AIS Development Strategies HAPTER 19 AIS Development Strategies

INTRODUCTION Questions to be addressed in this chapter include: How do organizations buy software, hardware, and vendor services? How do information systems departments develop custom software? How do end users develop, use and control computer-based information systems? Why do organizations outsource their information systems, and what are the benefits and risks of doing so? How are prototypes used to develop an AIS, and what are the advantages and disadvantages? What is computer-aided software engineering, and how is it used in systems development?

INTRODUCTION Companies can experience a number of difficulties in developing an AIS, including: Projects are backlogged for years because of the high demand for resources. The newly designed system doesn’t meet user needs. The process takes so long that by the time it’s complete, it’s obsolete. Users can’t adequately specify their needs. Changes to the AIS are often difficult to make after requirements have been written into the specifications.

INTRODUCTION We’ll be discussing how to obtain a new information system by: Purchasing prewritten software; Developing software in-house; or Outsourcing. We’ll also discuss how to hasten or improve the development process through: Business process reengineering Prototyping Computer-aided software engineering (CASE) tools

INTRODUCTION We’ll be discussing how to obtain a new information system by: Purchasing prewritten software Developing software in-house; or Outsourcing. We’ll also discuss how to hasten or improve the development process through: Business process reengineering Prototyping Computer-aided software engineering (CASE) tools

PURCHASING PREWRITTEN SOFTWARE In the early days of computers, companies were rarely able to buy software to meet their needs. But commercially available packages are now outpacing custom-developed software as old systems are replaced.

PURCHASING PREWRITTEN SOFTWARE Canned software is sold on the open market to a broad range of users with similar requirements. Some companies sell hardware and software together as a package. These systems are called turnkey systems. Many are written by vendors who specialize in a particular industry.

PURCHASING PREWRITTEN SOFTWARE A major problem with canned software: It often does not meet all of a company’s information needs. Can be overcome by modifying the canned software. Usually best done by the vendor. Unauthorized modifications may render the program unreliable and unstable.

PURCHASING PREWRITTEN SOFTWARE Companies can also acquire software through application service providers (ASPs). ASPs host Web-based software and deliver it to clients over the Internet. Companies don’t have to buy, install, or maintain canned software; they simply “rent” it. If you used an online version of a package like Turbo-Tax to prepare your taxes, that’s a consumer version of renting software over the Internet.

PURCHASING PREWRITTEN SOFTWARE Advantages of ASPs: Reduction of software costs and administrative overhead. Automated software upgrades. Scalability as the business grows. Global access to information. Access to skilled IT personnel. Ability to focus on core financial competencies rather than IT.

PURCHASING PREWRITTEN SOFTWARE Purchasing software and the SDLC: Companies that buy rather than develop software still follow the SDLC process, including: Systems analysis They conduct an initial investigation, systems survey, and feasibility study, as well as determining AIS requirements.

PURCHASING PREWRITTEN SOFTWARE Purchasing software and the SDLC: Companies that buy rather than develop software still follow the SDLC process, including: Systems analysis Conceptual design An important aspect is determining whether software that meets AIS requirements is already available. If so, a make-or-buy decision must be made.

PURCHASING PREWRITTEN SOFTWARE Purchasing software and the SDLC: Companies that buy rather than develop software still follow the SDLC process, including: Systems analysis Conceptual design Physical design If software is purchased, program design and coding can be omitted. But software modifications may be needed. Companies also may design inputs, outputs, files, and control procedures.

PURCHASING PREWRITTEN SOFTWARE These activities must still take place, including: Selecting and training personnel Installing and testing hardware and software Documenting procedures Converting from old to new AIS However, the software modules do not have to be developed and tested. And the computer programs do not need to be documented. Purchasing software and the SDLC: Companies that buy rather than develop software still follow the SDLC process, including: Systems analysis Conceptual design Physical design Implementation and conversion

PURCHASING PREWRITTEN SOFTWARE Purchasing software and the SDLC: Companies that buy rather than develop software still follow the SDLC process, including: Systems analysis Conceptual design Physical design Implementation and conversion Operation and maintenance The AIS is operated like any other software. The vendor usually maintains the software.

PURCHASING PREWRITTEN SOFTWARE Selecting a vendor Deciding whether to make or buy software can be made independently of the decision to acquire hardware, service, maintenance, and other AIS resources. And the preceding resources can be bought independently of the software. But hardware and vendor decisions may depend on the software decisions.

PURCHASING PREWRITTEN SOFTWARE Vendors can be found by: Looking in phone book Obtaining referrals Scanning computer or trade magazines Attending conferences Using search organizations Beware of fly-by-night companies that can leave your organization high and dry.

