Acquiring Information Systems and Applications Chapter 14 Acquiring Information Systems and Applications Kajano/Shutterstock

Chapter Outline 14.1 Planning for and Justifying IT Applications 14.2 Strategies for Acquiring IT Applications 14.3 The Traditional Systems Development Life Cycle 14.4 Alternative Methods and Tools for Systems Development 14.5 Vendor and Software Selection

Learning Objectives Discuss the different cost/benefit analyses that companies must take into account when formulating an IT strategic plan. Discuss the four business decisions that companies must make when they acquire new applications. Enumerate the primary tasks and importance of each of the six processes involved in the systems development life cycle. Describe alternative development methods and tools that augment development methods. Analyze the process of vendor and software selection.

Introduction Opening Case: Anniston Orthopedics and Greenway Medical Technologies Upgrading information systems is a complex task for organization of any size System acquisition goes beyond building new systems in house IT resources go beyond software and hardware

14.1 Planning for and Justifying IT Applications Organizations must analyze the need for applications and then justify each purchase in terms of costs and benefits © Image Source/Age Fotostock America, Inc.

IT Planning Analyze the organization’s strategic plan Identify the firm’s mission, goals, and steps required to reach these goals Develop the IT strategic plan IT strategic plan: A set of long-range goals describing IT infrastructure and identifying IT initiatives needed to reach the goals. The IT strategic plan… Must be aligned with the organization’s strategic plan Must provide for an IT architecture that seamlessly networks users, applications, and databases Must efficiently allocate resources among competing projects so the projects can be completed on time and within budget and still have the required functionality Steering committee helps develop and implement the IT strategic plan Develop IS operational plan Define a set of IS projects that will be executed to support the IT strategic plan

Figure 14.1 Analysis of the Organizational Strategic Plan

Figure 14.2 IT Architecture Source: http://www.cisco.com/en/US/i/200001-300000/250001-260000/253001-254000/253787.jpg

Evaluating and Justifying IT Investment: Benefits, Costs, and Issues Assessing the costs Allocate fixed costs among different IT projects Costs of a system do not end when the system is installed Assessing the benefits Intangible benefits are difficult to quantify Conducting the Cost-Benefit Analysis Four common approaches: Net present value Return on investment Breakeven analysis Business case approach

14.2 Strategies for Acquiring IT Applications Fundamental decisions How much computer code does the company want to write? How will the company pay for the application? Where will the application run? Where will the application originate? System acquisition methods Purchase a prewritten application Customize a prewritten application Lease the application Use application service providers and software-as-a-service vendors Use open-source software Use outsourcing Employ custom development

Customize a Prewritten Application Attractive option if the vendor allows the company to modify the application to meet its needs Disadvantages Customizing a prewritten application can be extremely difficult, particularly for large, complex applications May not be attractive if customization is the only way to address the company’s needs Not the best strategy for very expensive software or when software is likely to become obsolete in a short time

Purchase a Prewritten Application

Lease the Application Can save a company time and money compared to buying or in-house development 80/20 rule If the software meets 80% of the needs, the company should consider changing its business processes so it can utilize the remaining 20% Three approaches Lease the application from a software developer, install it, and run it on the company’s platform Vendor may help with installation and offer contract for the support and maintenance Lease the application and run it on the vendor’s platform Application service provider Software-as-a-service

Use Application Service Providers and Software-as-a-Service Vendors Application service provider (ASP) An agent or a vendor who assembles the software needed by enterprises and packages the software with services such as development, operations, and maintenance Software-as-a-service (SaaS) A method of delivering software in which a vendor hosts the applications and provides them as a service to customers over the Internet Customers do not own the software; they pay for using it

Figure 14.3 Operation of an Application Service Provider (ASP)

Figure 14.4 Organization of a SaaS Provider

Other Approaches Use open-source software Organizations obtain a license to implement an open-source software product and either use it as is, customize it, or develop applications with it Outsourcing Acquiring IT applications from outside contractors or external organizations Offshoring Relocate these operations to other countries Custom development Can be developed in house or outsourced More time consuming and expensive Results in a better fit to organization’s requirements

14.3 The Traditional Systems Development Life Cycle Systems development life cycle (SDLC) The traditional method used by organizations to develop large-scale IT projects Each process has clearly defined tasks Systems investigation Systems analysis Systems design Programming and testing Implementation Operation and maintenance

