications is
essential for success in new roles. Most obvious applications are already in place, such as
computers handling payroll, inventory records, and accounting processes. However, many
applications remain to be discovered, likely by managers like you.

1. Application Areas
IT applications are a broad topic that can be divided into interorganizational and
intraorganizational systems. Interorganizational systems, such as e-business applications,
span organizational boundaries and are crucial for connecting businesses with end
consumers or suppliers. Intraorganizational systems are divided into two major categories:
enterprise systems, designed to support the entire organization, and managerial support
systems, designed to support specific managers or groups. This chapter covers enterprise
systems like transaction processing systems and groupware, as well as client/server
architecture and service-oriented architecture (SOA). Chapter 6 focuses on systems
specifically designed to support managers, such as decision support systems and expert
systems. Some specific applications fall into multiple application areas, and groupware can
be both an enterprise system and a management support system.

2. ⁠Critical Concepts
Understanding key concepts intertwined with various application areas is crucial for
comprehending the various applications.

a. Batch Processing versus Online Processing

Batch processing and online processing are fundamental distinctions in computer
applications. In the early days, all processing was batched, where an organization
accumulated a batch of transactions and processed the entire batch at one time. This
method was problematic due to the time delay involved before the master inventory
file was updated. As technology improved, online processing was developed to avoid
this delay.

A fully implemented online system allows each transaction to be entered directly into
the computer when it occurs, ensuring the company always knows how many units of
each product it has in stock. This is also known as an interactive system, as the user
interacts with the computer. However, not all online systems are interactive, and
 some systems, often called in-line systems, provide for online data entry but delay
the actual processing until a batch of transactions has been accumulated.

The decision between batch versus online becomes a trade-off between cost and
timeliness. Online costs per transaction have been decreasing, and the importance of
timeliness has been increasing. Most applications today use online data entry, and
an increasing proportion also use online processing. However, natural batch
applications, such as payroll, have not shifted to online processing. Hybrid online
data entry/batch processing systems will continue to exist, allowing organizations to
manage their inventory more efficiently.

b. Functional Information Systems

A functional information systems framework can be created based on an
organization's primary business functions, such as production, marketing,
accounting, personnel, and engineering. Applications can be categorized as part of
the production, marketing, or accounting information systems. The overall information
system is composed of multiple subsystems, each providing information for various
tasks within the function. These subsystems may include interrelated subsystems for
sales forecasting, production planning, production scheduling, material requirements
planning, capacity requirements planning, personnel requirements planning,
materials purchasing, and inventory. The marketing information system may include
subsystems for promotion and advertising, new product development, sales
forecasting, product planning, product pricing, market research, and sales
information. The accounting information system, the oldest and most fully developed
functional system, may include computerized versions of the entire journal and ledger
system, cost or responsibility accounting systems, and financial reporting systems.
The integration of these functional information systems began in the late 1990s and
early 2000s, often focusing on business processes rather than functions.

c. Vertical Integration of Systems

A functional information systems framework can be created based on an
organization's primary business functions, such as production, marketing,
accounting, personnel, and engineering. Applications can be categorized as part of
the production, marketing, or accounting information systems. The overall information
system is composed of multiple subsystems, each providing information for various
tasks within the function. These subsystems may include interrelated subsystems for
sales forecasting, production planning, production scheduling, material requirements
planning, capacity requirements planning, personnel requirements planning,
materials purchasing, and inventory. The marketing information system may include
subsystems for promotion and advertising, new product development, sales
forecasting, product planning, product pricing, market research, and sales
information. The accounting information system, the oldest and most fully developed
functional system, may include computerized versions of the entire journal and ledger
system, cost or responsibility accounting systems, and financial reporting systems.
The integration of these functional information systems began in the late 1990s and
early 2000s, often focusing on business processes rather than functions.

d. Distributed Systems
 Distributed systems, also known as distributed data processing, are a mode of
delivery where processing power is distributed to multiple sites connected via
telecommunications lines. These systems are used in organizations to support
business processes, such as headquarters, factories, stores, warehouses, and office
buildings. The economics of distributed systems are not entirely clear, but they tend
to favor distribution due to increased communication and support costs, while
computer costs decrease. Smaller microcomputers and workstations are generally
less expensive than expanding a large system at a central site. However,
disadvantages such as increased security risk, dependence on high-quality
telecommunications lines, and coordination across sites are often outweighed by the
economic advantages.

