07/02/2015

Overview of Systems Integration:

Challenges and Drives

Dr. Amor Lazzez

Office location: Tarbia Campus (C/ 306)

Phone: 0549071465 (cell)
Email: [email protected]

502510-3/Systems-Integration
Week 2
Source: Chapters 1 and 2 from the Enterprise Systems for Management (2nd ed.) textbook.

Systems Integration
• Systems integration means that you allow an heterogeneous
Information System (IS) to communicate or integrate and
share information (or data) seamlessly with one another.

• Systems integration is a key issue for an organization for its

growth
– Management needs to pay close attention to this issue.

• Enterprise Resource Planning (ERP) systems are a major

kind of information system allowing organizations to
integrate different systems into one organization-wide
application with an integrated database management
system.

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

Information Systems in Organizations

• Information Systems are a critical component of a successful
organization today.
• Information Systems play a major role in primary and
secondary activities of an organization’s value chain.
– The evolution of IS suggests that its role has generally been to
support evolving information needs of the organization.
• Information Systems provide a high level of computer
automation to support business functions such as: Accounting,
Finance, Marketing, Customer Service, Human Resource Management,
Operations, Manufacturing
– Supporting horizontal silos of organization
• Information systems provide analytical and decision making
support for management, which is generally categorized into
three levels- Strategic, Middle, and Operational.
– Supporting vertical silos of organization
• Each business functions and management levels has
different information requirements.

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Functional Silos in Organization

• 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.

To increase efficiency and

productive, organizations
developed various
information systems to
support each major
activity and responsibility.

Management Pyramid with Information

Requirements
Each management level has different information requirements.

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IS as Categorized by Functional and

Hierarchical Models

Information Silos and Systems Integration

• Over time, organizations created a hodgepodge of independent

nonintegrated systems ultimately creating bottlenecks and interfering
with productivity.
• Organizations need to be agile and flexible and will require their
information systems to have integrated data, applications, and resources
from across the organization.
• A silo information system is inefficient, inaccurate, and expensive.
– The system creates bottlenecks for everyone and information is not available
in real-time.
• To compete effectively, organizations have to be customer focused.
– This requires cross-functional integration among the accounting, marketing
and other departments of the organization.
• The cross-functional integration 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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Systems Integration
Logical or human level
• 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 or technical level

• 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.

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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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

Implications for Management

• 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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Integrated Systems - Enterprise Resource

Planning (ERP)
• Goal of ERP is to integrate
departments and functions
across an organization into
a single infrastructure
sharing a common database
and serving the needs of
each department.
• ERP systems replace an
assortment of systems that
typically existed in
organizations. Moreover,
ERP solves critical problem
of integrating information
from different sources and
makes it available in real-
time.

ERP and Systems Integration

• 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 systems are the first generation of enterprise systems meant to
integrate data and support all the major functions of organizations.
• ERP systems integrate various functional aspects of the organization as
well as systems within the organization of its partners and suppliers.
• The goal of an ERP system is to make the information flow dynamic and
immediate, therefore, increasing its usefulness and value.

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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.

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

• In the early days of ERP implementation most management
did not understand the magnitude of issues an organization
has to consider before, during, and after implementation.
– ERP systems are very different from conventional packaged software,
such as Microsoft Office and others.
• ERP systems implementation is a complex organizational
activity.
– There are no shortcuts when it comes to implementing an enterprise
system.
• It is important to evaluate and learn from the successes and
failures.
• ERP systems implementation requires strong project
management oversight.

Evolution of ERP

Timeline System Platform

1960s Inventory Mainframe legacy systems using third
Management & generation software-(Cobol, Fortran)
Control
1970s Materials Mainframe legacy systems using third
Requirements generation software-(Cobol, Fortran)
Planning (MRP)
1980s Materials Mainframe legacy systems using fourth
Requirements generation database software and
Planning (MRP-II) manufacturing applications.
1990s Enterprise Resource Mainframe client-server systems using
Planning fourth generation database software and
package software.
2000s Extended ERP or Client-server systems using Web
ERP-II platform, open source with integration to
fifth generation applications like SCM,
CRM, SFA.

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E-Business and ERP

E-Business ERP
Focuses on linking a business with its Focuses on integrating the internal
external partners and stakeholders functional silos of the organization into
an enterprise application
Disruptive technology—Totally Adaptive technology—Merged the early
transformed the way a business data processing and integration efforts
operates in terms of buying and selling, within an organization
customer service, and relationships with
suppliers

ERP Systems Components

• An ERP system consists of:

Hardware Servers and peripherals

Software Process Operating systems and database
Information Organizational data from internal and external
sources
Process Business processes, procedures, and policies
People End users and IT staff

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ERP Architecture
• The architecture of an ERP system influences the
cost, maintenance, and the use of the system.
• The ERP architecture helps the implementation
team build the ERP system for the organization.
• If purchased, ERP architecture is often driven by
the vendor (Package-Driven Architecture).
• There are two types of architectures.
– Logical focuses on the supporting needs of the end
users.
– Physical focuses on the efficiency of the system.

Logical Architecture of an ERP System

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Tiered Architecture Example of ERP System

System Benefits of an ERP System

• Integration of data and applications across

functional areas (i.e., data can be entered once
and used by all applications; thus improving
accuracy and quality of the data).
• Improvements in maintenance and support as IT
staff is centralized.
• Consistency of the user interface across various
applications means less employee training, better
productivity, and cross-functional job movements.
• Security of data and applications is enhanced due
to better controls and centralization of hardware.

