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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 Preview

• Systems integration means that you allow

a heterogeneous (hodgepodge) IS to
communicate or integrate and share
information (or data) seamlessly (without
human intervention) with one another.
• Air Cargo case
• Systems integration is a key issue for an
organization for its growth; therefore,
management needs to pay close attention
to this issue.
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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.
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Functional Silos (Cont’d)

• 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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Fig 2-1: Functional Model of
Organization
(POSDCORB)

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Evolution of Functional
Model

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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
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Functional Silos (Cont’d)

• 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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Fig 2-2 Hierarchical Model of
Organization, Robert Anthony,
Harvard University, 1965

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 Business Process and Silos

• The problem of functional silos gave birth to business

process re-engineering (BPR) in late 80s and early 90s
• Led by management gurus, Peter Drucker and Hammer
& Champy
• The cross-functional business process orientation
involved people and resources from various functional
departments working together, sharing information at
any level of the organization.
• The business process view flattens the organization
structure from a hierarchy to a matrix structure; people
and resources from multiple functional units
collaborated on projects such as new product
development, order processing, or procurement to
serve external entities of the organization better
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• The cross-functional organizational structure
breaks the functional silos by opening the
informational flows from one department to
another.
• Many organizations moved from process
orientation to customer orientation
• Dell

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Fig 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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Fig 2-4 Functional Silos in
Organization

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Fig 2-5 Information Systems Evolution Chart

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Fig 2-6 Information Systems
Architectures

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 IS Architectures
• Centralized: First generation; Mainframe
hosts all applications and data resources
• Benefits: Good control over applications;
easy maintenance and tech support
• Limitations: Users do not have much
control over data manipulation; if the
central system is down, organization
comes to a halt

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 IS Architectures (Cont’d)
• Decentralized: Computing came out of the
back room onto the desktop; each user had a
PC and had full control of the IS and data
resources on his PC; PCs were loosely
networked for sharing data files, printers and
other resources on ad hoc basis
• Benefits: each user could choose the hardware
components and had full control of the IS
• Limitations: Due to little data and application
integration, there were duplication of efforts,
data redundancies, and inconsistent info
across the organization

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 IS Architectures (Cont’d)
• Distributed: Allows sharing of data and applications
between end user and server computers; combines
Centralized and Decentralized architectures; PCs are
connected via a network to a server computer; server
houses applications and data that are shared across
the organization; PCs store applications and data that
need not be shared
• Benefits: In this architecture, data is synchronized
between the server and the client in real time; hence
minimal duplication of effort and increased data
consistency; very flexible and scalable
• Limitations: Architecture is complex, requires careful
planning and design; Requires skilled IT support staff
to manage and coordinate the applications, OS, and
hardware
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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. 21
Fig 2-7 IS Categorized by
Functional and Hierarchical Models

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 Systems Integration
Logical
• Develop information systems that allow organizations
to share data with all its stakeholders based on need
and authorization.
• Management needs to change organizational
structures, processes, and employee roles and
responsibilities
• Will need change in organization structures. BPR
involves changing the mindset of the employees in the
organization, encouraging and enabling them to do
their tasks in a new way.
Physical
• Provide seamless connectivity between
heterogeneous systems and applications
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 Steps in Integrating Systems
Step 1 Resource Take an inventory of the various H/W &
categorization S/W resources focusing on vendors,
OS platform. IS architecture used in
these resources.

Step 2 Compliance Check whether the database & other

and standards technologies used in various
applications are supporting standards
such as JDBC/ODBC for databases

Step 3 Legacy Develop a policy in support of older

systems legacy applications.
support

Step 4 Middleware Middleware tools are essential for

tools integration in the short term if existing
applications must be used by the
organization. Do not retire these tools.

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Steps in Integrating Systems
(Cont’d)
Step Authentication Single sign-on policy for application and
5 and data access because all employees and
authorization external partners will need access to an
policies integrated system from anywhere,
anytime.
Step Centralized IT The IT staff needs to be able to support
6 services and all applications and platforms with a
support centralized IT help desk support.

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

7 recovery, and essential if there is a system failure or a
security major disaster. Builds confidence/trust

Step Hardware and Develop organization standards and

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

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Benefits and Limitations of Systems
Integration
Benefits Limitations
Increased Revenue and High Initial Set-up Costs –
Growth H/W, S/W and people costs
Leveling the Competitive Power and Interdepartmental
Environment (with big Conflicts (due to the sharing
players) of information)
Enhanced Information Long-term and Intangible
Visibility (taking informed ROI (Usually several years)
decisions, timely e.g., credit can upset financial
approvals on the spot) managers. Top management
support reqd.
Increased Standardization – Creativity Limitations
on H/W, S/W and (Standardization restricts
organization’s IT policy 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
functional 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 order info through departments,
• communication of output to various parties.
• Dell integrated order management system 28
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.
• A layered system architecture needed
• Integration is also required at the Data
level (one database), Client level
(standardizing on all client platforms), and
at the Application level (via common user-
interface design, backend access to
system infra, and back up/recovery plans). 29
 ERP’s Role in Physical
Integration (Cont’d)

• 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 external partners
• Integration provides for quick make or break
alliances with other business partners 30
Implications for Management

• Functional silos can have unintended

consequences that can harm an
organization’s growth and long-term
competitive position.
• Takeaways 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.
• CRM & SRM, B2B and B2C initiatives
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 Implications for Management
(Cont’d)

• System integration has many hidden

benefits both tangible and intangible
• Allows decision making to be
cascaded to all departments
• Empowerment - Allows employees at
lower-levels to make better decisions
while interacting with clients or
partners.

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 Implications for Management
(Cont’d)
• System integration has many challenges.
• Technological challenges, integrating
heterogenous systems
• Replacing old hardware and software
• Working with IT consultants for middleware
• 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. 34
 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.
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 Summary (Cont’d)

• For systems integration to be

successful, organizations must 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.
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 Summary (Cont’d)

• 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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