SYSTEM INTEGRATION AND ARCHITECTURE

Chapter 1

Integration Drivers

INTRODUCTION

As the world continuously advance, business and education must keep pace and immediately adopt to these
changes in order to take advantage of the benefits that technological advancement brings. System integration is
becoming very popular nowadays. When the integration is properly implemented, it will naturally increase productivity
by improving the quality of work.

Learning Outcome

At the end of the unit, the student should be able to:

• Identify Integration Issues upfront in the process of System Integration and should be able to identify the best
practices that ensure successful system integration.
• Have understanding of the technical and business process
• Understand the benefits and limitations of systems integration and its implication for management and;
• Construct deeper understanding on the different roles of ERP, benefits and limits of ERP and different types
and vendors of ERP

Learning Content

What is System Architecture?

A system architecture or systems architecture is the conceptual model that defines the structure, behavior, and
more views of a system. An architecture description is a formal description and representation of a system, organized in a
way that supports reasoning about the structures and behaviors of the system. A system architecture can comprise
system components, the expand systems developed, that will work together to implement the overall system.

There have been efforts to formalize languages to describe system architecture, collectively these are called
Architecture Description Languages (ADLs). Various organizations can define systems architecture in different ways,
including:

• The fundamental organization of a system, embodied in its components, their relationships to each other
and to the environment, and the principles governing its design and evolution.
• A representation of a system, including a mapping of functionality onto hardware and software components,
a mapping of the software architecture onto the hardware architecture, and human interaction with these
components.

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 • An allocated arrangement of physical elements which provides the design solution for a consumer
product or life-cycle process intended to satisfy the requirements of the functional architecture and the
requirements baseline.
• An architecture comprises the most important, pervasive, top-level, strategic inventions, decisions, and their
associated rationales about the overall structure (i.e., essential elements and their relationships) and
associated characteristics and behavior.
• A description of the design and contents of a computer system. If documented, it may include information
such as a detailed inventory of current hardware, software and networking capabilities; a description of long-
range plans and priorities for future purchases, and a plan for upgrading and/or replacing dated equipment
and software.
• A formal description of a system, or a detailed plan of the system at component level to guide its
implementation.
• The composite of the design architectures for products and their life-cycle processes.
• The structure of components, their interrelationships, and the principles and guidelines governing their
design and evolution over time.
• One can think of system architecture as a set of representations of an existing (or future) system. These
representations initially describe a general, high-level functional organization, and are progressively refined
to more detailed and concrete descriptions.

System architecture conveys the informational content of the elements comprising a system, the relationships
among those elements, and the rules governing those relationships. The architectural components and set of relationships
between these components that an architecture description may consist of hardware, software, documentation, facilities,
manual procedures, or roles played by organizations or people.

A system architecture primarily concentrates on the internal interfaces among the system's components or
subsystems, and on the interface(s) between the system and its external environment, especially the user. (In the specific
case of computer systems, this latter, special, interface is known as the computer human interface, AKA human computer
interface, or CHI; formerly called the man-machine interface.)

One can contrast a system architecture with System Architecture Engineering (SAE) - the method and discipline for
effectively implementing the architecture of a system:

• SAE is a method because a sequence of steps is prescribed to produce or to change the architecture of a
system within a set of constraints. SAE is a discipline because a body of knowledge is used to inform
practitioners as to the most effective way to architect the system within a set of constraints.

In very broad terms, system integration is the process of connecting different sub-systems (components) into a
single larger system that functions as one. With regards to software solutions, system integration is typically defined as
the process of linking together various IT systems, services and/or software to enable all of them to work functionally
together.
The main reason for organizations to use system integration is their need to improve productivity and quality of
their operations. The goal is to get the organizations various IT systems

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to “talk to each other” through the integration, to speed up information flows and reduce operational costs for the
organization. But system integration is not used only to connect an organization’s internal systems, but also third
parties that the organization operates with.
System integration is the process of linking many elements to one single IT system.
Integration creates a coordinated system with joined databases and data sources.
System Integration Implies that user permit an interdependent Information System (IS) to communicate or
connect as well as exchange Information or Data effortlessly amongst each other.

Figure 1. Integration Diagram

In this system integration diagram above, you can see external trading partner’s communications and
eCommerce data from Walmart, Target, Shopify, Amazon, and Magento being connected to Acumatica, a back-end
ERP solution, through the use of an integration platform.

