Business Process Management and IT

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Chapter 1

Business Process A set of activities that are performed in coordination

in an organizational and technical environment.

Goal directed - These activities jointly realize a business goal

Each business process is enacted by a single organization

A business process may interact with business processes performed by other organizations

Functional v/s Process OrganizationFunctional Organisation Process Organisation

Work unit Department Team

Key Figure Functional Executive Process Owner

Benefits • Focus on Functional Excellence• Easier to implement work balancing

because workers have similar skills• Clear management direction on how

work should be performed

• Responsive to market requirements• Improved communication and

collaboration between different functional tasks

• Performance measurements aligned with process goals

Weaknesses • Barrier to communicate between different functions

• Poor handover between functions that affects customer service

• Lack of end-to-end focus to optimize organizational performance

• Duplication of functional expertise

• Inconsistency of functional performance between processes

• Increased operational complexity

Strategic Value Supports cost leadership strategy Supports differentiation strategy3

BUSINESS PROCESS

FLOW

A prescribed sequence of

steps

Performed In order to produce

A desired result for the organization

AUTOMATION

Deliver Business tactics

faster

Zero loss of information

The Perfect Fit w/SOA and Applications

LEVELS (Different levels can be identified in business

process management, ranging from high-level business strategies to implemented

business processes)

Business Strategy

Goals

Organizational business processes

Operational business processes

Implemented Business processes4

BPM - Life Cycle

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Analysis

Design

Implementation

Run & Monitor

Optimize

Business Process ManagementBody of principles, methods and tools to Analyze, (re-)design, Execute and Monitor business processes, with the aim of improving their overall performance.

Key factors in implementing BPMFactors Key ConsiderationsScope A single process, a department, the entire company

Goals Process understanding, improvement, automation, re-engineering, optimization

Methods to be used

Six Sigma, BPM Life Cycle Method, TQM, Informal methods

Skills Required Consultants, Train Employees, Formal Certification, BasicEducation, Existing Skill sets

Tools to be used White-Boards, Sticky Notes, Software For Mapping,Documenting, Software for Simulation, Comprehensive BPMS

Investments to Make

Training, Tools, Time

Sponsorship/Buy-in Needed

Executive Level, Department Level, Process Owner Level,Employee Level

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Impact of IT on BPM

Automating repetitive business processes

BPMS works by ‘loosely coupling’ with existing application

Operational savings

Reduction in the administration involved in Compliance and ISO

Freeing up of employee time

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Six Sigma

Set of strategies, techniques & tools for process improvement

DMAIC Cycle

D: Define

M: Measure

A: AnalyzeI: Improve

C: Control

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Total Quality ManagementOrganization-wide effort to install and make permanent a climate in

which it (business or firm or organization) continuously improves its ability to deliver high-quality products and services to customers.

Plan

DoCheck

Act

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Business Process Reengineering To prevent means becoming ends, the business processes

need to be reengineering with the changing time andtechnology

BPR is fundamental rethinking and radical redesign ofprocesses to achieve dramatic improvement, in critical,contemporary measures of performance such as cost,quality, service and speed.

Few important key words, which need clear understanding Dramatic Achievement Radical Redesign Fundamental rethinking

Accounting Information Systems (AIS)Defined as a system of collection, storage and processing of financial and accounting data that is used by decision makers.

Computer-based method for tracking accounting activity in conjunction with information technology resources.

The resulting statistical reports can be used internally by management or externally by other interested parties including investors, creditors and tax authorities.

Basic functions include Collecting and storing data; recording transaction and Safeguarding organizational assets.

Data Processing Cycle - Data input; Data storage; Data processing and Information output

Business Risks of Failure of IT Superficial or deficient executive involvement Deficient project management Limited option for customization of BPM software is

required Inadequate assessment of the need for change

management Resources not available when desirable Software fails to meet business needs System may be over-engineered when compared to the

actual requirements Technological obsolescence

Mapping Systems

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Flowchart E-R Diagram

Data Flow Diagram Decision Table

MAPPING SYSTEMS

Flowchart

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Pictorial representation

Using organized combination of shapes,

lines, and text

That graphically illustrates all the steps

of a process and algorithm.

