Learning Objectives

By the end of this chapter, you will be able to:

  • Define Functional Area Information Systems (FAIS).
  • Explain the problem of information silos and why they are detrimental to an organization.
  • Provide examples of common FAIS for accounting, marketing, operations, and HR.

Departmental Systems: Functional Area Information Systems (FAIS)

Functional Area Information Systems (FAIS) are information systems that are designed to support the specific activities and data needs of a single functional area or department within an organization. Each department—such as accounting, finance, marketing, operations, and human resources—has its own set of processes and data requirements, and an FAIS is tailored to meet those specific needs.

FAIS support individual departments Figure 1: Functional Area Information Systems

These systems evolved from the early days of business computing, where each department would often develop or purchase its own systems independently.

The Problem of Information Silos

While FAIS are effective at supporting the work of their specific departments, their traditional, independent nature created a significant problem for the organization as a whole: information silos.

flowchart TB
    subgraph SILOS["Information Silos Problem"]
        MKT["📣 Marketing\nSystem\nCustomer A: Data X"]
        SALES["📊 Sales\nSystem\nCustomer A: Data Y"]
        ACCT["💰 Accounting\nSystem\nCustomer A: Data Z"]
    end

    SILOS --> PROBLEMS

    subgraph PROBLEMS["⚠️ Problems"]
        P1["❌ No Unified View"]
        P2["❌ Data Inconsistency"]
        P3["❌ Manual Integration"]
        P4["❌ Duplication"]
    end

    PROBLEMS --> NEED["💡 Need for ERP"]

    style SILOS fill:#c62828,color:#fff
    style NEED fill:#2e7d32,color:#fff

Figure 2: The Information Silos Problem

An information silo is a situation where data is isolated and stored in separate, incompatible systems. For example:

  • The Marketing department has a database of potential customers.
  • The Sales department has a database of actual customers and their purchase history.
  • The Accounting department has a database of customer payment information.

In a siloed environment, these systems cannot easily communicate with each other. This makes it incredibly difficult to get a complete, unified view of a customer or of the business as a whole. Sharing data between departments often required manual data re-entry or complex, custom-built integrations. This inefficiency and lack of a single source of truth was a major driver for the development of integrated Enterprise Resource Planning (ERP) systems.

Examples of Functional Area Information Systems

Here are examples of common FAIS found in different business departments:

Accounting and Finance

  • Financial Planning and Budgeting Systems: Help managers forecast revenue, expenses, and profits to create a budget.
  • Accounts Payable/Receivable Systems: Manage payments to suppliers and track money owed by customers.
  • General Ledger Systems: The central repository for all of the company’s accounting data.

Marketing

  • Customer Relationship Management (CRM) Systems: Manage all aspects of the customer relationship, from lead generation to post-sale support. (Note: Modern CRMs often grow to be cross-functional).
  • Marketing Campaign Management Systems: Help marketers plan, execute, and measure the performance of marketing campaigns.

Operations (Production/Manufacturing)

  • Inventory Management Systems: Track the quantity, location, and status of all raw materials, work-in-progress, and finished goods.
  • Quality Control Systems: Monitor product quality and identify defects during the manufacturing process.
  • Computer-Aided Manufacturing (CAM) Systems: Use computers to control and automate manufacturing equipment.

Human Resources

  • Human Resource Information Systems (HRIS): Manage all aspects of the employee lifecycle, including:
    • Recruiting and Applicant Tracking Systems
    • Payroll and Benefits Administration Systems
    • Performance Management and Review Systems

Summary

Functional Area Information Systems are tailored to the specific needs of individual departments. While they are effective at supporting departmental tasks, their isolated nature leads to information silos, which prevent a unified view of the organization and create inefficiencies. This fundamental problem of data being trapped in separate systems was the primary motivation for the development of integrated, cross-functional platforms like ERP systems.

Key Takeaways

  • FAIS are information systems designed for a single business department.
  • The use of separate FAIS leads to the creation of information silos.
  • Information silos prevent data sharing and a holistic view of the business.
  • The limitations of FAIS drove the need for integrated ERP systems.

Discussion Questions

  1. Besides the examples given, what is another negative consequence of information silos in a large organization?
  2. Why would a department choose to buy its own FAIS instead of using a module from a company-wide ERP system?
  3. How does an information silo make it difficult to provide good customer service?