PURCHASING PREWRITTEN SOFTWARE Acquiring hardware and software Once AIS requirements have been defined, the organization can buy software and hardware. Companies needing only a PC and some office software can usually complete their own research and make a selection.

PURCHASING PREWRITTEN SOFTWARE When buying large or complex systems, a request for proposal (RFP) should be prepared: The RFP is an invitation to bidders to propose a system by a specific date. Each proposal is evaluated. Finalists are investigated in depth.

PURCHASING PREWRITTEN SOFTWARE The formal approach is important for several reasons: Saves time The same information is provided to all bidders.

PURCHASING PREWRITTEN SOFTWARE The formal approach is important for several reasons: Saves time Simplifies the decision-making process The bidders all respond in the same format and based on the same information.

PURCHASING PREWRITTEN SOFTWARE The formal approach is important for several reasons: Saves time Simplifies the decision-making process Reduces errors Less likely to look over important factors in evaluating proposals.

PURCHASING PREWRITTEN SOFTWARE The formal approach is important for several reasons: Saves time Simplifies the decision-making process Reduces errors Avoids potential for disagreement Both parties have the same expectations and information in writing.

PURCHASING PREWRITTEN SOFTWARE When an RFP is solicited based on exact hardware and software specifications: Total costs are usually lower. Less time is required for vendor preparation and company evaluation. However, the vendor cannot recommend alternatives.

PURCHASING PREWRITTEN SOFTWARE A generalized RFP contains a problem definition and requests a system that meets specific performance objectives and requirements. Leaves technical issues to the vendor. However, makes it more difficult to evaluate proposals. May produce more costly bids.

PURCHASING PREWRITTEN SOFTWARE Usually, the more information a company provides to the vendors, the better their chances of receiving a system that meets their requirements. Detailed specifications should include: Required applications Inputs and outputs Files and databases Frequency and methods of file updating and inquiry Unique characteristics or requirements Be sure to distinguish between mandatory and desirable requirements.

PURCHASING PREWRITTEN SOFTWARE Evaluating proposals and selecting a system Eliminate any proposals that: Are missing important information. Fail to meet minimum requirements. Are ambiguous. Those that pass the preliminary screening should be compared with the proposed AIS requirements to determine: If they meet all mandatory requirements. How many desirable requirements they meet. Finalists can be invited to demo their system using company-supplied data.

PURCHASING PREWRITTEN SOFTWARE In reviewing the proposals, you need to evaluate: Hardware Software Vendors

PURCHASING PREWRITTEN SOFTWARE In reviewing the proposals, you need to evaluate: Hardware Software Vendors

PURCHASING PREWRITTEN SOFTWARE Criteria to evaluate hardware include: Cost Ability to run required software Processing speed and capabilities Secondary storage capability Input and output speeds Communication capabilities Expandability Recency of technology Availability Compatibility with existing hardware, software, and peripherals Performance compared to competitors Cost and availability of support and maintenance Warrantees and guarantees Financing arrangements Ability to meet mandatory requirements

PURCHASING PREWRITTEN SOFTWARE In reviewing the proposals, you need to evaluate: Hardware Software Vendors

PURCHASING PREWRITTEN SOFTWARE Criteria to evaluate software include: Conformity with specifications Need for modification Performance (speed, accuracy, reliability) Use by other companies Satisfaction of other users Documentation Compatibility with existing software User-friendliness Ability to be demonstrated and test-driven Warranties Flexibility and maintainability Capability for online inquiry of files and records Vendor upgrades

PURCHASING PREWRITTEN SOFTWARE In reviewing the proposals, you need to evaluate: Hardware Software Vendors

PURCHASING PREWRITTEN SOFTWARE Criteria to evaluate vendors include: Size Financial stability and security Experience Quality of support and warranties Regularity of updates Ability to provide financing Willingness to sign contract Willingness to provide references Reputation for reliability and dependability Hardware and software support and maintenance Implementation and installation support Quality and responsiveness of personnel Willingness to provide training Responsiveness and timeliness of support

PURCHASING PREWRITTEN SOFTWARE Approaches to comparing system performance: Benchmark problem Point scoring Requirements costing

PURCHASING PREWRITTEN SOFTWARE Approaches to comparing system performance: Benchmark problem Point scoring Requirements costing

PURCHASING PREWRITTEN SOFTWARE Benchmark problem The new AIS performs a data processing task with input, processing, and output jobs typical of what would be required of the new system. Processing times are calculated and compared. The AIS with the lowest time is judged most efficient.