In this system integration flow diagram, external (front-end) data is moved from left to right, transformed, and then
automatically integrated into the internal (back-end) system.

Let’s focus on human communication for a second. If two people who speak in two different languages want to
communicate, they can try communicating with their arms, legs, and facial expressions (which we surely all had to do
a few times in our lives). Or they need a person who can understand them both. That person, the translator has the
same role as the integration system.
“Integration is communication (translator) between systems.
Every system has its own language, the way it understands input commands and responds with output. If another
system wants to communicate, that system would need to know how, it needs to know the language of other system.

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 Figure [Link] Module

However, integration doesn’t always have to act as a middleman, it can be done on one side only. In
technical terms, when a solution can connect to a database or some other system, integration module is present
inside that solution. Then, integration module translates to a language of other system.

There are numerous ways and technologies and use cases of system integrations.

What is the Purpose of System Integration?

In short, the objective of integration is to put a puzzle together. There are scattered pieces of an organization’s
information subsystems that need to fit together into one well-coordinated, cohesive architecture or integrated
application mesh. It’s a complex building process that connects an organization’s functions from varying systems,
streamlining disparate systems, including existing hardware, software (customized or out-of-box), and
communications.
The value of an integrated system is an organization improves working relationships with customers and partners
while increasing work-flow efficiency and lowering operational costs for the business. A system integrator can do this
through business process management, computer networking, enterprise application integration, and/or manual
programming.

Implementing a modernized, B2B integration software platform infrastructure provides multiple benefits and
moves businesses into a future-ready state. Before you decide on an integration platform, it is important to
understand the different types of system integration.

3 Types of System Integration

Based on the area and the type of use, integration services can be divided into three categories:

• Enterprise Application Integration (EAI)

• Data Integration (DI)
• Electronic Document Integration/Interchange (EDI)

1. Enterprise Application Integration (EAI)

Enterprise Application Integration is a service-based integration. It’s a process that communicates with different
services, gathers data, and then proceeds with further steps based on desired action or a workflow. Process can be
triggered with the exposed service.

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 2. Data Integration (DI)
Usually, every company has a lot of different data sources (or databases). When you want to consolidate your
services into one central point of access you need data integration. Data integration enables gathering of data from
all services, aggregating, and transforming them into a central place for interactive reporting, most commonly used
for management.

3. Electronic Data Interchange (EDI)

Electronic Document Interchange is core business to business-oriented process. It functions on paperless exchange
of documents and electronic standards. By automating paper-based business, companies save time and eliminate
cost and errors.

If you are new to system integration world or you want to know how system integration can help your business talk
with solutions architect.

Nailing down suitable integrated solutions isn’t exactly simple. But selecting the right parts to deploy and the
precise location to deploy them depends on how well a company, as well as its partners and vendors, understand the
necessary processes, security needs, resources, and business objectives. In turn, proper alignment with the
business delivers better value from integrating scattered systems, applications, services, and software.
However, solutions are more than just vertical and horizontal integration. Here are four key system integration
examples:

1. Vertical integration

What is vertical integration? The vertical integration definition under the construct of system integration is a
process of connecting unrelated subsystems as one functional unit with each subsystem benefiting from another.
This vertically integrated concept is also known as creating “silos,” wherein each layer or element works upward. The
simplest and fastest method only comprises a handful of vendors, partners, and developers to begin with, but over
time, then expands as the process evolves and attempts to include newer functions to meet further business
requirements.
Let’s briefly consider a vertical integration example in radiology. A Radiology Information System (RIS) tracks results
and orders as a Picture Archive and Communication System (PACS) preserves the image. This is where the term
“silo” comes into play since the system is tightly integrated to serve a specific and narrowly defined radiology
business function, holding the data in one place without coordinating with other siloes.

