Information systems types and architecture - Erp and integra...

Learning Outcomes

After reading this article, you will be able to distinguish between different types of information systems (including ERP and integrated systems), explain the concept and structure of system architecture, and identify key features, advantages, and challenges of ERP solutions. You will understand how integrated systems support business processes, describe typical modules in ERP, and assess issues involved in system selection and implementation.

ACCA Business and Technology (BT) Syllabus

For ACCA Business and Technology (BT), you are required to understand the main types of information systems, the purposes they serve, and how architecture and system interconnection support business objectives. In particular, focus on:

• The main types of information systems used within organisations: TPS, MIS, DSS, EIS, expert systems, and accountancy packages
• The definition, features, and uses of enterprise resource planning (ERP) systems
• The concept of system architecture and how integrated systems function
• Typical modules found in ERP and how they support processes and data sharing
• Benefits, limitations, and potential risks of ERP and integrated systems
• Considerations for implementing integrated business systems

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. Which statement best describes an ERP system?
   1. It is only for financial reporting
   2. It is a single integrated system combining multiple business functions
   3. It is used solely for automated manufacturing control
   4. It is a spreadsheet-based tool

2. True or false? A transaction processing system (TPS) is designed to provide strategic managers with high-level summaries from all business areas.

3. What is a typical challenge faced by organisations implementing an ERP system?

4. Match the following ERP modules to their primary business area:
   i) Inventory management – __
   ii) Payroll – __
   iii) Accounts receivable – __

Introduction

Modern organisations rely on a range of information systems to support operations, decision-making, and strategic goals. As the demand for accurate, timely, and shared business information has grown, businesses have moved from stand-alone systems towards integrated solutions. Enterprise Resource Planning (ERP) systems and other integrated architectures combine core business processes, enabling efficient information flow and supporting coordination across the organisation.

Key Term: information system
A set of components (people, procedures, data, software, and hardware) that collect, process, store, and disseminate information to support decision-making and control in an organisation.

Types of Information Systems

Organisations typically use several types of computerised systems:

• Transaction Processing Systems (TPS): Handle daily, routine transactions (e.g., sales, payroll).
• Management Information Systems (MIS): Summarise data from TPS for tactical managers.
• Decision Support Systems (DSS): Assist with complex, unstructured decisions, offering analytical tools and external data.
• Executive Information Systems (EIS): Deliver high-level summaries and forecasts to strategic managers.
• Expert Systems (ES): Mimic expert human knowledge to provide advice and recommendations.

Key Term: enterprise resource planning (ERP) system
A comprehensive, integrated software platform that manages and automates core business processes across departments through a single, centralised database.

Key Term: integrated system
A set of software and technology solutions combined to allow seamless data flow and process support across departments or functions within an organisation.

ERP and Integrated Systems

ERP systems represent a major evolution in business technology. These platforms combine core business functions—such as finance, procurement, inventory, sales, HR, and production—into one system, using a single database to store relevant data and facilitate end-to-end process management. The central objective is to provide complete, up-to-date information throughout the organisation, reduce duplication, and improve both internal efficiency and external service.

Integrated systems are not limited to large organisations or ERP platforms. Smaller businesses may connect different standalone systems—for example, integrating payroll and accounting packages—to achieve similar benefits. The key is that information flows smoothly between systems without manual re-keying or data silos.

ERP Modules

ERP systems are structured around modules, each supporting a specific set of business activities. Common modules include:

• Finance and accounting: General ledger, accounts payable/receivable, cash management
• Procurement: Purchase orders, supplier management
• Inventory/stock management: Materials tracking, stock levels
• Sales and distribution: Order processing, billing, shipping
• Human resources (HR): Payroll, employee records, recruitment
• Manufacturing/production: Scheduling, quality control, materials planning

Each module shares data with others via the central database, ensuring consistency.

Key Term: system architecture
The design and structure of an information system, describing how its components (hardware, software, data, networks) interact and are organised to achieve business objectives.

Comparison of Integrated Systems and Standalone Systems

Worked Example 1.1

A company operates separate systems for finance, inventory, and sales. The finance department complains that payment records are regularly delayed, and inventory levels in reports are often wrong. What issues do these symptoms indicate, and how could an ERP system help?

Answer:
The issues are caused by poor system linkage: manual data transfer, duplication, and possible errors or time lags between systems. An ERP system would link all processes and store data centrally, providing real-time visibility and reducing errors or delays.

System Architecture in Integrated Systems

System architecture describes how the components of an information system are arranged and communicate. In ERP and integrated environments, this usually includes:

• Client-server architecture: Users (clients) access applications hosted on servers.
• Database layer: All business data is maintained in a single, central repository.
• Application layer: Functional modules support different business processes, but share the same data.
• User interface: Employees access the system via standardised screens (desktop or web-based).
• Network layer: Connects all locations, supporting real-time processing.

Well-designed architecture allows scalability, security, and efficient data flow.

Key Term: client-server architecture
A network structure where client devices (such as user PCs) interact with central servers that store data and run applications, forming the basis for many ERP solutions.

Benefits and Limitations of ERP and Integrated Systems

Benefits:

• Real-time, accurate data available company-wide
• Improved process efficiency and cross-departmental coordination
• Removal of redundant processes and duplicated data entry
• Easier compliance with regulations and audit requirements
• Better management reporting and analytics

Limitations and Challenges:

• High implementation and training costs
• Need for significant process standardisation (which may not suit every business)
• Change management issues—users may resist major system changes
• Risk of project failure or disruption during implementation
• Cybersecurity and data privacy risks must be considered

Worked Example 1.2

A medium-sized manufacturer wants to replace its legacy systems with ERP. What should management consider before starting the ERP project?

Answer:
Key considerations include: aligning business processes with the ERP modules, assessing total costs (software, hardware, training), preparing staff for change (communication and involvement), ensuring strong project management, selecting the right vendor, and planning for data migration.

Exam Warning

Implementing an ERP system is more than just replacing old software. It usually requires major changes to business processes, data management, and ways of working. Be careful not to overlook the need for planning, change management, and ongoing support when discussing benefits.

Implementation Considerations

When selecting or implementing integrated systems, organisations should:

• Map business processes and ensure software matches requirements
• Plan for phased implementation to minimise disruption
• Train staff thoroughly on new procedures and system use
• Ensure strong leadership and cross-departmental collaboration
• Set up data security and appropriate access controls
• Monitor performance and gather user feedback for continuous improvement

Revision Tip

Use diagrams to show ERP architecture or the flow of data between modules to help visualise integrated systems in the exam.

Summary

ERP and other integrated information systems are essential for supporting modern business operations. By linking finance, HR, sales, inventory, and more, these systems remove barriers between departments and centralise key data. Understanding their structure, purposes, and challenges prepares you to make decisions about system selection and implementation, and to answer related ACCA exam questions.

Key Point Checklist

This article has covered the following key knowledge points:

• Distinguish between main information system types (TPS, MIS, DSS, EIS, expert systems)
• Define ERP and integrated systems, and explain their purposes
• List and describe typical ERP modules and business processes supported
• Explain system architecture and the principles of data sharing and central databases
• Compare integrated versus standalone systems
• Outline benefits and common limitations of ERP and integrated business systems
• Identify challenges of system selection and implementation, including change management

Key Terms and Concepts

• information system
• enterprise resource planning (ERP) system
• integrated system
• system architecture
• client-server architecture