Business and IS Performance ( IS 6010 )

1. Business and IS Performance(IS 6010) MBS BIS 2010 / 2011 4thNovember 2010 Fergal Carton (f.carton@ucc.ie) Accounting Finance and Information Systems

2. Last week Latency Tuning of databases for performance Previous Apple exam questions Focus this year on management information model rather than process Confidentiality of Apple processes Apple process flows Types of data ESB maintenance culture change led by cost goals GSK yield data impacted by humidity Production planning How do managers do their work Virtualisation Nobo pen example Zuboff, S. (1984), In the Age of the Smart Machine, Basic Books

3. Apple process mapping Should have assumptions documented Eg. What is the presumed role of Distributors? Show information flows for Gift card numbers How are gift card revenue for Cork reported for Apple? Think about revenue models for other soclal networks eg. Facebook Use this as a case study? Go and see Social Network? How does a useful idea turn into a revenue generating model? What kind of performance measures would Apple have in place for gift cards

4. Apple iTunes process Not sold in Apple stores Sent out from central distribution point (as with all Apple material) No reporting from ATMac to Apple on sales Sales reports used locally for accounting No customer data passed on to Apple Small inventory kept locally (3 machines of each spec) Delivery from central distribution point within 24 hours of order Possibly larger US Apple stores connect directly

5. HMV iTunes sales HMV Patrick St. Selling cards for last 12 months Barcode on back of card identifies denomination (eg. €15 card) Scanned at HMV till, connected to central HMV system (UK) Sales are aggregated overnight from all HMV stores All product sales (inlcuding cards) visible next day to stores Replenishment of individual stores done centrally by HMV

6. Notes on process mapping Assumptions should deal with overall objective: how Apple reports revenues for global gift cards sales What is the role of distributors in the process? Show information flows Card sales information (customer, product, quantity, price, date, ...) Gift card numbers: inlcude the end customer creating an iTunes account Any link between two processes? Apple sale of gift cards to distributors Redemption of gift cards by customers How might Apple sychronise with HMV sales, or do they need to?

7. This week Virtualisation Demamd uncertainty Decoupling point Integration framework “One version of the truth” Integration benefits and downsides Change of date for lecture week of 15th Nov Monday 15th at ? instead of Thurs 18th, at Lab 3.15 Assessment date 2nd Dec in-class assessment Case study to be distributed Mon 15th Nov at the latest

8. Virtualisation • Person physical • Vs. • Profile facebook (Virtual)

9. Zuboff’s observations • Distress caused by virtualisation of work: • “floating in space”, or • “lost behind the screens” • “What does that number actually mean” • Computer system designer on data integrity: • “The pressure is to get everything that is sensed and convert it to a symbol ... You must be able to trust your symbols ... Confidence in the symbols of operations is worth it, even if it takes brute-force measures like giving someone the job of maintaining one sensor.” • Evolution of “technostructure” into IS dept

10. Usefulness of information “most managers suffer not from a lack of relevant information, but rather from an over-abundance of irrelevant information.”Ackoff (1967) “Information generated by computer based systems does not include much of the information that is most important to management - especially, important qualitative information.” Dearden (1972)

11. Virtualisation distress • Zuboff: Work is perceived to be • “floating in space”, or • “lost behind the screens”

12. Mason and Swanson, 1979 • Real world • Objects, events, states, situations • Theory of signs (Zuboff’s symbols) • Virtualisation = gathering data to describe the properties of the real world • A good measure is not just an accurate one • Must take into account it’s use or influence • Accuracy and precision

13. What does integration mean? • Dearden 72 • As computer use expands, control is vital • Single group of experts design a completely integrated supersystem = absurd • Specialist expertise is functional by nature • Finance, logistics, sales = different expertise • Centralisation of control of systems = dangerous • Examine the interfaces • Vizard 06 • Data used to be in disparate databases • Data now in databases, file systems, applications, … • “One truth” concerning the state of a business process • Interdependent business processes (eg. sales & service) • Meta-data structures • Enterprise Application Integration vs. BI tools