Some advantages to vertically integrated solutions are:

• Efficient supply chain coordination

• Streamlined vendor communication
• Enhanced competitiveness
• Greater control of processes
• Lower operating costs

2. Horizontal integration

What is horizontal integration (aka enterprise service bus (ESB))? The horizontal integration definition under the
construct of system integration is more than a one-off process. A specialized subsystem is assigned to
communicate with other subsystems. This integrated method also

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involves the creation of an application layer to allow programmatic connections between various applications and to
the ESB. In turn, it becomes a systemic system integration.
Some horizontal integration examples can be found throughout the healthcare sector, helping to simplify integrated
medical systems. Through customized development, ESB integration interfaces can effectively work with customer
systems generating data or requiring data movement and integration. There is usually seamless communication to
provide business rules and policies for HIPAA standard compliance. The ERP functionality can be extended by also
implementing EDI software, managed file transfer (MFT) tools, and application connectors to transfer, transform, and
integrate data originating across numerous systems.
Some advantages to horizontally integrated solutions are:

• Higher operational efficiency

• Scalability for dynamic workloads
• An incremental or phased approach to SI
• High Availability for business continuity
• Expand to include additional technology
• Versatile communication capabilities

3. Point to Point Integration (Star Integration)

What is point to point integration (aka star integration)? The definition is in the name. Star integration relies
on the point-to-point method of integrating system components. When this system integration method interconnects
each system to the remaining subsystems, the series of connections can look like star polyhedron. Although, the
presentation of the diagram as a whole can look messy and interwoven like a plate of spaghetti. In other words, the
whole neat and tidy IT infrastructure becomes quickly disorganized if a company approaches SI through point-to-point
integration.
An example of star integration is if a company segments its processes. A separate accounting system would track
finances; a web analytics system manages website traffic, and a customer resource management (CRM) system
would integrate Salesforce. Data from each system could be pulled and combined as needed.

Thus, star integration is simultaneously the simplest and most complex version of SI. Currently, star integration is
often employed outside of a comprehensive technology strategy. For instance, point-to-point integration may be used
to meet the data analytics needs of a specific business unit in sales or marketing while going unchecked by IT.

While the integrated star system cost is unpredictable, as integration fees and deployment time can skyrocket when
subsystems export heterogeneous or proprietary interfaces, there are some limited advantages to this integration
method, including:

• Quick application feature implementation

• Deployment flexibility
• Simplicity (granted there isn’t much IT scale)

4. Common data format

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 What is a common data format? To effectively ensure reliable and accurate integration, most financial,
accounting, customer management, and storage applications require specific and often singular data formats.
A high-performance integration solution establishes a common format to remove the reliance for an adapter to
translate between various application formats. An enterprise application integration (EAI) system providing an
application-independent data format and data transformation service, helping to alter between a common format and
an application-specific format.
An example of a common data format is converting zip codes to city names by merging or dividing objects from one app
or database to another.
Some advantages to common data format integration are:
• Seamless data translation
• Automation

Key Questions for Overcoming Software Integration Problems

Asking the right questions before creating an IT system integration strategy and laying out system integration
project steps are both critical to creating an efficient path to the finish line. Here are a few questions to keep in mind:

1. What is the correct integration strategy for a company?

• Don’t try to fit a square peg in a round hole. An IT department must justify an integration recommendation
to benefit vital B2B technology. Avoid forcing something to extract functions and capabilities that are
missing. Make sure a modernized IT infrastructure is ready for a system integration method that
includes data, application, business-to- business (B2B), and legacy infrastructure. Planning appropriately
with the right vendor offers multiple benefits.

2. What integration interface options are offered?

• There several connector choices (B2B/EDI, RESTful, SOAP, Web Services, custom development, etc.),
and these options impact implementation, infrastructure, and design. Think about the pros and cons of
things like vertical integration vs. horizontal integration. Make sure the vendor explains if the interface
solution will be complex or simplified.

3. How will this integration process affect current systems?

• An integration vendor should have full real-time visibility into an IT infrastructure from the very beginning
and before a project is even started. As explained earlier, a disjointed ecosystem comprised of varying
and constantly evolving protocols, formats, technologies, and data use patterns can often cause a
domino effect.

4. How will this integration project affect future processes?

• Implementing a new project likely won’t be a one-off venture. Take into account the scalability of the
business and IT ecosystems as well as what system integration offers the best flexibility, versatility, and
upgrade options going forward.

No doubt, there are a ton of moving parts when it comes to centralizing an organization’s physical and digital
IT infrastructure. The very thought of taking on a project to solve integration and data movement challenges can
seem overwhelming and complex.