Can be used for -

• Training

• Troubleshooting

• Testing

• Inspecting a process

Symbols in Flowchart

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PROCESS SYMBOL - represents any process, function, oraction.

DOCUMENT SYMBOL - represents any type of hard copy input or output.

DECISION SYMBOL - Decision Symbol is a junction where a decision must be made.

START/END SYMBOL - represents START or END of the process.

INPUT/OUTPUT SYMBOL - represents data that isavailable for input or resulting from processing.

A Housing Society in a newly developed Smart City has provided several advanced security systems to each house in that city. Based on the value of these advanced security systems installed in each house, the Society has divided all the houses in four categories and fixed the criteria for annual maintenance charges as under:

House Category Maintenance charges as % of value of advanced security systems installed at house

A 8%

B 6%

C 4%

D 3%

In addition to above there is a GST @ 12% on the amount of maintenancecharges. Considering house number and value of advanced security systeminstalled, as input, draw a flow chart to have printed output as housenumber, maintenance charges, GST and the total amount to be paid by eachhouse owner. (Fictitious Rates are taken for the sake of simplicity) 16

Flow Chart Example

Yes

Start

Read HNO, VAL_ASS

Yes

No

If HC = A?

If HC = B?

No

MC = 0.08 * VAL_ASS

MC = 0.06 * VAL_ASS

Yes

No

If HC = C? MC = 0.04 * VAL_ASS

MC = 0.03 * VAL_ASS

No

Yes

GST = 0.12 * MC

TA = MC + ST

Print HNO, MC, GST, TA

More HNO ?

Stop

Flowchart Ex. (Ctd..)

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A book publisher of Information Technology offers discount to itscustomers on the basis of customer type as detailed below:

Customer Type Discount

Book Seller 30%

Library 20%

Student 10%

Further if number of copies purchased is more than 20, thenadditional discount of 5% is allowed irrespective of customer type.Number of books, unit price of each book and customer type aregiven as input.

Draw a flow chart to calculate the net amount after all discount andprint customer type, number of copies and net amount.

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Flow Chart Example (Ctd..)

Let us define the variables first:

Customer Type: CT;Discount: DISC;Unit Price of Each Book: XNumber of Copies: NC;Net Amount: AMT

Flow Chart Example (Ctd..)

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No

DISC = 0.1

No

Yes

If CT=

Library

?

DISC = 0.35

If NC >

20?

Print

“Invalid

Customer

Type”

Start

Read CT, NC, X

Print CT, NC, AMT

Stop

Yes

NoIf CT=

Book

Seller?

Yes

No

If NC >

20?

DISC = 0.3

No

Yes

DISC = 0.2

DISC = 0.25

If NC >

20? Yes

DISC = 0.15

AMT = NC *(X - DISC*X)

Yes

NoIf CT=

Student

?

Entity Relationship Diagrams

Data modeling technique that creates a graphicalrepresentation of the entities, and therelationships between entities, within aninformation system.

Boxes are commonly used to represent entities.

Diamonds are normally used to represent relationships.

Ovals are used to represent attributes.20

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1:1 relationship

1:N relationship

Student bookborrow

M:1 relationship

Administrators MinisterReport to

M:N relationship

Student courseenrolls

Types of Relationships

Data Flow Diagram is a graphical representation of the flow of data through an information system.

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Symbol MEANING

PROCESS

DATA STORE

ENTITY

DATA FLOW

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Decision Table is a collection of a basis (condition)

and a conclusion (action).

Condition Stubwhich comprehensively lists thecomparisons or conditions

Condition Entrieswhich list in its various columns thepossible permutations of answer to thequestions in the conditions stub

Action stubwhich comprehensively lists the actions tobe taken along the various programbranches

Action Entrieswhich lists, in its columns correspondingto the condition entries the actions con-tingent upon the set of answers toquestions of that column.

