The Transverse Information System

New Solutions for IS and Business Performance

Francois Rivard, Georges Abou Harb, Philippe Meret

• Publisher: Wiley-ISTE
• Year: 2013
• Print ISBN: 9781848211087
• eBook ISBN: 9781118619711
• Edition: 1
• Topic: Computer Science
• Subtopic: Information Technology
• Index: Computer Science

Information systems have an enormous potential for improving business performance. With this in mind, companies must set out to exploit and optimize this potential without delay in order to improve their efficiency and continue to set themselves apart from the competition. This comprehensive text provides the information needed to understand and implement these systems at a practical level.

Chapter 1

Innovation for Business Value and Cost-killing

It is February 2000. A top-selling European daily paper is starting to enter all the day’s sports results into its database. The aim is to make the process of retrieving results from its website more reliable, as well as to make it easier to produce the statistics that its readers are so fond of. Until now, individual journalists recorded the results themselves, on media and in formats of their own choosing: notebooks, Excel sheets, sometimes their own memory, etc.

Fast forward to the year 2004. A large French mutual insurance company is taking a fresh look at the tools it uses to monitor the exchange of company data at its processing center. Staff must always know what is happening with transactions between departmental funds, trust funds and parent organizations, so that they can identify those that are late without needing to chase them up urgently through the system. These five brave people have had enough of manually ticking off miles of lists giving the names of prompt payers, deducing the stragglers for themselves.

In August 2007, a break in the chain processing remittances and transactions between customers of a large German bank and the clearing houses held up €1 billion in the payment facilities chain, all in a single day. The penalties incurred were in keeping with the amount held up. As a result, this bank is now thinking about rolling out a system to monitor this process in real-time, a system they do not have at the moment, surprising as this may seem.

What is particularly significant is that examples like these occur again and again in every country in the world, in all business sectors, year after year. They perfectly illustrate the main areas for improvement of information systems, as well as the enormous scope for further enhancing their performance. When we teach our discipline in management or engineering schools, we amaze the students with cases like these. “What?” they exclaim incredulously. “How can we possibly still be running into this type of problem, even in 2009?” However, is it so difficult to believe? There are still a great number of value and performance improvements that can be achieved by intelligent, competent computerization of the information system. A company can end up losing vast amounts of energy and money as a result of its information system not being sufficiently robust to meet the requirements of the business.

In spite of an unparalleled degree of technological development, in spite of progress that is accessible, available and within reach, some companies make extensive use of computers, whereas others make less use of them. This discrepancy exists between all business sectors and even between companies within the same sector. Since only a very small part of the IT budget is devoted to developing and applying new technologies, it is first of all necessary to identify the right kind of technology, one which will be able to create value quickly, which will be reliable and which will provide a structure without being restrictive. In addition, between choosing the technology and making successful use of it every day comes the project, which itself must be successfully implemented. There are so many hurdles to get over and so many risks of failure!

But does that mean we have to resign ourselves to fate when faced with technological advances? Can you imagine working every day without word processors or spreadsheets? No, you would probably change your job because these days, the effort of carrying out office work manually seems unbearable to contemplate. So let’s not accept that situations such as those described above should always be so. And let us implement ways of finding efficient solutions to them.

The actions of IT managers are guided by these thoughts. Major projects are no longer only rationalization projects, aimed at reducing the costs of what has for too long been regarded as a support function and a cost center. They must also create value, performance and a competitive edge. The will to rationalize may persist, but with new objectives in mind. Just as with other functions, such as marketing departments, IS departments are now responsible for driving the profitable growth of the business. Even in times of crisis, rationalization and cost-killing must come with performance improvement and added business value.

In itself, our students’ reaction is justified. In spite of the enormous potential of IT for improving business performance, which can be exploited with proper innovation, successful projects and an ad hoc budget, we still allow these timeworn situations to persist. Instead, we must now try our utmost to reduce them. In its own way, this book proposes solutions and remedial action for all of these situations.