PURCHASING PREWRITTEN SOFTWARE Approaches to comparing system performance: Benchmark problem Point scoring Requirements costing

PURCHASING PREWRITTEN SOFTWARE Point scoring: A weight is assigned to each criterion used to evaluate the system, based on the relative importance of that criterion. Each criterion is rated for each product. Each rating is multiplied times the weight assigned to the criterion to develop a weighted score. The weighted scores are added for each product.

PURCHASING PREWRITTEN SOFTWARE Example: Zorba Co. is evaluating systems offered by three different vendors: Able Co., Baker Co., and Cook Co. Zorba has determined three criteria that they will use to evaluate the different systems: cost, speed, and vendor reliability. They have provided the following weights to each criteria, with vendor reliability being the most critical: Vendor reliability—9 Cost—6 Speed—4

PURCHASING PREWRITTEN SOFTWARE Zorba examined the packages offered by the three vendors and rated them based on these three criteria. Ratings were from 1–5 with 5 being the highest score. Criteria Able Co. Baker Co. Cook Co. Vendor reliability (9) 2 5 4 Cost (6) 3 Speed (4)

PURCHASING PREWRITTEN SOFTWARE The weighted scores are then computed by multiplying the rating given to each vendor on each criterion times the weight assigned to that criterion. Criteria Able Co. Baker Co. Cook Co. Vendor reliability (9) 2 5 4 Cost (6) 3 Speed (4) X = WEIGHTED SCORES Criteria Able Co. Baker Co. Cook Co. Vendor reliability (9) 18 45 36 Cost (6) 30 24 Speed (4) 12 16 8

PURCHASING PREWRITTEN SOFTWARE The weighted scores for each company are summed: Able = 60 points Baker = 79 points Cook = 68 points Based on the preceding scores, the bid would probably be awarded to Baker Co. WEIGHTED SCORES Criteria Able Co. Baker Co. Cook Co. Vendor reliability (9) 18 45 36 Cost (6) 30 24 Speed (4) 12 16 8

PURCHASING PREWRITTEN SOFTWARE The preceding example is a simplification. In a real-life scenario, several factors would be different: There would probably be many more criteria being considered. Several people would be rating the criteria, and the final scores for each vendor would probably be a composite of those individual scores.

PURCHASING PREWRITTEN SOFTWARE Approaches to comparing system performance: Benchmark problem Point scoring Requirements costing

PURCHASING PREWRITTEN SOFTWARE Requirements costing: Estimates cost of purchasing or developing features that are not included in a particular AIS. The total AIS cost is calculated by adding the acquisition cost to the purchasing and development costs. Total cost = cost of system with all required features.

PURCHASING PREWRITTEN SOFTWARE To verify that the AIS that looks best on paper is actually the best in practice: Test-drive the software. Contact other users for references. Evaluate vendor personnel. Confirm details of the proposal.

INTRODUCTION We’ll be discussing how to obtain a new information system by: Purchasing prewritten software Developing software in-house Outsourcing We’ll also discuss how to hasten or improve the development process through: Business process reengineering Prototyping Computer-aided software engineering (CASE) tools

DEVELOPING SOFTWARE IN-HOUSE Despite the availability of good canned software, many organizations develop their own because: Their requirements are unique; or Their size and complexity necessitates a custom package. Developing custom software is difficult and error prone and consumes much time and resources. The GAO reports that 31% of federal government IT projects are poorly planned or do not meet intended objectives.

DEVELOPING SOFTWARE IN-HOUSE The most difficult hurdles: Lack of time. Complexity of desired system. Poor requirements and systems planning. Inadequate communication and cooperation between departments and users. Lack of qualified staff. Poor senior executive support.

DEVELOPING SOFTWARE IN-HOUSE After end users define their requirements, the analysts: Work with the end users to determine the format of paper and screen outputs. Identify: Data required for each input. Data to be retained in files. Develop detailed program specs to be interpreted and coded by programmers.

DEVELOPING SOFTWARE IN-HOUSE The process requires much discipline and management supervision. Accountants may help as project supervisors, users, or development team members.

DEVELOPING SOFTWARE IN-HOUSE Custom software is usually developed and written in-house. Alternately, organizations may engage an outside company to develop a package or assemble one from their inventory of modules. These modules are adapted, combined, and organized to form a customized product that meets specific requirements.

DEVELOPING SOFTWARE IN-HOUSE When contracting with an outside organization, maintain control over development and observe the following guidelines: Carefully select a developer Look for: Experience in the industry A good understanding of: Business in general How your company conducts business

DEVELOPING SOFTWARE IN-HOUSE When contracting with an outside organization, maintain control over development and observe the following guidelines: Carefully select a developer Sign a contract to clearly define responsibilities

DEVELOPING SOFTWARE IN-HOUSE When contracting with an outside organization, maintain control over development and observe the following guidelines: Carefully select a developer Sign a contract to clearly define responsibilities Plan and monitor each step Design all aspects in detail. Include frequent checkpoints.