Chapter 2

Information Systems and IT Fundamentals

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Learning Objectives

To understand the need for IT in business organisations its relevance in Auditing

To explain BPA and understand the role of BPA in improving business processes

To understand the term ‘computing’ and various popular computing architectures

To understand information system layers – different layers of interaction in an information system

To explain information system life cycle and the process of building IS, and

To have an overview of recent technologies

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Need for IT and Relevance in Auditing

A strategic business enabler, e.g., banking Communication capabilities

Data and information management

Automated processes

Relevance in Auditing Audit objectives

IT risks and issues

Need for control in IS

Impact of IT on risks and controls26

BPA and Its role in Improving processes

BPA – automation of business processes

IT processes Database access and changes

File replication and data backup

Systems and event log monitoring

Job scheduling

Application integration

File transfers

Printing

The steps involved in BPA27

Computing and Computing Architecture

Comp Sc., Comp. Engg., IS, IT, SE

IT servers

file, print, network, database, application, web, mail

Architectures

ISA – fixed and variable length

RISC v. CISC

Emerging computing models - cloud

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Information System Layers

Application program

Hardware

Operating system – system software

Networks

DBMS – data, database and models

Hierarchical, network, relational, OO, ORDBMS

Computing models – client-server, Internet, mobile, cloud

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Information System Life Cycle

Investigate – understand the problem

Analyze – Assess the solutions

Design or select the best solutions

Implement – put solution into effect

Maintain and review – evaluate results

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Overview of Recent Technologies

Bluetooth

Wi Fi

Laptop, tablet, smartphone, touchpad, iPad, iPod, ultra mobile PC (UMPC)

Android

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Chapter 3

Telecommunication and Networks

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TELECOMMUNICATION NETWORK

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Computer Network

A collection of autonomous(independent) computers –

laptops, PCs, Phones, Servers etc.

interconnected by some means (Transmission

media) through which they are able to communicate

To share resources (like audios, videos, doc files, storage servers etc.) andprovide high reliability.

Fundamentals of Communication

a Sendera

Receiver

theMessage

theMedia

aProtocol

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Sender

Receiver

Media

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Telecommunication Network Model

Terminals

Telecommunication Processors

Telecommunication Media

Guided

Twisted PairCoaxial Cables

Fibre Optic

Unguided

Micro Waves

Radio Waves Infra Red

Waves

Satellite

Cellular Phones

Computers Telecommunication Control Software

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Classification of Telecommunication

Network

Area Coverage Based Classification

LAN

MAN

WAN

Functional Based Classification

Client-Server

Peer-to-Peer

Multi-Tier

Ownership Based Classification

Public Network

Private Network

Virtual Private Network

Functional Based Client-Server: A client is a single-user workstation that provides a presentation services and

the appropriate computing. A client computer can request specific data from the server. The server program retrieves the requested data from its data bases and returns it to the client.

Peer-to-Peer : P2P network is created with two or more PCs connected together and going through a separate server computer. there are no dedicated servers. All computers are equal and therefore are termed as peer. Normally, each of these machines functions both as a client and a server.

Multi-Tier: A tier is a distinct part of hardware or software.

Single Tier: A single computer that contains a database and a front-end (GUI) to access the database is known as Single Tier System. Generally, this type of system is used in small businesses

Two-Tier: a presentation layer or interface runs on a client, and a data layer or data structure gets stored on a server.

Three Tier: in which the functional process logic, data access, computer data storage and user interface are developed and maintained as logical independent modules ie.. Presentation, Application (business logic tier) and Database tier are different. 38

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Transmission Mode

The Direction of Exchanges

Simplex

Half-Duplex

Duplex

Number of bits sent simultaneously

Parallel

Serial

Synchronization b/w Transmitter and

Receiver

Synchronous

Asynchronous

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X Y

Unidirectional, Simplex

One way at a time, Half Duplex

Both ways simultaneously, Duplex

Transmission Mode – Direction of Exchanges

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Parallel Serial

Transmission Mode – No. of bits sent simultaneously

0

1

1

1

0

0

1

0

Sender Receiver

0

1

1

1

0

0

1

0

Sender Receiver

0 1 1 1 0 0 1 0

AsynchronousSynchronous

Transmission Mode Synchronization b/w Transmitter and Receiver

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Network Topologies

Mesh Star Bus Ring

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Transmission Media

Guided

Twisted Pair

Coaxial Cables

Optical Fibers

Unguided

Radio

Micro Infra-Red Waves

Satellite

Cellular Phones

Switching Techniques

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Transmission Techniques

Broadcast Networks Switching Techniques

Message Switching

Circuit SwitchingPacket Switching

Temporary connections

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I II

III

IV

A

B

C

D

E

F

G

Circuit - Switched Network

A,B and C in case of pt. to pt. require 12 links but four

switches reduce no. and total length of the links.