e. Virtualization
Virtualization is a popular method for delivering IT services. It involves splitting a
physical server into multiple virtual servers, each running its own operating system.
The physical server manages these virtual servers using a hypervisor program,
reducing the number of physical servers needed and saving money and space.
Desktop virtualization separates the desktop environment from the physical machine,
allowing users to access it through a client/server computing model. This virtualized
desktop environment is stored on a server, allowing users to work from their desktop
device. A thin client is suitable for desktop devices, but standard PCs, notebook
computers, or smartphones can also be used as clients.

f. Service-Oriented Architecture and Web

Service-oriented architecture (SOA) and Web services are becoming increasingly
important in the development and deployment of application systems. SOA is an
application architecture based on a collection of functions or services that can
communicate or be connected with one another. It allows services to be used over
and over again in different applications, with only the connections varying. Services
can be developed within an organization, purchased from a vendor, or obtained from
a vendor on a fee-for-use basis.

While SOA is not the same as Web services, it is a collection of technologies built
around the XML standard of communicating. In practice, web services might be the
means by which SOA services communicate with one another, but other connecting
technologies could also be used.

SOA is slow in coming, but there are numerous vendors pushing their SOA-oriented
products, including IBM, Oracle, Hewlett-Packard, TIBCO Software, and SOA
Software. A 2009 survey by InformationWeek found that only 23% of respondents
have deployed an SOA project, with another 15% having an SOA project in
development.

Some firms that have invested in SOA include Automatic Data Processing (ADP),
Pep Boys, and BT Group. ADP wanted better integration and more reuse of code,
while Pep Boys used IBM's SOA strategy to help give its point-of-sale system a
tune-up. BT Group launched a major SOA initiative by designing straightforward
 services for retail customers or independent broadband providers using BT's
network.

3. ⁠Transaction Processing System

Transaction processing systems are the foundation of modern business operations, handling
thousands of daily transactions in organizations such as sales, payments, inventory,
employee hiring, and dividend payments. These systems produce documents and updated
records, such as invoices, checks, and orders, and generate summaries for upper-level
management. They are crucial for medium and large organizations and are the first
computerized systems, utilizing large-machine computing time. They are able to process
transactions more rapidly and economically than manual systems. Transaction processing
systems can be mainframe-based, midrange-based, two-tier or three-tier client/server
systems, or service-oriented architectures (SOAs). Most recent systems are client/server
systems or SOAs, but many mainframe or midrange-based systems are still in use.
Managers need only understand the general nature, importance, and complexity of these
systems.

a. Payroll System
At first glance, a payroll system seems fairly simple. Operators input the number of
hours worked for each employee (usually employing online data entry), and the
system batch processes these transactions to produce payroll checks. While this
one-sentence description is correct, it represents only the tip of the iceberg, because
it involves only about 10 percent of the system. The payroll processing subsystem
also must keep year-to-date totals of gross income, social security income, individual
deductions, various categories of taxes, and net income. It also must incorporate the
ability to compute federal, state, and local taxes, as well as social security
contributions, and it must handle both mandatory and voluntary deductions. What
other subsystems are necessary? Figure 5.4 lists the primary subsystems in most
payroll systems and the tasks the subsystems must accomplish. Thus, the payroll
system is both commonplace and complex. The payroll system is usually easy to
justify on a cost-benefit basis because it would take an incredible number of payroll
clerks to complete a modern payroll and maintain all the associated records.

b. Order Entry System

An order entry system is a computer-based system that processes orders received in
various ways, such as in person, mail, or telephone. The sales representative enters
the information into the system, either via a microcomputer or a point-of-sale
transaction recording system. The computer updates the files and prints an invoice,
which can generate various types of computer output. The system can check the
customer's credit status, print a multipart shipping document if the item is in stock, or
send a message to the customer if they want to backorder the item. The system also
prints out sales reports, customer statements, inventory reports, backorder status
reports, and accounts receivable reports. It can also generate reports when
exception conditions occur, such as when an item is out of stock or a customer
attempts to exceed the established credit limit. The primary advantage of an online
order entry system is that inquiries can be answered in a few seconds.
 An interorganizational system is another variant where orders are placed directly by
the customer or their computer. An early example was the American Hospital Supply
Corporation's ASAP system, where order entry terminals were placed on the
customers' premises, reducing delays and costs associated with printing and mailing
order forms. The World Wide Web has further simplified the order entry process,
allowing both consumers and businesses to place orders via a web browser and
internet connection.