14. Who benefits? • Finance gain greater visibility • Manufacturing? • Demand may be too unstable for MRP • Production planning needs more “nuance” • ERP is too literal • Much planning still done on Spreadsheets • Sales: need of integration

15. Integration downsides • Response times • Vulnerability: single point of failure • Limitations on expansion • Dependence on single vendor • Flexibility to change system • … • … • Access to basic information is complicated

16. Living with demand uncertainty • Good business is about • satisfying customer demand • within given cost constraints • Good processes should ensure consistency • However • most businesses are seasonal • most customers will change their requirements • Being flexible means • dealing with late changes • without blowing the resource budget

17. “Stretch” performance targets • When planning, organisations set goals that are optimistic • Shareholder confidence sought • Performance targets rarely reduce over time • So target data is considered to be “soft” • Managers given visibility of actual data

18. MRP model doesn’t always fit • So, for example, we might load MRP today and look for something in 5 weeks time, even though it’s got maybe a 10 week lead time. So, if you were using what you called a closed loop MRP system, it would say, well there’s no point in loading that, here, load it in 10 weeks time. We say load it and we’ll make it happen. So we might pay premiums, we might go visit vendors, we might beat ‘em up or flex our muscle or pay for more overtime shifts, or whatever.

19. Virtualisation introduces constraints on reporting • Technical latency (accumulation of processing, querying and displaying times) • Gap between virtual and physical • Customisation of application (eg. Shipping) • Data integrity at point of capture (eg. Sales order) • Complexity of standard reports • Forecasting and reporting tools not integrated • ERP integration drives greater manual manipulation of data 

20. Decoupling point • Decisions were made “intellectually”, “in the brain”, “on the fly”, “off-line” or “by the seat of the pants”. • Such managerial observations represented the “decoupling point” where the physical and the virtual diverged. • Information that was structured in a system was no longer adequate to support decision making.

21. Decoupling point • Inability of planners to deal with demand uncertainty, so responsibility for make or break performance decisions was pushed downwards to operations managers • Instead of the planning role protecting operations from fluctuations in demand, managers had to take personal risks in operational decision making (Planning, Buying, Making and Delivering) • In so doing, managers were obliged to take control of the means of decision making, including the implementation and use of appropriate decision support tools. • Hence the predominance of the “soft” vocabularly

22. Control objectives of integration undermined

23. Plan Plan Measure Plan Virtual Resource visibility Execute Schedule Physical Supply Demand Performance control Integration framework

24. Mason and Swanson, 1979 II • Managers require information about resources and their relative effectiveness for achieving the organisation’s purpose • Resources = people, materias, plant and equipment, money and information • Managerial accounting systems • Resources and costs • Relationship between costs and performance

25. Finance: eyes on the road ahead and on the rear-view mirror • Control of costs and revenues • Report on results to directors and shareholders • Plan expenditure (budgets) • Pay suppliers (including employees!) • Collect cash from customers • Manage cash flow and currency exposure • Plan for financing requirements (eg. acquisitions)

27. Mason and Swanson, 1979 IV • Managers queries and alternatives which govern the precision of the measure • Precision of measure only to “discriminate between critical magnitudes” • Use recruitment process to differentiate between primary and secondary data

28. Mason and Swanson, 1979 V • What problems shall I look into (attention)? • What course of action is better (solution)? • How well am i doing (scorecard)? • IS view of information accuracy (data intgegrity) obscures role of information as influential

29. Accuracy versus precision • Accuracy is tellling the truth • Precision is telling the same story over and over again • Granularity is the level of detail required

30. Accuracy versus precision • Accuracy: closeness of agreement between the result of measurement and the true value of the measurand • Precision: closeness of agreement between independen t measurements Precision Accuracy Accuracy with precision

31. Reading • Mason, 1969 • Child, 1973 • Mason and Swanson, 1979 • Galbraith, 1983 • Zuboff, 1984 • Elmes et al., 2005