Header Body Footer

Virtual CircuitDatagram

Packet

Packet- Switched Network

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Message - Switched Network

M2

SP 1

SP 2

SP 3

SP 4

M1

M1

Store and ForwardStore and Forward

Store and ForwardStore and Forward

M1

M2

M1

Q

PA

B

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Transmission Protocol

Syntax refers to the structure or format of the data,

meaning the order in which they are presented.

Semantics refers to the meaning of each section

of bits.

Timing refers to two characteristics: when the data is to be transmitted and how fast can they

be sent.

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Host A

Session

Application

Transport

Network

Data Link

Physical

Host B

Presentation

Session

Application

Transport

Network

Data Link

Physical

Frames

Bits

Segments

Packets

Presentation

Open Systems Interconnection (OSI) Reference Model and TCP/IP

TCP/IP

Application

Transport

Network

Data Link

Physical

Network Security

Aspects

Privacy

Message Authentication

Message Integrity

Non-repudiation

Techniques

Intrusion Detection

System

Firewall

Network Access Control

Anti – MalwareSite Blocking

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e-Commerce

Business to Business (B2B)

Business to Consumer (B2C)

Consumer to Business (C2B)

Consumer to Consumer (C2C)

Business to Government (B2G)

Business to Employee (B2E)

Mobile Commerce

Electronic Fund

Transfer

Chapter 4

Business Information Systems

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Functions of Information SystemsINPUT(Business

problems in the

form of data,

information,

instructions,

opportunities)

PROCESSING(Software,

Programs, people,

equipments,

storage)

OUTPUT(Solution to

problems in the

form of reports,

graphics,

calculations,

voices)

CONTROL(Decision

Makers, Auto

Control)

Feedback

Operational Level Systems

• Supportoperationalmanagers intrackingelementaryactivities.

• For example -TPS

Knowledge Level Systems

• Support thebusiness tointegrate newknowledge intothe business andcontrol the flow ofpaperwork andenable groupworking.

• For eg: OAS andKMS.

Management Level Systems

• Support themiddle managersin monitoring,decision-makingand administrativeactivities.

• For example -MISand DSS.

Strategic Level Systems

• These areinformationsystems at thestrategic levelof anorganizationdesigned toaddressunstructureddecision-making.

• For example -ExecutiveInformationSystems.

Operational Level Systems

(a) Operational-level systems or OperationalSupport Systems (OSS) ensure that businessprocedures are followed.(b) These support operational managers intracking elementary activities.(c) TPS is an operational level system.

Transaction Processing Systems (TPS)

Often considered the bread of MIS application

The upper management knows that it cannot pull the plug on its TPS and survive.

Historically, many organizations had TPS since the 1950’s. Most of these TPS have morethat paid for themselves. Many TPS have been – and continue to be – mainframe-oriented.

The accurate recording of transactions

TPS includes –

• Used control procedures in issuing such documents as paychecks, invoices, customerstatements, payment reminders

• It may be far-reaching, extending completely through and out of the organization, linkingtogether - The entire financial system; Factory; Customer and suppliers.

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Transaction Processing Cycle In CBIS, transaction data must be converted to a form that can be entered into the computer system for processing. This involves: Source data automation , Electronic data interchange and Document Management Systems .

Data Entry

Transaction processing and File/Database Updating

Inquiry processing

Document and Report generation

• Collecting

• Recording

• Coding

• Editing

• Batch mode

• Online vs. Real time

• Online interrogation by authorized users in authorized manners

• Responses are often displayed in a pre-specified format on the user’s workstation screen

• One may also print out a copy of the response as it appears on the screen

• Information, Action and Turnaround documents

• Accounting statements

• Control listings and Edit reports

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Knowledge Level Systems

These support the business to integrate new knowledge into the business and control the flow of paperwork and enable group working.

Two types of Knowledge Level Systems are: Office Automation SystemsKnowledge Management Systems

Office Automation Systems

Office Automation refers to the integration ofoffice functions usually related to managinginformation. Basic activities include - Document Capture Document Creation Receipts and Distribution Filling, Search, Retrieval and Follow up Calculations Recording Utilization of Resources

Management Level Systems

• These systems support the middle managersin monitoring, decision-making andadministrative activities. This is helpful inanswering questions like are things workingwell and in order?• Management Information System (MIS) andDecision Support System (DSS) are types ofManagement Support Systems.