DEVELOPING SOFTWARE IN-HOUSE When contracting with an outside organization, maintain control over development and observe the following guidelines: Carefully select a developer Sign a contract to clearly define responsibilities Plan and monitor each step Maintain effective and frequent communication

DEVELOPING SOFTWARE IN-HOUSE When contracting with an outside organization, maintain control over development and observe the following guidelines: Carefully select a developer Sign a contract to clearly define responsibilities Plan and monitor each step Maintain effective and frequent communication Control all costs Cash outflows should be minimized until the project is completed and accepted.

DEVELOPING SOFTWARE IN-HOUSE Information systems consultants suggest that clients develop their own software only if it provides a significant competitive advantage. Payroll and A/R systems are not good candidates for in-house development. There might be significant benefits to developing sophisticated product manufacturing software. If there is no significant competitive advantage, buy software from an outside supplier. Trend appears to be in that direction. There is no pat answer to the make-or-buy decision.

DEVELOPING SOFTWARE IN-HOUSE Another approach to developing software in-house is to take the lion’s share of the effort out of the hands of the IS department and place it in the laps of the ultimate information users.

DEVELOPING SOFTWARE IN-HOUSE End-user developed software End-user computing (EUC) is the hands-on development, use, and control of computer-based information systems by users. With EUC, individuals use IT to meet their own IS needs rather than rely on systems professionals. Why? The demand for information systems has grown exponentially since the introduction of the computer. One solution to meeting these needs is to have end users meet their own information needs.

DEVELOPING SOFTWARE IN-HOUSE Technology has evolved to automate much of the system development process. Factors contributing to EUC are: Increased computer literacy. Easier-to-use programming languages. Inexpensive PCs. A variety of powerful and inexpensive software packages.

DEVELOPING SOFTWARE IN-HOUSE Consequently, users have begun to develop their own systems to: Create and store data. Access and download company data. Share data and computer resources in networks.

DEVELOPING SOFTWARE IN-HOUSE As end users began to meet their initial needs, two things happened: Users realized computers could be used to meet more and more information needs. Increased access to data created many new uses and needs for information. Result: A tremendous growth in end-user computing that is expected to continue.

DEVELOPING SOFTWARE IN-HOUSE EUC has altered the role of the IS staff: They continue to develop and maintain transaction processing systems and company-wide databases from which end users draw information. They provide users with technical advice and operational support and make as much information available to them as possible. While the support work has increased for the IS staff, this work is counter-balanced by a decreased demand for traditional IS services. EUC may make up 75–95% of all IS processing by 2010. Because accountants will be end users, they need an understanding of EUC concepts.

DEVELOPING SOFTWARE IN-HOUSE Appropriate end-user development and use End user development (EUD) happens when information users (e.g., managers, accountants, auditors) develop their own applications using computer specialists as advisors. Inappropriate for complex systems. Not used for large-scale processing, such as payroll, receivables, payables, general ledger, or inventory.

DEVELOPING SOFTWARE IN-HOUSE End user development may be most appropriate for: Retrieving info from company databases to produce simple reports or answer single queries. Performing “what if,” sensitivity, or statistical analyses. Developing applications that use prewritten software (e.g., spreadsheet or database software). Preparing schedules (such as aging of accounts) and lists.

DEVELOPING SOFTWARE IN-HOUSE Benefits of end-user computing: User creation, control, and implementation Users control the development process, decide what info needs are important, and if a system should be developed. Ownership helps them build better systems.

DEVELOPING SOFTWARE IN-HOUSE Benefits of end-user computing: User creation, control, and implementation Systems that meet user needs Because users discover flaws that systems people would not catch. Also, the communication problem between user  analyst  programmer are avoided.

DEVELOPING SOFTWARE IN-HOUSE Benefits of end-user computing: User creation, control, and implementation Systems that meet user needs Timeliness Much of the expensive and time-consuming cost-benefit analysis, requirements definitions, and red tape are reduced.

DEVELOPING SOFTWARE IN-HOUSE Benefits of end-user computing: User creation, control, and implementation Systems that meet user needs Timeliness Freeing up systems resources The IS department can exert time and resources on other information and maintenance activities. Reduces both visible and invisible backlog of systems development projects.

DEVELOPING SOFTWARE IN-HOUSE Benefits of end-user computing: User creation, control, and implementation Systems that meet user needs Timeliness Freeing up systems resources Versatility and ease of use Most EUC software is easy to understand and use. With a laptop, the work can be done at home or almost anywhere.