Figure 14.5 Systems Development Life Cycle (SDLC) with Supporting Tools

Figure 14.6 Comparison of User and Developer Involvement over the SDLC

Systems Investigation Understand the business problem to be solved Specify the options for the systems Do nothing; use the existing system unchanged Enhance the existing system Develop a new system Conduct a feasibility study to analyze which solutions best fits the business problem Technical feasibility determines whether the company can develop and/or acquire the system Economic feasibility determines whether the project investment is worth the financial risks Behavioral feasibility addresses the human issues of the systems development project Anticipate the problems during development

Systems Analysis Examine the business problem that the organization plans to solve with an information system Gather information about the existing system and create a set of system requirements Kajano/Shutterstock

Systems Design Describes how the system will resolve the business problem Technical system specifications include System outputs, inputs, and user interfaces Hardware, software, databases, telecommunications, personnel, and procedures A blueprint of how these components are integrated Scope creep Adding system requirements after the project has been initiated

Programming and Testing Translating the design specifications into computer code Testing Checking to see if the computer code will produce the expected and desired results and to detect errors in the computer code

Implementation Converting from an old computer system to a new one Direct conversion The old system is cut off and the new system is turned on at a certain time. Pilot conversion Introduces the new system in one part of the organization. If the system works properly, the system is implemented in other parts of the organization. Phased conversion Introduces components (modules) of the new system. If it works properly, other modules are introduced, until the entire new system is operational. Parallel conversion The old and new systems operate simultaneously for a time.

Operation and Maintenance After the new system is implemented, it will operate for a period of time, until it no longer meets its objectives Systems require several types of maintenance Debugging the program Continues throughout the life of the system Updating Modify the system to accommodate changes in business conditions Adding new functions to the existing system without disturbing its operation

14.4 Alternative Methods and Tools for Systems Development Joint application design (JAD) A group-based tool for collecting user requirements and creating system designs Most often used within the systems analysis and systems design stages of the SDLC Rapid application development (RAD) Combines JAD, prototyping, and integrated computer-assisted software engineering (ICASE) tools to rapidly produce a high-quality system

Figure 14.7 A Rapid Prototyping Development Process versus SDLC Source: datawarehousetraining.com/Methodologies/rapid-application-development

Alternative Methods and Tools for Systems Development Agile development A software development methodology that delivers functionality in rapid iterations Requires frequent communication, development, testing, and delivery Example: Scrum approach End-user development Organization’s end users develop their own applications with little or no formal assistance from the IT department

Tools for Systems Development Prototyping Defines an initial list of user requirements, builds a small version of the system (prototype), and then refines the system in several iterations based on users’ feedback Integrated computer-assisted software engineering (ICASE) Computer-aided software engineering (CASE) tools A group of tools that automate many of the tasks in the SDLC Upper CASE tools: Automate the early stages of the SDLC (systems investigation, analysis, and design) Lower CASE tools: Automate later stages of the SDLC (programming, testing, operation, and maintenance) Integrated CASE (ICASE) tool links upper and lower CASE tools

Tools for Systems Development Component-based development Uses standard components to build applications Components Reusable applications that generally have one specific function Examples: Shopping cart, user authentication, a catalog Object-oriented (OO) development Focuses on aspects of the real world that must be modeled to perform that task

14.5 Vendor and Software Selection Step 1: Identify potential vendors through various sources Software catalogs Lists provided by hardware vendors Technical and trade journals Consultants and industry analysts experienced in the application area Peers in other Step 2: Determine the evaluation criteria Include criteria in a request for proposal (RFP) Characteristics of the vendor Functional requirements of the system Technical requirements that the software must satisfy Amount and quality of documentation provided Vendor support of the package

Vendor and Software Selection Step 3: Evaluate vendors and packages Step 4: Choose the vendor and package Step 5: Negotiate a contract Step 6: Establish a service-level agreement A formal agreement that specifies how work is to be divided between the company and its vendors

Table 14.3 Criteria for Selecting a Software Application Package

What’s in IT for ME? Accounting Performs the cost-benefit analyses on proposed projects Finance Helps with financial issues on systems development project Marketing Helps develop systems by providing information Production/Operations Management Participates on development teams Human Resources Management Acquiring new systems may require hiring new employees, changing job descriptions, or terminating employees MIS Leads the system development efforts

Closing Case 1: Tweak or Trash? The Problem The IT Solution The Results Questions What are the risks associated with throwing out old information systems and replacing them with new information systems? Provide examples to support your answer. Provide examples of a situation in which it would be better for an organization to tweak an existing information system rather than replace it with a new system.

Closing Case 2: Putting IT All Together The Problem The Solution The Results Questions Review the section in Chapter 1 called “Managing Information Resources.” Based on your review, which information system capabilities should Chubb keep at the corporate level? Justify each one. Based on your review, which information system capabilities should Chubb keep in the business units? Justify each one.