Management Reporting SystemIt is the MIS sub-system that issues pre-formatted reports to managers

Info

rmat

ion

Sys

tem

That provides predefined types of information to management;

For relatively structured types of decisions; and

focuses on Information, and occasionally, on effectiveness.

Usually concerned with data about the past than data relating to the future.

Pro

pe

rtie

s

Support structured and semi-structured decisions, primarily at the middle and lower levels

Provides fixed types of information in an established format; the information requirements of users are normally known and stable

Often implemented with voluminous, hard copy reports, requiring each users to search specifically for key information

Usually require a formal request to be submitted; formal systems development may be required to approve the request.

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Decision Support SystemAn interactive Computer-based system that facilitate the solution of unstructured problems by a set of decision makers working together as a group.

PROPERTIES

Middle or top management focus

Interactive capabilities

Use of models

Difficulty in cost justifying

Evolutionary development

Focus on managerial effectiveness, rather than efficiency

DSS TOOLS

Micro computer systems

DBMS

Display devices and Graphics generators

General-purpose programming languages

Optimization tools

Statistical tools

Spreadsheet packages 63

Components of a DSS

GUI

DBMS

Spreadsheet Appl

Word Processor

DTP Application

Graphic software

Report generator

Stat, OR, Other Analysis software

Database

ModelBase

Workstation

DecisionMaker

DSS Software

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Strategic Level Systems

• Strategic-level Systems (SLS) are informationsystems at the strategic level of an organizationdesigned to address unstructured decision-making.

•Executive Information Systems (EIS) – It issometimes referred to as an Executive SupportSystem (ESS). It serves the strategic level i.e. toplevel managers of the organization.

Chapter 5

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Business Process

Automation through

Application Software

Information Processing The effort to create information from raw data is known as “Information Processing”.

Two types of Information Processing exist.

Manual Information Processing Cycle

Computerized Information Processing Cycle

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Controls in BPA and their need

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Objectives of BPA

Control Objectives

Control Objectives

AuthorizationCompleteness

Accuracy

ValidityPhysical Safeguards

and Security

Error handling

Segregation of Duties

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Information Systems’ Controls

The controls are used to Prevent, Detect, orCorrect unlawful events. An unlawful event canarise if unauthorized, incomplete, inaccurate,redundant, ineffective, or inefficient inputenters the system.

Preventive Control; Detective Control; and Corrective Control

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Controls in BPA – Audit Perspective

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Managerial Top Management

Information Systems Management

Systems Development

Programming Management

Data Administration

Quality Assurance

Security Administration

Operations Management

Application Boundary

Input

Communication

Processing

Database

Output

Application Controls

BoundaryControls

• Comprisesthecomponentsthat establishthe interfacebetween theuser and thesystem.

InputControls

• Comprisesthecomponentsthatcapture,prepare,and entercommandsand datainto thesystem.

Communication Controls

• Comprisesthecomponentsthattransmitdata amongsystems andsubsystems.

ProcessingControls

• Run-to-RunTotals;ReasonablenessVerification; EditChecks etc.

DatabaseControls

• Comprisesthecomponentsthat define,add, access,modify, anddelete datain thesystem.

OutputControls

• Comprisesthecomponentsthatretrieve andpresentdata tousers of thesystem.

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Cloud ComputingCloud Computing is computing in which large groups ofremote servers are networked to allow centralized datastorage and online access to computer services orresources.

Characteristics of Cloud Computing

Elasticity and Scalability Pay-per-Use

On-demand Resiliency

Multi Tenancy Workload

Movement for certain types of workloads.73

Cloud Computing Types

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delivers special purpose softwarethat is remotely accessible.

offers high level integratedenvironment to build, test, anddeploy custom apps.

hardware, software, equipments,can scale up and downdynamically (elastic).

Cloud Service ModelsInfrastructure as a Service Platform as a Service Software as a Service

Grid ComputingGrid Computing is the collection of computer resources from multiple locations to reach a common goal.

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Thank You!!!