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But the fact is, with the direction digital transformation is headed, not aligning and modernizing cloud, API, and B2B
technologies will ultimately just add complexity on top of convolution. Luckily, approaching system integration with the
right strategy can simplify it all.

How to Eliminate System Integration Issues & Complexities

Development teams and IT departments are no doubt wrestling with myriad new and existing applications, as they
embark on a digital transformation strategy, many with different architectures and payload formats. A single integration
platform, however, can provide the ability to connect and centralize the best-of-breed systems and applications that
enable business processes and tackle software integration challenges.

• Consolidate Disparate Applications

Rather than continuing to rely on disparate, legacy, and outdated systems, modernizing your IT environment allows
you to streamline communications while gaining more automation, control, and visibility, which strengthen those
partner relationships.

• Built-In Connectors for the Most Common Applications

A centralized platform comes pre-loaded with applications, SaaS, and EDI

integration connectors to power an enterprise, whether it’s on-premise or in the cloud. The right solution allows you
to customize and integrate applications to suit your business needs without any additional scripting.

• Automate Common Business Processes

Automation saves time and money by replacing manually initiated processes with software that reduces errors,
enhances your work and process flow while lowering expenses and improving efficiency across the board.

• Reduce Dependency on Customized Solutions

Remaining dependent on customized solutions also means you sink more up-front costs into your tools, and it requires
developer sources that have inherent risks, as well as needing developers to communicate throughout the software
development cycle.

• Free Up Valuable Resources for Other Projects

By automating the majority of your business processes, your precious IT resources to spend valuable time on other
core tasks. A digital transformation strategy means that time-consuming projects are no longer a burden on
employee resources and bandwidth.

SYSTEM INTEGRATION CHALLENGES

System integration is not rocket science by any means, but there are a number of issues that make system
integration challenging for all organizations. According to certain studies, up to 70% of all integration projects fail in
some aspect. This is probably more common for complex projects, but sometimes even relatively simple system
integration projects can run into trouble.

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Most of the failures are not due to the chosen integration technology itself or technical difficulties with the systems in
the scope, but due to project and change management issues.

WHAT IS THE SYSTEM INTEGRATOR’S ROLE?

On broad terms in the IT world, a Systems Integrator (“SI”) is regarded as a company that specializes in
implementing, planning, coordinating, scheduling, testing, improving and sometimes maintaining IT systems. Good
examples of SIs are, e.g., Deloitte, IBM, Accenture, TCS, etc. They deliver large IT projects (e.g., ERP projects)
trying to manage such projects and the numerous suppliers involved. However, in terms of system integration, the role
of the systems integrator is narrowed down to enabling the data integrations between the different existing systems of
the end customer defined in the project scope. This may mean anything starting from simple internal point-to-point
connections to very complex many-to-many integrations both internally and with third parties.

The systems integrators role in this equation is normally to design, implement and test the integration solution,
but the role of the systems integrator may also include continuous management of the solutions as well as contacting
third parties to enable connections with them. Most importantly, however, the systems integrator brings to the table
integration expertise that the customer is otherwise lacking internally (or has a shortage of available internal
resources at hand).

Typical reasons for system integration project failure include for example:

1. CONSTANT CHANGES OF THE INTEGRATION LANDSCAPE

The longer the project takes, the more significant this issue becomes. To manage this risk, time is of the
essence, keeping the integration projects short improves the success rate of the project. Further, an agile working
methodology that can cater to changing requirements along the way and also after the project is essential for the
success of the systems integration.

2. LACK OF SKILLED RESOURCES

System integration requires expertise that is not easy to come by. Having excellent integration technology is
not enough if the required expertise is not there. Most companies struggle to find and retain employees with the
required skills set for system integration. The best way to tackle this issue is to use an external third-party provider
that can bring the needed integration expertise into the table as required, in addition to providing the integration
technology.

3. LACK OF ACCOUNTABILITY
When you’re integrating many different sub-systems, the accountability for the success of the integration
becomes blurred very easily. You may have multiple stakeholders (e.g., vendors, system owners, etc.) in the
equation, none of whom is responsible for the entire system integration. They only care and handle their side of
integration at best, but they will not venture outside their own territory. But integration always has more than one
party. So, when something goes wrong, the situation turns very easily to finger pointing and blaming the other
parties, instead of someone “owning” the integration. If a single party handles the system

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 integration project, that party is also (often contractually) responsible for the success of such a system
integration project, and there is no ambiguity over accountability.