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System Limitations of an ERP System

• Complexity of installing, configuring, and maintaining
the system increases, thus requiring specialized IT
staff, hardware, and network facilities.
• Consolidation of IT hardware, software, and people
resources can be cumbersome and difficult to attain.
• Data conversion and transformation from an old
system to a new one can be tedious and complex
process.
• Retraining of IT staff and end users of the new
system can produce resistance and reduce
productivity.

Business Benefits of an ERP System

• Agility of the organization in terms of responding to

changes in environment for growth and maintaining
market share
• Sharing of information across functional areas helps
collaboration between employees.
• Linking and exchanging information in real-time with
supply-chain partners improves efficiency leading to
lower costs.
• Better customer service due to quicker information
flow across departments.
• Efficiency of business processes are enhanced due
to the re-engineering of business processes.

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Business Limitations of an ERP System

• Retraining of all employees with the new
system can be costly and time consuming.

• Change of business roles and department

boundaries can create upheaval and
resistance to the new system.

ERP Implementation
• Before implementing ERP, an organization has to
plan and understand the life cycle of these systems.
• The key to a successful implementation is to use a
proven methodology, take it one step at a time, and
begin with an understanding of the ERP life cycle.
• ERP system implementations are very risky, and
using a well-defined project plan with a proven
methodology will assist in managing those risks.
• There must be a strong well-communicated need to
make the change from the existing information
systems/applications to an ERP system.

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ERP Implementation

Software and Vendor Selection

• It is best for an organization that does not

have the experience in developing ERP
systems to purchase one on the market.
• Before selecting a vendor, the organization
must carefully evaluate its current and future
needs in enterprise management systems.
• Review the organization’s existing hardware,
network, and software infrastructure, and the
resources available for the implementation.

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Vendor Evaluation
• Business functions or modules supported by their software
• Features and integration capabilities of the software
• Financial viability of the vendor as well as length of time
they have been in business
• Licensing and upgrade policies
• Customer service and help desk support
• Total cost of ownership
• IT infrastructure requirements
• Third-party software integration
• Legacy systems support and integration
• Consulting and training services
• Future goals and plans for the short and long term

Operations and Post-Implementation

• Going live (“Go-live”) is one of the most critical points in a
project’s success.
• It is vital to focus the efforts of all project teams to ensure
that task and activities are completed before going live.

Five areas of stabilization are important:

• Training for end-users
• Reactive support (i.e., help desk for troubleshooting)
• Auditing support to make sure data quality is not
compromised by new system
• Data fix to resolve data migration and errors revealed by
audits
• New features and functionalities to support the evolving
needs of the organization

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People and Organization

Project Management
For an ERP system to be implemented
successfully, project management must provide
strong leadership, a clear and understood
implementation plan, and close monitoring of the
budget.

Consultants
It is often the case for organizations without much
ERP implementation experience to use
implementation partners such as consultants.

People and Organization

Change Management
Role is essential because it prepares for changes to how
business is done. In implementing new systems,
communicating, preparing, and setting expectations is as
important as providing training and support.
Business Process Re-engineering
Business processes will need to be changed, adjusted, or
adapted to the new system to use the functionality of an
ERP system fully.
Global, Ethical and Security Management
Outsourcing overseas, ethical issues, and problems with
system security have also attracted a lot of attention in
ERP implementation.

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ERP Vendors

ERP Vendors
SAP
SAP is the recognized global leader among ERP vendors
with over 12 million users. Its solutions are for all types of
industries and for every major market. www.sap.com

Oracle/Peoplesoft
As the second largest ERP vendor, Oracle provides
solutions divided by industry category and promises long-
term support for customers of PeopleSoft- (acquired in
2004). www.oracle.com

Microsoft Dynamics
Formerly Microsoft Business Solutions or Great Plains,
Microsoft Dynamics is a comprehensive business-
management solution built on the Microsoft platform.

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ERP Vendors

Infor
The world’s third largest provider of enterprise software. It
delivers integrated enterprise solutions in supply chain,
customer relationship and suppliers management.

Lawson
Industry-tailored software solutions that include enterprise
performance management, distribution, financials, human
resources, procurement, and retail operations.
www.Lawson.com

Summary
• Functional silos categorize an organization’s tasks and activities into
groups to improve efficiency and responsibility of work in the
organization.
• Silos can improve productivity, but they often lead employees to achieve
departmental goals rather than overall organizational goals.
• IS over the years have been divided horizontally by functions and
vertically by hierarchical levels.
• IS architecture has evolved from centralized mainframe architecture to
personal computers with distributed or client–server architecture.
• In order for systems integration to be successful, organizations have to
focus both on the human or logical level and on the physical or systems
level.
• ERP systems thus make the process of systems integration easier, but
they are expensive and often require organizations to start from scratch.
• System integration involves the whole organization, requiring top-
management support and resources for a long-term period. Management
must be ready to face the human and ethical challenges in a systems
integration project.

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Summary
• Whereas the risks for implementing an ERP are greater, the payoff is
very high for organizations.
• The integration of data helps an organization to better meet the
demands of a fast and dynamic business world.
• The use of ERP systems provides for integrated data and business
processes, thereby creating opportunities for organizations to expand
and change as their business changes.
• ERP components consist of hardware, software, information, process,
and people to perform the fundamental phases of an information
system: input, process, and output.
• ERP system architecture is a blueprint of the actual ERP system. There
are two types of architecture: physical and logical.
• The selection of a system must be based on these needs and how well
a vendor meets those needs now or in the future.
• To be successful in implementing an ERP system, an organization and
its management must clearly understand the implementation process.

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