4. ⁠Enterprise Resource Planning System

Enterprise resource planning (ERP) systems are integrated business applications that
perform common functions like general ledger accounting, accounts payable, accounts
receivable, material requirements planning, order management, inventory control, and
human resources management. They are designed to reflect a particular way of doing
business and are often purchased from software vendors or mixed with existing applications.
ERP systems gained popularity in the late 1990s and early 2000s due to their benefits, such
as cost-effectiveness and the ability to support decision-making and planning needs. The
Year 2000 problem in the late 1990s also increased the demand for ERP systems. However,
implementing an ERP system is challenging due to the need to change business practices
and the high cost of large-scale implementation. The choice of the right ERP software is also
a challenging task. While there are arguments for choosing a single vendor for ERP
purchases, a mix-and-match approach with multiple vendors could help companies meet
their unique needs and reduce reliance on a single vendor.

a. An Example ERP System: SAP ERP

SAP ERP, developed by SAP AG, is a top software firm with over 95,000 customers
in 120 countries. Its R/3 system, the latest version, uses its fourth-generation
language, ABAP, to develop and extend standard R/3 modules. Companies can use
SAP's NetWeaver platform, particularly SAP NetWeaver Developer Studio, to
develop new SAP-related applications or extend modules. In 1999, SAP launched
mySAP, an umbrella concept for Web-enabled versions of its R/3 software. The SAP
Business Suite includes various enterprise software modules, including the robust
ERP module. Implementing SAP ERP requires companies to change their business
processes to conform to the software's built-in processes. The SAP ERP consists of
four primary sets: financials, human capital management, operations, and corporate
services. The SAP NetWeaver platform offers end-user service delivery and
performance management, ensuring seamless interaction with other SAP or
non-SAP software. Other applications in the SAP Business Suite include customer
relationship management, product lifecycle management, supply chain management,
and supplier relationship management. Companies choose SAP modules or
applications that make sense for them, such as Comcast Corporation, Harry & David
Operations Corporation, and Graybar Electric Company.

5. ⁠Data Warehousing

A data warehouse is a large data storage facility that stores data on various aspects of an
enterprise. It is established and maintained by pulling data from operational systems and
storing it in a separate facility. The data must be accurate, current, and stored in a usable
form. To be useful, data access and analysis tools must be provided. Establishing a data
warehouse is time-consuming and expensive, and requires three types of software tools:
warehouse construction software, warehouse operation software, and warehouse access
and analysis software.

Comprehensive data warehousing software packages and data warehousing applications

are increasingly used by organizations. Comprehensive software packaLotus Development
Corporation's 1-2-3 was the dominant spreadsheet package in the 1980s and early 1990s,
followed by Notes, a groupware system with strong document-sharing features and an email
package. IBM purchased Lotus in 1995, focusing on large machine software and allowing
Lotus to operate as a separate business unit.

The welcome page of Lotus Notes allows users to configure it to their liking, with a menu bar,
icons, address box, and navigation bar. The screen is divided into a navigation pane on the
left and an active view pane on the right, with the inbox view displayed when the user opens
the mail. The navigation pane lists views and folders for managing mail, such as drafts and
file folders.

Notes has various databases, each containing documents related to the same topic. Users
can create databases for various activities, such as committee assignments, research
projects, and faculty discussion groups. Some databases are set up for sharing, while others
are created by users throughout the company.

To open a database, users can click on the database bookmark button on the left side of the
page, which opens the database bookmark page. The opening screen of any database looks
similar to Figure 5.10, with appropriate tool buttons, a navigation pane to the left, and a list of
topics or documents in the view pane to the right.