Aligning Strategies, Processes, and Information Technologies

A business alignment process guides information technology assessment, acquisition, and implementation.
This demonstrates how business strategies, teams, operations, processes, and information technologies can be
carefully and successfully aligned.

STRATEGIC ALIGNMENT MODEL

“Strategic alignment between IT and business occurs when IT is use to dynamically create and exploit
business opportunities. It can be use then to transform business process and also to create business dislocations in
the Market Place”.
(Boar: 1994)

STRATEGIC ALIGNMENT

The process of aligning an organization’s decisions and actions such that they support the achievement of
strategic goals.
Four fundamental Domains of strategic choice:

1. Business Strategy
2. Information Technology Strategy
3. Organizational Infrastructure and processes
4. Information Technology Infrastructure and processes

ABOUT…
• Inability to realize value from IT investment is, in part, due to lack of alignment between Business
and IT strategies in an organization.

• Strategy involves
o Formulation – decision making
o Implementation- Execution

• Two fundamentals
o Economic performance is directly related ability of management.
o Strategic fits inherently dynamic.

Examples

• Organizations leveraging IT capabilities to shape and support their business strategies.

o Eastman Kodak and IBM
o Baxter Healthcare Corp. launched Value link material management.
o Electronic filling of taxes in US

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 o Procter and Gamble Co. and Wal-Mart Stores- to manage the movement of products from
different channels.

• These highlights the different facets of aligning IT strategy and Business strategy.

STRATEGIC ALIGNMENT: The emerging concept

This is based on two building blocks
• Strategic fit- need for addressing External and Internal domains.
• Functional Integration- how choices are made in the IT domain those made impact in the
business domain.

Positioning of an organization in an IT Market place involves three choice.

• IT scope
• System competencies
• IT Governance

Fig. 3. STRATEGIC ALIGNMENT MODEL

DEEP DIVE
This model identifies the need to specify two types of integration between business and IT domains.

• Strategic Integration- link between business and IT strategy

• Operational Integration- link between organizational infrastructure and processes.
ALIGNMENT PERSPECTIVE

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 1. Strategic Execution – Anchored on the notation that business strategy has been articulated and is
driver of both organizational design and IS design
• Classic and heretical view of strategic management.
• Top management should play the role of “strategy formulator” and the IS manager should be
“strategy implementer”.

Figure 4.1. Strategic Execution Model

2. Technology Transformation – this involves implementing business strategies through appropriate IT

strategy and processes.

Examples: USAA, American Express

In contrast to strategic execution, this perspective is not constrained by current organization
design but seeks to identify best IT competencies and corresponding.

Figure 4.2. Technology Transformation

3. Competitive Potential – involves ne implementing IT strategies to impact new products and services.
Examples: Baxter Healthcare , Federal express corp, American Express thru IDS financial corp.

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 - In contrast to earlier perspective allow the adoptation of business strategy via
emerging IT capabilities.

Figure 4.3. Technology Transformation

4. Service Level- this involves building world class IS service organization.

• This requires understanding of external dimensions of IT strategy with corresponding
internal design of infrastructure and processes.
• Specific role of top management is that a “Prioritizer” and the role of IS manager is one of
Executive Leadership.

Figure 4.4. Service Level

Differences between Strategic Alignment and Traditional Linkages

• Predominant focus of information system and technology

• Management objectives

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 • IS executive roles
• Dominant criteria for performance assessment

Characteristics Traditional Linakge Strategic Alignment

Predominant focus of information Internaal I/S function and organization Internal I/S function and organization and
system and technology external IT marketplace
Management Objectives Ensuring that I/S activities are linked to Selecting appropriate alignment perspective
business requirements for achieveing business objectives.
I/S executive roles Line Leadership and I/S functionl support Multiple execcutive roles for line and I/S
managers
Dominant criteria for performance Cost and considerations Multiple criteria
assessment

MANAGEMENT IMPLICATIONS
• Understanding of the enabling strategic choices that binds a business strategy with IS infrastructures and
IT strategy with organizational infrastracture.
• Reconceptualise the scope and power of IT strategy of the firm.
• The criteria to asses the performance of the IT function should be reonceptualised.
• Strategic alignment is a journey , not an event.
THE ENTERPRISE RESOURCE PLANNING SYSTEM AS A STRATEGIC SOLUTION