1.1. Supporting profit and growth

There have been less favorable times for IT. In particular, the aftermath of September 11th 2001 and the ensuing economic turmoil was a dark period in the history of IT, as it was in many other fields. As a result of budget restrictions imposed during these years, CIOs were forced to adopt defensive tactics and seek out drastic cost-cutting measures. Given that a belt-tightening policy does not form the ideal basis for implementing an action plan – far from it – running an IT department was no easy task in these years of famine.

Nevertheless, when it did come the recovery was well worth waiting for, since it enabled IT to finally assert itself. In spite of the crisis, businesses have undertaken to improve rather than just maintain their performance, spurred on by increasingly insistent shareholders and major geo-economic maneuvers. In the eyes of decision-makers, IT has to be a growth lever for the business. IT must once more sustain and improve performance in the business units, an objective which is now forced upon all the company’s support functions to a general extent.

1.1.1. A junction with the business

1.1.1.1. A thwarted ambition

This is not the first time that IT has been tasked with the role of contributing to improved performance. In its early years, because it was something new, people thought that IT could do no wrong and placed all their hopes in it. Its development marked the start of a cycle of progress. During what was a period of apparently limitless growth, people could put up with a few transgressions, understandably tentative attempts to harness a discipline that was still new, the occasional over-eagerness to do well and to turn a situation to one’s own advantage. This teenage crisis couldn’t last long.

However, an increase in the number of failures brought this young pretender back down to earth. Delayed from entering the age of reason, IT became a mere support function once more. In the company organizational chart, the IT department lost its organizational component. Brushed aside but not easily forgotten, in an economic climate that had turned into a slump, IT retreated into the technician’s domain, cutting itself off from the business to manage its own affairs, causing major discrepancies between strategic and operational expectations. This is how the enormous credibility which IT enjoyed was squandered, to the extent that its contribution was perceived as being wholly negative as far as the business was concerned. It was expensive, inappropriate and out of touch with the actual requirements of the business. This remains a common perception of IT in too many businesses, a perception which it is now taking great effort to shake off.

1.1.1.2. The issues involved with an efficient information system

Which businesses have built their reputation on the fact that their information system does not work? Not many, certainly. On the contrary, being efficient through an optimized design and use of the information system can be a way to differentiate. Dell and the direct model (which is, however, soon to lose its exclusivity), Amazon or eBay, are players who couldn’t survive without an efficient information system. One of our models is Ikea. All of the store’s business is based on an available, efficient information system where the business processes faithfully reproduce the customer’s path. Thus, as the customer passes through the checkout, withdrawal slips are printed automatically. These are used by warehouse staff to bring the products as quickly as possible. An optimized process based on a just-in-time logic. A business process tool optimized by a value-creating IT tool.

Having an efficient information system is no longer a luxury. Nobody would disagree with the following statements: a “good” information system is a way for the company to set itself apart, whereas a “bad” information system may hold up the business’s development. This leads to the conclusion that: the information system is a growth lever. Let us examine a simple convincing example of this in 2008 in France. Due to strong internal growth after acquiring several competitors in its sector, a real estate company experiences rapid development, increasing the number of staff from 40 to 600 in 5 years. However, the information system has not developed at the same rate. It must, however, definitely be modified to sustain current and future growth. Otherwise, managing the property transactions portfolio and clients portfolios based on Excel sheets and simple Intranet applications will soon seem outdated, if not detrimental. This company is looking for a powerful information system built on intangible foundations (the business assets of the company). What characteristics does it need? To integrate the new without having a major impact on the old (other than those that are clearly accepted and defined); to be able to design and roll out solutions to new business requirements quickly, in any case, more quickly than before; to control predicted expansion and rationalize costs; and finally, to provide justification to the business units regarding investments made, by justifying the contribution of IT in creating value.