Notes is a client/server system, with large files stored on the server, which Lotus calls a
"Domino server powered by Notes." Corporate files are replicated from one Notes server to
another on a regular basis, ensuring everyone in the organization has access to the same
version of a document. The Lotus Notes client, operating on a PC, is used to access the
server with appropriate password protection, either directly across a LAN or via an Internet
connection.ges include IBM InfoSphere Warehouse, Informatica Platform, Microsoft SQL
Server, Oracle Data Integrator Enterprise Edition, and SAS/Warehouse Administrator. Data
warehousing appliances are packaged solutions that consist of hardware and software
specifically pre-installed and optimized for data warehousing. Column-store databases,
where each customer's record occupies one row, are another new development in data
warehousing. These solutions can be row-store or column-store depending on the mix of
uses of the warehouse.

Data warehousing is a powerful tool for organizations to analyze and utilize data collected
from their databases. It can be used by organizations of all sizes, such as the U.S. Postal
Service, Walmart, and eHarmony. The U.S. Postal Service uses a 32-terabyte data
warehouse to analyze various aspects of its business, including sales, mail-processing
facilities, and manpower and transportation resources. The warehouse generates about
20,000 reports for 1,800 users daily using software from Microstrategy, providing a clearer
picture of finances and operations.
Walmart operates a massive data warehouse with 583 terabytes of sales and inventory data,
built on a 1,000-processor system from Teradata. The company uses the data warehouse to
manage daily store operations, allowing managers to check the database hourly and see
what is happening at individual stores or stores throughout a region. Walmart has also
become one of the early customers of Hewlett-Packard's NeoView data warehousing
system, which allows Walmart's 20,000 suppliers to access data about sales in Walmart
stores.

Online dating company eHarmony uses a Netezza data warehouse appliance to manage its
massive data warehouse, which includes 12 terabytes of data on over 20 million registered
users. Scoring algorithms are run on eHarmony's pool of users to match potential mates,
and data are collected on users' satisfaction with matches and results from them. Netezza
provides plug-ins for the warehouse to work with Oracle, Microstrategy, and other software
packages used by eHarmony.

6. ⁠Customer Relationship Management Systems

Customer relationship management (CRM) is an application that integrates all aspects of

interaction a company has with its customers, including marketing, sales, and support. The
goal of a CRM system is to use technology to forge a strong relationship between a business
and its customers. A variety of software packages have been created to manage customer
relationships, most based on capturing, updating, and utilizing extensive profiles of individual
customers. These profiles are often stored in a data warehouse, and data mining is used to
extract relevant information about the firm's customers.

Web-based frontends have been created so that a customer can interact with the company
online to obtain information about products and services offered by the company, place an
order, check on the status of an existing order, seek answers from a knowledge base, or
request service. CRM software packages enable organizations to market to, sell to, and
service customers across multiple channels, including the Web, call centers, field
representatives, business partners, and retail and dealer networks.

There are many players in the CRM marketplace, with most of the top 15 CRM enterprise
vendors offering traditional out-of-the-box CRM applications, hosted or on-demand solutions
(SaaS), and a few repeats. Major software vendors SAP and Oracle offer both traditional
CRM applications and hosted solutions, while Salesforce.com offers only a hosted solution.
Some vendors have chosen to focus on a particular industry, such as telecommunications
carriers and Internet service providers.

Some examples of CRM projects using a data warehouse include BT Group plc,
Resurrection Health Care, and Author Solutions. Companies like Resurrection Health Care
have deployed Microsoft Dynamics CRM to manage and grow their relationships with
physicians, while Author Solutions has created its CRM system based on a hosted solution
from Salesforce.com and customization by Appirio.