DEVELOPING SOFTWARE IN-HOUSE Risks of end-user computing: Logic and development errors End users are inexperienced in systems development. Consequently, they are more likely to make errors and less likely to recognize them. They may: Solve wrong problem Poorly define systems requirements Apply inappropriate analytical methods Use wrong software Use incomplete or outdated information Errors are often caused by faulty logic, formulas, or software commands.

DEVELOPING SOFTWARE IN-HOUSE Risks of end-user computing: Logic and development errors Inadequately tested applications Users probably won’t test rigorously. They tend not to recognize the need for testing, the difficulty, or the time involved. Tend to have grossly inflated opinions of how error-free their systems are.

DEVELOPING SOFTWARE IN-HOUSE Risks of end-user computing: Logic and development errors Inadequately tested applications Inefficient systems They get the job done but aren’t always efficient.

DEVELOPING SOFTWARE IN-HOUSE Risks of end-user computing: Logic and development errors Inadequately tested applications Inefficient systems Poorly controlled and documented systems Many end users don’t implement controls to protect their system. Systems are often poorly documented because they think it’s unimportant. They fail to realize that others cannot understand the system without documentation.

DEVELOPING SOFTWARE IN-HOUSE Risks of end-user computing: Logic and development errors Inadequately tested applications Inefficient systems Poorly controlled and documented systems System incompatibilities Some companies add end-user equipment without considering the technological implications. May end up with a diversity of hardware and software that is difficult to support or network.

DEVELOPING SOFTWARE IN-HOUSE Risks of end-user computing: Logic and development errors Inadequately tested applications Inefficient systems Poorly controlled and documented systems System incompatibilities Duplication of systems and data and wasted resources If end users aren’t aware that others have similar information needs, duplication occurs. Inexperienced users may also bite off more than they can chew, wasting time and resources.

DEVELOPING SOFTWARE IN-HOUSE Risks of end-user computing: Logic and development errors Inadequately tested applications Inefficient systems Poorly controlled and documented systems System incompatibilities Duplication of systems and data and wasted resources Increased costs Buying PCs for multitudes of workers is costly. Regular updating of hardware and software is also expensive. EUC also increases costs if it diverts users from their primary jobs. EUC can increase demands on the company mainframe and IS staff for support.

DEVELOPING SOFTWARE IN-HOUSE To achieve proper balance between maximizing the benefits of end user systems and minimizing the risks: Systems analysts can act as advisers and require user-created systems to be reviewed and documented prior to use. Users can be trained in systems analysis so they can identify and adequately meet their needs, as well as reviewing the work of others.

DEVELOPING SOFTWARE IN-HOUSE Organizations use several approaches to managing and controlling EUC. If you give the systems department control over EUC: Growth of EUC is discouraged. The organization is denied most of its benefits. It’s not in the company’s best long-term interests. However, if there are no controls over the tools that can be purchased or how they can be used: Chaos can result The system can be difficult to support.

DEVELOPING SOFTWARE IN-HOUSE Best to provide enough guidance and support to adequately control the system but allow users flexibility. A help desk can encourage, support, coordinate, and control end-user activities. One level of help desk employees might be trained with scripted answers. A higher level might handle more complicated issues.

DEVELOPING SOFTWARE IN-HOUSE Help desk duties include: Providing hotline assistance to solve problems. Serving as a clearinghouse for information, coordination, and assistance. Training end users how to use specific hardware and software, and providing technical maintenance and support. Evaluating new end-user hardware and software products. Assisting with application development. Developing and implementing standards for: Hardware and software purchases to ensure compatibility. Documentation and application testing. Overseeing security issues such as fraud, software piracy, and viruses.

INTRODUCTION We’ll be discussing how to obtain a new information system by: Purchasing prewritten software Developing software in-house Outsourcing We’ll also discuss how to hasten or improve the development process through: Business process reengineering Prototyping Computer-aided software engineering (CASE) tools

OUTSOURCE THE SYSTEM Outsourcing is hiring an outside company to handle all or part of an organization’s data processing activities. In a mainframe outsourcing agreement: The outsourcers buy the client’s computers and hire all or most of the client’s employees. Then operate and manage the entire system on the client’s site or migrate it to the outsourcer’s computers. Many of these contracts have terms of 10 or more years and cost from hundreds of thousands to millions of dollars a year.

OUTSOURCE THE SYSTEM In a client/server or a PC outsourcing agreement the organization outsources: A particular service (e.g., help desk services); A segment of its business; A particular function; or PC support.

