Information technology and business process
A student wrote to me: “I am confused between the term “Business Process” and “Software process” and how information systems are used to improve the business. Please explain. Thank you.”
Answer: A business process is a set of activities that define how certain business tasks are done. Business processes are the ways in which companies organize their activities to create products or services. For example, a business process of the manufacturing factory may include processing raw materials into parts, assembling parts into products, checking for quality, and shipping products to customers. The business process for a retail company may include getting products, advertising and displaying products to making customers aware of the product, and selling the product.
A software process is a set of activities and methods that define how to create software products. There are several models or life cycles, each describing certain ways to develop software such as the waterfall model, the spiral model, the incremental model, and the agile model etc. Each model has certain phases such as requirements, design, implement, test and maintenance etc.
Information technology can improve business processes making them faster, better and cheaper by increasing their efficiency, accuracy and effectiveness. Today Information systems are used in most business functions such as sales and marketing, manufacturing and production, finance and accounting, and human resources. For example, information systems can track all sale transactions of a retail store and organized them into reports to each level of management to make decisions. The store manager receives sale report everyday on how the store perform, how much revenue it makes. The inventory manager receives product report on which products are sold so he can keep enough products in each store‘s inventory. Marketing manager receives report on which products are sold well and which are not so he can advertise more or reduce price to get rid of unsold products. Finance and accounting manager receives report of sales in all of their stores so he can calculate revenues on account receivable, costs on account payable and his profit plan to make decision on how to increase revenues and reduce costs to increase profits etc. All of these decisions are happening daily to increase performance of company to maximize profits. These data and decision that they made are collected by another information system called Decision Support System (DSS) that analyze all decisions made by complex advanced analytic models and big data analysis then combine with information from other external sources of business intelligence such as market trends, customer trends, competitor trends into another reports or graphs and present them to the company executives and owners for more strategic decisions. At each level of the organization, information systems support the major functional areas of the business by increase the efficiency and competitive capability of the company.
- Blogs of Prof. John Vu, Carnegie Mellon University