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Chapter 5
Enterprise Systems
Objectives and Overview
Chapters 5 through 7 offer a comprehensive view of the applications of information technology
(IT) in organizations. In particular, Chapters 5 and 6 consider IT applications within an
organization (intraorganizational), while Chapter 7 focuses on interorganizational information
systems, especially those used for e-business (electronic commerce). The primary objective of
To provide some structure to the broad range of intraorganizational systems, we have divided
these applications into two major categories: enterprise systems systems that support the entire
organization or large portions of it and managerial support systems those designed to provide
Within Chapter 5, we begin by covering a variety of critical concepts that are important to
understanding many of the IT application areas: batch processing versus online processing,
functional information systems, the vertical integration of systems, distributed systems,
client/server systems, service-oriented architecture and Web services, and in a brand new
section virtualization. Then we systematically consider seven major types of organizational
systems in use today:
Transaction processing systems, including enterprise resource planning (ERP) systems
In the Seventh Edition, an important new section on virtualization (both server and desktop
virtualization) has been added to the critical concepts discussion that begins the chapter. The data
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Chapter 5 is designed as a stand-alone chapter, but it is closely related to both Chapters 6 and 7 as
described above. In concert, these three chapters cover the spectrum of IT applications used in
The specific objectives of Chapter 5 are:
2. To introduce a number of concepts that are important to the study of IT applications,
3. To introduce the critical concepts of distributed systems and client/server systems, including
4. To introduce the relatively new and critical concepts of virtualization, which is changing the
5. To describe seven major types of organizational systems in use today, including transaction
6. To focus on an extremely important type of transaction processing systems, namely
Teaching Suggestions
every detail must be covered in class. The classroom session(s) should provide a framework for
Chapter 5 Enterprise Systems
1. To make a class session really come alive, prepare a demonstration of one of the application
areas. For many institutions, the easiest demonstration pertaining to Chapter 5 is to
demonstrate your own campus groupware system. In the Kelley School of Business at
2. Invite a guest speaker from a vendor to talk about a particular ERP system, data warehousing
3. Utilize a case study dealing with an enterprise information system, such as Case Study II-1,
Vendor-Managed Inventory at NIBCO. See the teaching note on this case in this
Manual.
As mentioned above, the amount of classroom time devoted to this chapter will vary but in most
Review Questions
1. Consider the enterprise systems application areas listed in Figure 5.1. Which application
area developed first?
Transaction processing systems developed first.
Which one is most common today?
day?
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Enterprise resource planning (ERP) systems are still a hot topic as we enter the second decade of
2. Describe the fundamental differences between batch processing and online processing.
What is in-line processing?
A batch processing system accumulates a group (batch) of transactions, then processes the entire
batch at one time, such as at the end of the day. An online processing system enters and
3. What is a vertically integrated information system? Give an example.
4. What is a client/server system?
A client/server system is a particular type of distributed system in which processing power is
What is a client?
A client is usually a desktop microcomputer, which usually provides the graphical user interface
What is a server?
Chapter 5 Enterprise Systems
Why would an organization choose to implement a client/server system?
5. Explain the concept of virtualization. Describe at least one type of virtualization that is
being used in IT shops today. Why is virtualization becoming important?
Virtualization is the creation of a virtual (rather than actual) version of something in the area of
computing, such as an operating system, a server, a storage device, or network resources.
Perhaps the most commonly discussed type of virtualization is server virtualization, in which a
physical server is split into multiple virtual servers. Each virtual server can run its own full-
fledged operating system, and these operating systems can be different from one virtual server to
6. Define middleware. What are the three categories of middleware?
7. What is service-oriented architecture, and how does it relate to Web services?
Chapter 5 Enterprise Systems
Service-oriented architecture is an application architecture based on a collection of functions, or
8. List the primary categories of modules that are likely to be offered by a major ERP
vendor.
9. What are the primary reasons for implementing an ERP system?
Companies do not have the desired integration of applications, and therefore integration of data,
to support their decision making and planning needs. If the marketing department, the
10. What is groupware? What are the features likely to be included in a groupware
product?
11. What is an intranet? Why would an intranet be implemented?
Chapter 5 Enterprise Systems
An intranet is a network operating within an organization that employs the TCP/IP protocol, the
same protocol used on the Internet. The organization can use the same Web browser, Web search
12. Some of the most important acronyms used in the factory automation area are listed
below. Provide the full names for each of these acronyms, and give a one-sentence
explanation of each term.
CIM: computer-integrated manufacturing. CIM is a general term used to describe systems
designed to increase productivity and quality while reducing lead times; these systems
Chapter 5 Enterprise Systems
Discussion Questions
1. Differentiate between a two-tier client/server system and a three-tier client/server system.
Differentiate between a fat client and a thin client. Why would a firm choose one of these
approaches over the other when implementing a client/server system?
2. In review question 6, you listed the three categories of middleware. In one sentence each,
define the three categories. Explain the role of each category and how they interact.
Middleware includes server operating systems, transport software, and service-specific software.
3. In this chapter, payroll and order entry were used as examples of transaction processing
systems. Another example with which all of us are somewhat familiar is the check–
processing system employed by your bank. Consider how the check-processing system is
similar to (and different from) the two examples in this chapter. Is the check-processing
system likely to be batch, online, or some hybrid of the two? What subsystems would be
required to operate the check-processing system?
4. Why do many firms find it difficult to implement an ERP system? List all the reasons
you can think of, and indicate which reasons you think are most important and why.
Implementation of an ERP system is extremely difficult because the company must change the
way it does business. This requires a major, ongoing commitment on the part of the company
5. Every large organization has large files or databases containing data used in operating
the business. How does a data warehouse differ from these operational files or databases?
Why are these differences important?
6. Consider an office environment with which you are somewhat familiar. Over the past
decade, what changes in the way the office operates (including communication, document
preparation, and scheduling meetings) have been brought about by office automation?
Why do you think these changes have occurred? Have they been technology-driven or
people-driven, or both?
7. Based on your reading and knowledge from other sources, in what ways has the
phenomenon of the Internet influenced office automation?
8. Explain the concept of Software as a Service (SaaS), and describe at least one application
area in which SaaS is becoming important. Do you think the use of SaaS will expand, and
why or why not?
Software as a Service (SaaS) is the most widely known and widely used form of cloud
computing. SaaS delivers a single application to its multiple users through a Web browser. SaaS
9. Find out if the university where you are enrolled, or the company where you work, or the
company where a close relative or friend works, has developed a portal for employees (or
ble,
log into the portal and find out what services are available.
The answers to this question will certainly vary, but we suspect that most larger organizations
10. The terminology employed in factory automation is often confusing, in part because the
names are so similar and in part because the subareas do indeed overlap. Carefully
distinguish among CIM, CAD, CAE, CAM, and CAPP, indicating any overlaps.
CIM is computer-integrated manufacturing. CAD is computer-aided design. CAE is computer-
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11. All of us come into contact with distributed systems almost every day, even if it is only
while shopping at Walmart or Sears. Describe a distributed system with which you have
come in contact. In your view, what are the advantages and disadvantages of this system?
Is the system you described a client/server system?
One example: The client device (cash register) at Kroger inputs data by scanning the UPC codes
a flows
12. What factors are pushing organizations to adopt service-oriented architectures, and
what factors are holding them back? Considering these factors, do you believe that SOA
will be adopted, but slowly; that SOA will be adopted rapidly; or that SOA will disappear
as another good idea that simply costs too much?
The factors pushing organizations to adopt SOA are primarily economic: SOA services
developed for one application (or somehow obtained for that application) can be re-used again