Enterprise systems (ES) are large-scale organizational systems which composed of people, processes
and information technology built around packaged enterprise system software:
• is a set of packaged application software modules, with an integrated architecture, that can be used
by organizations as their primary engine for integrating data, processes, and information
technology, in real time, across internal and external value chains;
• impound deep knowledge of business practices that vendors have accumulated from
implementations in a wide range of client organizations, that can exert considerable influence on
the design of processes within new client organizations;
• is a generic “semi-finished” product with tables and parameters that client organizations and their
implementation partners must configure, customize, and integrate with other computer-based
information systems to meet their business needs.

ENTERPRISE SYSTEM SOFTWARE (ESS)

Enterprise system software (ESS) includes:

• Enterprise Resource Planning (ERP)
• Customer Relationship Management (CRM)
• Supply Chain Management (SCM)
• Product Life Cycle Management (PLM)
• Enterprise Application Integration (EAI)
• Data Warehousing
• Decision Support

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 • Intelligent Presentation Layer
• eProcurement/eMarketplace/electronic exchange software

ENTERPRISE RESOURCE PLANNING SYSTEMS (ERP)

“ERP comprises of a commercial software package that promises the seamless integration of all the
information flowing through the company – financial, accounting, human resources, supply chain and customer
information” (Davenport, 1998).
“One database, one application and a unified interface across the entire enterprise” (Tadjer, 1998).
“ERP systems are configurable information systems packages that integrate information and information-
based processes within and across functional areas in an organization” (Kumar & Van Hillsgersberg, 2000).
“ERP systems are computer-based systems designed to process an organization's transactions and
facilitate integrated and real-time planning, production, and customer response” (O'Leary, 2001).
“A method for the effective planning and controlling of all the resources needed to take, make, ship and
account for customer orders in a manufacturing, distribution or service company“ (American Production and
Inventory Control Society, 2001).
Core software used by companies to coordinate information in every area of the business such as planning,
manufacturing, sales, marketing, distribution, accounting, financial, human resource management, project
management, inventory management, service and maintenance, transportation and e-business monk.

Over all an ENTERPRISE RESOURCE PLANNING SYSTEMS (ERP) ERP programs help to manage company-wide
business processes, using a common database and shared management reporting tools.
ERP software supports the efficient operation of business processes by integrating throughout a business tasks
related to sales, marketing, manufacturing, logistics, accounting, and staffing.

BUSINESS PROCESS
A business process is a collection of activities that takes one or more kinds of inputs (raw material,
information, etc.) and creates an output, such as a goods, report or forecast, that is of value to the customer.
A business process is a collection of linked tasks that find their end in the delivery of a service or product to
a client. A business process has also been defined as a set of activities and tasks that, once completed, will
accomplish an organizational goal. The process must involve clearly defined inputs and a single output. These inputs
are made up of all of the factors that contribute (either directly or indirectly) to the added value of a service or
product. These factors can be categorized into management processes, operational processes, and supporting
business processes.

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 Management processes govern the operation of a particular organization’s system of operation. Operational
processes constitute the core business. Supporting processes, such as human resources and accounting, are put in
place to support the core business processes.

The definition of the term “business process” and the development of this definition since its conception by
Adam Smith in 1776 has led to such areas of study as operations development and operations management and to
the development of various business management systems. These systems, in turn, have created an industry for BPM
software, seeking to automate process management by connecting various process actors via technology.

A process is defined as a series of actions to achieve a certain objective. BPM processes are continuous but also
allow for ad hoc action. Processes can be simple or complex based on the number of steps required, number of
systems involved, etc. They can be short or long running, with longer processes tending to have multiple
dependencies and a greater documentation requirement.

BUSINESS PROCESSES IN CEMENT INDUSTRY

 THE SAMPLE OF THE FUNCTIONAL ORGANIZATION CHART

A functional Organizational chart is one of the organizational structure types which organize staff based
on their specific skills and knowledge. In a functional organization structure, the entire organization is divided into
smaller departments based on their specialization.