Focussing the information system on the business unit has become a quest and a vocation for information system departments. According to an annual survey carried out by Gartner in 2007 on more than 1,000 IT departments in Europe and throughout the world, controlling IT costs remains high up in the list of priorities but has dropped from first to second position. Top priority is now reserved for improving business processes. Information system managers are now turning about-face and focussing more on the business units. Why? Because defining new ways of creating value for the business, thanks to new technologies and the information system, will allow them to set themselves apart and contribute to global performance and profitable growth by implementing innovative, successful systems. And when it is done in a proper manner, costs will be cut. Cost-killing is an inherent benefit of a proper IT strategy and the use of sustainable development technologies and practices.

1.1.1.3. Numerous applications

In 2003, in a previous publication¹, we listed some areas where information systems had an important role to play:

— reducing the time taken to bring new products or new product references to market;

— reducing costs and the amount of time taken to perform business processes;

— providing excellent customer relations thanks to a unique vision, a consistent image and consistent behavior throughout the different sales channels;

— improving the logistics chain by reconciling logistics with demand;

— assisting business integration in the event of mergers/acquisitions.

– assisting business integration in the event of mergers/acquisitions.

There is no denying that these issues are still as topical as ever. Although a lot has already been done and each of these areas has been developed in a number of businesses, progress is still ongoing. New business models are emerging and others are becoming established. New technologies are being used to support these models effectively and to reinforce, or even improve, the projects already started, in a continuous improvement cycle to which businesses must submit.

1.1.1.3.1. The importance of exchanging data in new business models

In this book we noted that each of the areas mentioned involved increasing and automating the exchange of information in the business. We also pointed out the importance of controlling these exchanges. Recent cases can be quoted that show that these subjects are still very important today. For example, in the energy sector, deregulation and opening the sector up to competition forced companies in this sector to open up their information systems and increase the number of data exchanges between players. In the insurance sector, the decoupling of back-offices channels from the distribution partners lead to data exchanges.

In some cases, controlling exchanges is an essential condition for success. Decide for yourself using an example of this business in the retail industry. To establish itself as an agent, the business offers its customers a wide range of products which it does not, however, intend to stock itself, so as not to incur massive storage costs and so that it can continue with the drop shipment distribution model, which it is currently implementing. It opens up its information system to its partners and, over all its sales channels, offers a wider range of products and a more up-to-date catalog, thanks to more frequent, regular exchange of data.

Information on availability is available in real-time, prices can be recalculated at any time depending on partner promotions or the customer’s rating. By implementing new business processes, by setting up a real-time interoperability model between partners, by centralizing data in a data repository, and by sharing pricing services, the information system, technology and innovation provide solutions for this business and support its strategy.

This business has been able to align its business strategy and its information system strategy based on methods that will be described in detail later on in this book and which are based on the use of new technologies: business process management, service-oriented architecture and master data management. Data exchanges contribute to the success of the set-up but are not the only methods used. It is this acknowledgement that leads to the transverse information system.

1.1.1.3.2. The role of technology in improving performance

It is widely claimed that technology is playing a more and more important role in this development in terms of the place it now holds in businesses and in people’s daily lives.

Let us take the case of RFID (Radio Frequency Identification) tags. In the future these chips will be fitted to so many things (public transport cards, passports, student cards, medicines, library books etc.) that the number of possible applications is, quite simply, difficult to imagine. In all these cases, this innovation will only become established in relation to the information system of the business, the institution, the body with which the relevant process is connected, then, in a networked economy, by integrating these different information systems into each other. In all cases, the in...

Table of contents

• Cover
• Title Page
• Copyright
• Preface
• Acknowledgements
• Chapter 1: Innovation for Business Value and Cost-killing
• Chapter 2: The Transverse Information System
• Chapter 3: Master Data
• Chapter 4: Service-Oriented Architectures
• Chapter 5: Business Process Management
• Chapter 6: Exchange Platforms
• Chapter 7: Complex, Innovative Business Architectures
• Chapter 8: The Impact of NISS on Software Implementation
• Chapter 9: From Implementation to Measurment
• Chapter 10: Contribution and Impact of NISS on Organization
• Chapter 11: How to Get the Best Out of NISS
• Index