7. ⁠Office Automation
Office automation encompasses various office-related applications, including telephony,
voicemail, videoconferencing, electronic mail, word processing, copying, desktop publishing,
electronic calendaring, document imaging, and document preparation, storage, and sharing.
The newest buzzword in office automation is unified communications (UC), which integrates
real-time communication services with non-real-time services like email, voicemail, and
facsimile. UC products are becoming more unified, with companies like Avaya, Cisco, HP,
IBM, and Microsoft offering strong offerings. The overall picture of office automation is
comprehensive, including email, videoconferencing, and groupware.

a. Videoconferencing
Videoconferencing allows face-to-face meetings and conferences without the need for costly
travel. Desktop videoconferencing is popular for one-on-one and small group conferences,
but it may not be suitable for larger groups due to the small screen size. Larger businesses
often have separate videoconferencing facilities for group participation. Polycom, Inc. offers
HDX series conference room videoconferencing units designed for different-sized rooms and
groups. All models have high-definition video, audio, and "People+Content" data-sharing
capabilities. People+Content allows users to share content from laptops or PCs with an IP
network connection. Polycom PVX software is designed for desktop use with a PC and a
high-quality USB camera attached to the PC. The low-end HDX 4000 series offers
high-definition video and audio. Skype, an Internet telephony company, can also be used for
one-on-one desktop videoconferencing without data sharing. Skype software can be
downloaded from the internet at no cost, and audio calls or video plus audio calls to another
user are free.

b. Electronic Mail
Email systems enable rapid, asynchronous communication between workstations on a
network, eliminating the need for telephone tag. They include features like sending notes to
distribution lists, forwarding messages, responding without reentering the address, and filing
notes in electronic file folders. However, email can become overwhelming due to its easy
use, spam, and less personal nature. Privacy issues arise due to electronic monitoring by
supervisors.

Variants of email include electronic bulletin boards, listservs, computer conferencing, chat
rooms, instant messaging (IM), blogs, and Twitter. Bulletin boards are repositories on which
users can post and read messages, while listservs are computerized mailing lists that accept
messages and forward them to everyone. Computer conferencing is set up around a specific
topic, while chat rooms are real-time versions of synchronous communication conducted on
the Internet. IM is a popular synchronous communication system, with 20 percent or more of
employees using it. Blogs are user-generated websites that deal with various subjects, while
Twitter is a broadcast version of IM.

The first popular e-mail systems were mainframe- or minicomputer-based, designed to run
under proprietary operating systems. Advanced mainframe-based systems, like PROFS,
included electronic calendaring and other features, while the second wave of e-mail systems
was designed to run on UNIX servers. These systems are more economical to operate on a
per-user or per-message basis.
The development of POP-servers and POP-mail demonstrates how PC-based front-ends
can provide a user-friendly interface. POP-mail is based on post office protocol and requires
a POP-client like Eudora or Pegasus to be loaded on the PC. Various email systems, like
Pine, can be used as POP servers. In the third wave, LAN-based client/server software
systems with GUI interfaces were popular in the 1990s. However, they were replaced by
more robust groupware systems like Lotus Notes/Domino and Microsoft Outlook/Exchange
in the 2000s. Internet mail, a variation of this third wave, is popular for small business and
home use. However, organizations are moving beyond simple e-mail and want greater
functionality, electronic calendaring, and document sharing. Groupware is the answer, and
the key to further development appears to be the use of unified communications combined
with collaboration tools or groupware.

8. ⁠Groupware and Collaboration

Groupware and collaboration are essential components of office automation, as they
facilitate collaboration, communication, and coordination. These products include electronic
mail, electronic bulletin boards, computer conferencing, electronic calendaring, group
scheduling, sharing documents, electronic whiteboards, shared workspace, meeting support
systems, workflow routing, electronic forms, Internet telephony, desktop videoconferencing,
learning management systems, unified communications, and IM. One key feature needed for
real-time collaboration is presence awareness.

Microsoft Exchange and Lotus Notes are the top two general-purpose groupware products,
with excellent email capabilities. However, Microsoft Exchange is less expensive to operate,
has a user-friendly interface, and has a larger installed base. Other players in the market
include Oracle Beehive Collaboration Software, Novelll GroupWise, HotOffice, Webcrossing
Community, and EMC’s Documentum eRoom.

Microsoft Office SharePoint Server and Microsoft Office Communications Server offer
streamlined communications, presence awareness, voice and video conferencing, and
mobile access. IBM Lotus Sametime provides integrated, real-time communications
services, and IBM Lotus Quickr offers content libraries and team collaboration tools. IBM
also offers LotusLive Notes, a web client accessing a server hosted by IBM, and LotusLive
iNotes, which provides email service but does not have full Domino functionality.