MAIN FUNCTIONAL AREAS OF COMPANY’S OPERATION

• Marketing and Sales (M/S)

o Marketing of a product
o Taking sales orders
o Customer support
o Customer relationship management
o Sales forecasting
o Advertising
• Supply Chain Management (SCM)
• Accounting and Finance (A/F)
• Human Resources (HR)

• Marketing and Sales (M/S)

o Supply Chain Management (SCM)
o Purchasing goods and raw materials
o Receiving goods and raw materials
o Transportation and logistics
o Scheduling production runs
o Manufacturing goods
o Plant maintenance
• Accounting and Finance (A/F)
• Human Resources (HR)

• Marketing and Sales (M/S)

• Supply Chain Management (SCM)

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 • Accounting and Finance (A/F)
o Financial accounting of payments from customers and to suppliers
o Cost allocation and control
o Planning and budgeting
o Cash-flow management
• Human Resources (HR)

• Marketing and Sales (M/S)

• Supply Chain Management (SCM)
• Accounting and Finance (A/F)
• Human Resources (HR)
o Recruiting and hiring
o Training
o Payroll
o Benefits

Functional Information System is based on the various business functions such as Production, Marketing,
Finance and Personnel etc. These departments or functions are known as functional areas of business. Each
functional area requires applications to perform all information processing related to the function.
FUNCTIONAL AREA INFORMATION SYSTEMS: MARKETING & SALES

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 FUNCTIONAL AREA INFORMATION SYSTEMS: SUPPLY CHAIN MANAGEMENT

FUNCTIONAL AREA INFORMATION SYSTEMS: ACCOUNTING & FINANCE

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 FUNCTIONAL AREA INFORMATION SYSTEMS: HUMAN RESOURCES

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 FUNCTIONAL MODELS describe business processes and the interaction of an information system with
its environment. In object-oriented systems development, two types of models are used to describe the functionality
of an information system: use cases and activity diagrams. Use cases are used to describe the basic functions of the
information system. Activity diagrams support the logical modeling of business processes and workflows. Both can be
used to describe the current as-is system and the to-be system being developed. This chapter describes business
process and functional modeling as a means to document and understand requirements and to understand the
functional or external behavior of the system.
INFORMATION AND MATERIAL FLOWS IN A FUNCTIONAL BUSINESS MODEL

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 DATA FLOW WITHIN AN INTEGRATED INFORMATION SYSTEM

TYPICAL TECHNOLOGICAL CHARACTERISTICS OF AN ERP

ERP systems are large integrated computer software packages consisting of components, each with a given set of
functions.

All available functions operate on a shared set of data, thereby achieving integration.

The idea of these systems is to support every single aspect of organizational storage, processing, retrieval, and
distribution of data.

TYPICAL ERP SYSTEM MODULES

 INFORMATION AND MATERIAL FLOWS IN A PROCESS BUSINESS MODEL

ADVANTAGES OF ERP SYSTEMS

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WHAT BENEFIT HOW

Reliable information access Common DBMS, consistent and accurate data, improved reports

Modules access same data from the central database, avoids multiple data input
Avoid data and operations redundancy
and update operations

Delivery and cycle time reduction delays Minimizes retrieving and reporting

Time savings, improved control by enterprise-wide analysis of organizational

Cost reduction
decisions

Easy adaptability Changes in business processes easy to adapt and restructure

Improved scalability Structured and modular design with “addons”

Vendor-supported long-term contract as part of the system procurement

Improved maintenance

Global outreach Extended modules such as CRM

E-Commerce
E-business Internet commerce, collaborative culture

DISADVANTAGES OF ERP SYSTEMS

DISADVANTAGE HOW TO OVERCOME

Minimize sensitive issues, internal politics and raise general consensus

Time-consuming

Cost may vary from thousands of dollars to millions Business process

Expensive
reengineering cost may be extremely high

The architecture and components of the selected system should conform to the
Conformity of the modules business processes, culture and strategic goals of the organization

Single vendor vs. multi-vendor consideration, options for “best of breeds”, long-term
Vendor dependence
committed support

ERP system may have too many features and modules so the user needs to
Features and complexity
consider carefully and implement the needful only

Look for vendor investment in R&D, longterm commitment to product and

Scalability and global outreach
services, consider Internet-enabled systems

Extended ERP capability Consider middle-ware “add-on” facilities and extended modules such as CRM
and SCM.

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