OUTSOURCE THE SYSTEM Examples of outsourced activities: Installation Training Maintenance Help desk Technical support

OUTSOURCE THE SYSTEM The growth in outsourcing applications Outsourcing was initially used for standardized applications such as payroll, accounting, and purchasing. Also used by companies that were struggling to survive and wanted a quick cash infusion from selling their hardware.

OUTSOURCE THE SYSTEM Kodak and Xerox were very successful at cutting capital expenditures and other costs, which motivated others to outsource their systems. Now many Fortune 500 companies outsource some or all of there IS. Outsourcing business processes is the fastest growing IT trend—large and small companies are jumping on the band wagon.

OUTSOURCE THE SYSTEM Most companies that outsource use several different companies rather than a single source in order to: Increase flexibility Foster competition Reduce costs Most companies do not outsource: Strategic management of their IT environment Business process management IT architecture

OUTSOURCE THE SYSTEM Benefits of outsourcing: Provides a business solution Allows companies to concentrate on their core competencies.

OUTSOURCE THE SYSTEM Benefits of outsourcing: Provides a business solution Asset utilization Companies can improve cash position and reduce expenses by selling their computers to an outsourcer.

OUTSOURCE THE SYSTEM Benefits of outsourcing: Provides a business solution Asset utilization Access to greater experience and more advanced technology The cost and time to stay at the cutting edge of technology is escalating rapidly.

OUTSOURCE THE SYSTEM Benefits of outsourcing: Outsourcing can reduce IS costs by 15–30% because of economies of scale and lower costs of outsourcers. IBM outsources project management and programming to China where labor costs are 1/3 of U.S. costs. Benefits of outsourcing: Provides a business solution Asset utilization Access to greater experience and more advanced technology Lower costs

OUTSOURCE THE SYSTEM Benefits of outsourcing: Provides a business solution Asset utilization Access to greater experience and more advanced technology Lower costs Improved development time Experienced specialists can often develop and implement a system faster and more efficiently. Can also help the company cut through some of the internal politics.

OUTSOURCE THE SYSTEM Benefits of outsourcing: Provides a business solution Asset utilization Access to greater experience and more advanced technology Lower costs Improved development time Elimination of peaks-and-valleys usage Companies with seasonal fluctuations don’t have to staff an IT force or maintain hardware for peak periods.

OUTSOURCE THE SYSTEM Benefits of outsourcing: Provides a business solution Asset utilization Access to greater experience and more advanced technology Lower costs Improved development time Elimination of peaks-and-valleys usage Facilitation of downsizing Companies with in-house systems that downsize are often left with an unnecessarily large AIS function.

OUTSOURCE THE SYSTEM Risks of outsourcing Many outsourcing contracts fail to meet expectations for reasons including: Inflexibility Many outsourcing contracts are for 10 years. If the company is dissatisfied, has problems, or goes through extensive structural changes, the contract is difficult and/or costly to break.

OUTSOURCE THE SYSTEM Risks of outsourcing: Inflexibility Loss of control The company may lose control of its system and data. Also risk of confidential data being shared with others.

OUTSOURCE THE SYSTEM Risks of outsourcing: Inflexibility Loss of control Reduced competitive advantage Companies can lose a fundamental understanding of their IS needs and how the system can provide it with competitive advantages. Outsourcers are not as motivated to meet the client’s competitive challenges. Can be mitigated significantly by outsourcing the portion of business processes considered standard (e.g., payroll, accounts receivable) and customizing the portion that provides competitive advantage.

OUTSOURCE THE SYSTEM Risks of outsourcing: Inflexibility Loss of control Reduced competitive advantage Locked in system It is expensive and difficult to reverse outsourcing.

OUTSOURCE THE SYSTEM Risks of outsourcing: Inflexibility Loss of control Reduced competitive advantage Locked in system Unfulfilled goals Many outsourcing goals and benefits are never realized.

OUTSOURCE THE SYSTEM Risks of outsourcing: Inflexibility Loss of control Reduced competitive advantage Locked in system Unfulfilled goals Poor service Some companies complain of poor service from their outsourcers, particularly with respect to: Slow or no responsiveness to changing business conditions. Poorly planned migration to new technologies.

OUTSOURCE THE SYSTEM Risks of outsourcing: Inflexibility Loss of control Reduced competitive advantage Locked in system Unfulfilled goals Poor service Increased risk Increased risks include loss of market position, loss of human capital, and reputation impairment among others.