Groupware and collaboration are growing areas in the software industry, with Lotus Notes
being a leading example.

a. An Example Groupware System: Lotus Notes

Lotus Development Corporation's 1-2-3 was the dominant spreadsheet package in the
1980s and early 1990s, followed by Notes, a groupware system with strong
document-sharing features and an email package. IBM purchased Lotus in 1995, focusing
on large machine software and allowing Lotus to operate as a separate business unit.

The welcome page of Lotus Notes allows users to configure it to their liking, with a menu bar,
icons, address box, and navigation bar. The screen is divided into a navigation pane on the
left and an active view pane on the right, with the inbox view displayed when the user opens
the mail. The navigation pane lists views and folders for managing mail, such as drafts and
file folders.
Notes has various databases, each containing documents related to the same topic. Users
can create databases for various activities, such as committee assignments, research
projects, and faculty discussion groups. Some databases are set up for sharing, while others
are created by users throughout the company.

To open a database, users can click on the database bookmark button on the left side of the
page, which opens the database bookmark page. The opening screen of any database looks
similar to Figure 5.10, with appropriate tool buttons, a navigation pane to the left, and a list of
topics or documents in the view pane to the right.

Notes is a client/server system, with large files stored on the server, which Lotus calls a
"Domino server powered by Notes." Corporate files are replicated from one Notes server to
another on a regular basis, ensuring everyone in the organization has access to the same
version of a document. The Lotus Notes client, operating on a PC, is used to access the
server with appropriate password protection, either directly across a LAN or via an Internet
connection.

9. Intranets and Portals

Intranets are private networks that organizations use to manage internal communications,
resources, and business operations. These systems are often accessible only to employees
or members of an organization, allowing secure access to shared resources, documents,
and applications. Intranets promote collaboration and knowledge sharing, often including
features like content management systems, employee directories, and discussion forums.

Portals are web-based platforms that provide a centralized access point for multiple
services, such as applications, documents, or databases. Enterprise portals often serve as
the gateway for employees to access various organizational systems through a single
sign-on (SSO) mechanism. Both intranets and portals focus on enhancing communication,
operational efficiency, and information flow.

Example: A company may use an intranet to share HR policies, team calendars, and
performance dashboards. Employees can access a portal to view their paychecks, request
time off, or collaborate on project documents stored in the cloud.

Source: Laudon, K.C. & Laudon, J.P. (2020). Management Information Systems: Managing
the Digital Firm. Pearson.

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10. Factory Automation

Factory automation refers to the use of technology to control and operate production
processes in manufacturing facilities with minimal human intervention. This includes
robotics, computer-aided systems, and software applications that manage and monitor
machinery, workflow, and production outputs. Automation improves accuracy, reduces labor
costs, and enhances the overall efficiency of manufacturing operations.
Modern factory automation involves Industrial Internet of Things (IIoT), where sensors and
devices communicate data about the machinery's performance in real-time. Automation also
covers automated quality checks, material handling systems, and assembly lines that run
24/7.

Example: In the automotive industry, robots assemble car components with precision, while
conveyor systems automatically transport parts from one stage to the next. Real-time
monitoring systems track machine performance, alerting supervisors if any malfunctions
occur.

Source: Groover, M.P. (2021). Automation, Production Systems, and Computer-Integrated

Manufacturing. Pearson.

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11. Supply Chain Management Systems

Supply Chain Management Systems (SCMS) are integrated solutions used to manage the
flow of goods, information, and finances as a product moves from supplier to manufacturer,
wholesaler, retailer, and finally to the consumer. These systems help organizations optimize
operations by coordinating procurement, production, warehousing, inventory management,
and logistics.

Modern SCMS often include Enterprise Resource Planning (ERP) systems, enabling
organizations to track demand, plan production schedules, monitor inventory levels, and
manage supplier relationships. SCMS is essential for ensuring products reach customers
efficiently, minimizing delays and costs.

Example: A retail company uses an SCMS to track the shipment of goods from overseas
suppliers, plan delivery schedules, and manage warehouse stock. The system notifies the
logistics team when inventory is low and suggests when and where to reorder items.

Source: Chopra, S., & Meindl, P. (2020). Supply Chain Management: Strategy, Planning, and
Operation.