INTRODUCTION We’ll be discussing how to obtain a new information system by: Purchasing prewritten software Developing software in-house Outsourcing We’ll also discuss how to hasten or improve the development process through: Business process reengineering Prototyping Computer-aided software engineering (CASE) tools

BUSINESS PROCESS REENGINEERING Business process reengineering (BPR) is the analysis and redesign of business processes and information systems to achieve significant performance improvements. Reduces a company to its essential business processes. Reshapes organizational work practices and information flows to take advantage of technological advancements.

BUSINESS PROCESS REENGINEERING BPR: Simplifies the system. Makes it more effective. Improves a company’s quality and service. BPR software has been developed to help automate many BPR tasks.

BUSINESS PROCESS REENGINEERING Michael Hammer has set forth several principles that help organizations successfully reengineer business processes: Organize around outcomes, not tasks. DO AWAY WITH: Assigning different parts of a business process to different people, with the resulting handoffs, delays, and errors. INSTEAD: Each person’s job is designed around an objective, outcome, or process rather than a task needed to complete a process.

BUSINESS PROCESS REENGINEERING Michael Hammer has set forth several principles that help organizations successfully reengineer business processes: Organize around outcomes, not tasks. Require those who use the output to perform the process.

BUSINESS PROCESS REENGINEERING Michael Hammer has set forth several principles that help organizations successfully reengineer business processes: Organize around outcomes, not tasks. Require those who use the output to perform the process. Require those who produce information to process it.

BUSINESS PROCESS REENGINEERING You centralize operations to achieve economies of scale and eliminate redundancy. You decentralize operations to be more responsive to customers and provide better service With technology, you don’t have to choose. Corporate-wide databases centralize data. Telecommunications technology disburses it to the organization. Michael Hammer has set forth several principles that help organizations successfully reengineer business processes: Organize around outcomes, not tasks. Require those who use the output to perform the process. Require those who produce information to process it. Centralize AND disperse data.

BUSINESS PROCESS REENGINEERING Michael Hammer has set forth several principles that help organizations successfully reengineer business processes: Organize around outcomes, not tasks. Require those who use the output to perform the process. Require those who produce information to process it. Centralize AND disperse data. Integrate parallel activities. Example: In developing a new product, include on the development team at least one person from each involved department, so the right hand will know what the left hand is doing and the process will be smoothly integrated.

BUSINESS PROCESS REENGINEERING Michael Hammer has set forth several principles that help organizations successfully reengineer business processes: Organize around outcomes, not tasks. Require those who use the output to perform the process. Require those who produce information to process it. Centralize AND disperse data. Integrate parallel activities. Empower workers, use built-in controls, and flatten the organization chart. In a traditional system, there is a layer of worker bees and several layers of manager bees, auditor bees, and controller bees. In a reengineered system, the people who do the work have decision-making responsibility. Information technology enables their decision accuracy. Controls are built into the process itself.

BUSINESS PROCESS REENGINEERING Michael Hammer has set forth several principles that help organizations successfully reengineer business processes: Organize around outcomes, not tasks. Require those who use the output to perform the process. Require those who produce information to process it. Centralize AND disperse data. Integrate parallel activities. Empower workers, use built-in controls, and flatten the organization chart. Capture data once—at its source. Instead of having each functional area running its own AIS and entering the same data, use source data automation, EDI, etc. to capture data electronically at the source and disburse it to where it needs to be used.

BUSINESS PROCESS REENGINEERING Underlying reengineering is the efficient and effective use of the latest information technology, e.g.: Radio- and satellite-based communications. Powerful handheld computers. Image processing that lets multiple users handle a document simultaneously. Active documents.

BUSINESS PROCESS REENGINEERING Challenges faced by reengineering efforts: Many BPR efforts fail or fall short of their objectives. A company must overcome the following obstacles: Tradition “We’ve always done it this way!” Success requires changes in culture and beliefs.

BUSINESS PROCESS REENGINEERING Challenges Faced by Reengineering Efforts: Many BPR efforts fail or fall short of their objectives. A company must overcome the following obstacles: Tradition Resistance Change is always met with resistance. Requires continual reassurance, persuasion, and support.

BUSINESS PROCESS REENGINEERING Challenges Faced by Reengineering Efforts: Many BPR efforts fail or fall short of their objectives. A company must overcome the following obstacles: Tradition Resistance Time and cost requirements Two or more years are required to complete BPR.

BUSINESS PROCESS REENGINEERING Challenges faced by reengineering efforts: Many BPR efforts fail or fall short of their objectives. A company must overcome the following obstacles: Tradition Resistance Time and cost requirements Lack of management support Managers are nervous about the “big hype—few results” syndrome. Without their support, the effort will fail.

BUSINESS PROCESS REENGINEERING Challenges Faced by Reengineering Efforts: Many BPR efforts fail or fall short of their objectives. A company must overcome the following obstacles: Tradition Resistance Time and cost requirements Lack of management support Skepticism BPR is sometimes viewed as just the same picture in a different frame.

BUSINESS PROCESS REENGINEERING Challenges Faced by Reengineering Efforts: Many BPR efforts fail or fall short of their objectives. A company must overcome the following obstacles: Tradition Resistance Time and cost requirements Lack of management support Skepticism Retraining The necessary retraining costs time and dollars.

BUSINESS PROCESS REENGINEERING Challenges faced by reengineering efforts: Many BPR efforts fail or fall short of their objectives. A company must overcome the following obstacles: Tradition Resistance Time and cost requirements Lack of management support Skepticism Retraining Controls Cannot skip the inclusion of controls to ensure reliability and integrity.

INTRODUCTION We’ll be discussing how to obtain a new information system by: Purchasing prewritten software Developing software in-house Outsourcing We’ll also discuss how to hasten or improve the development process through: Business process reengineering Prototyping Computer-aided software engineering (CASE) tools

PROTOTYPING Prototyping is an approach to systems design in which a simplified working model of a system is developed. The prototype (first draft) is built quickly at low cost and provided to users for experimentation. Playing with the prototype allows users to determine what they do and do not like. Developers modify the system in response to user comments and re-present it to them. The iterative process continues until users are satisfied that the system meets their needs.

PROTOTYPING The basic premise is that it’s easier for people to express what they like or dislike than to imagine what they want in a system. In another words, it helps to have a straw man to aim at. Even a simple system that is not fully functional demonstrates features far better than graphics and verbiage.

PROTOTYPING Developers who use prototyping still go through the systems development life cycle. But prototyping allows them to expedite some analysis and design. For example, prototyping captures user needs and helps developers and users make many conceptual and physical design decisions. Current practice leans heavily toward prototyping so that projects can be completed quickly.

PROTOTYPING Four steps are involved in developing a prototype: STEP ONE: Identify basic requirements STEP TWO: Develop an initial prototype STEP THREE: Repeated iterations STEP FOUR: Use the system

PROTOTYPING Four steps are involved in developing a prototype: STEP ONE: Identify basic requirements STEP TWO: Develop an initial prototype STEP THREE: Repeated iterations STEP FOUR: Use the system

PROTOTYPING The first step is to identify basic requirements by meeting with users to agree on the size and scope of the system and decide what it should include and exclude. Developer and users also determine: Decision-making and transaction processing outputs. Inputs and data needed to produce those outputs. The emphasis is on what outputs should be produced rather than how.

PROTOTYPING The developer must ensure: User expectations are realistic. Their basic information requirements are met. The designer uses the information requirements to develop cost, time, and feasibility estimates for alternative AIS solutions.

PROTOTYPING Four steps are involved in developing a prototype: STEP ONE: Identify basic requirements STEP TWO: Develop an initial prototype STEP THREE: Repeated iterations STEP FOUR: Use the system

PROTOTYPING The second step involves developing an initial prototype that meets the agreed-on requirements. Emphasize speed and low cost rather than efficiency of operation. The goal is to implement the prototype within a short time period.

PROTOTYPING Because of time constraints, some aspects are sacrificed. For example, at this point, you ignore: Non-essential functions System controls Exception handling Validation of input data Processing speed Efficiency considerations

PROTOTYPING Users must see and use tentative versions of: Data entry display screens Menus Input prompts Source documents They must also: Respond to prompts Query the system Judge response times Issue commands

PROTOTYPING When the prototype is finished, the developer returns to the users and demonstrates the system. Users are instructed to: Experiment. Comment on what they do and do not like.

PROTOTYPING Four steps are involved in developing a prototype: STEP ONE: Identify basic requirements STEP TWO: Develop an initial prototype STEP THREE: Repeated iterations STEP FOUR: Use the system

PROTOTYPING The third step involves repeated iterations of: Users identifying changes. Developers making the changes. The system being turned back to users for next round. This step continues until users are satisfied—usually 4 to 6 iterations.

PROTOTYPING Four steps are involved in developing a prototype: STEP ONE: Identify basic requirements STEP TWO: Develop an initial prototype STEP THREE: Repeated iterations STEP FOUR: Use the system

PROTOTYPING The final step involves using the system approved by the users. An approved prototype is typically used in one of two ways.

PROTOTYPING Half of the prototypes are turned into fully functional systems referred to as operational prototypes. To make them operational, the developer must: Add needed controls. Improve operational efficiency. Provide backup and recovery. Integrate the prototype with the systems with which it interfaces.

PROTOTYPING Changes may be necessary to allow the program to: Accept real input. Access real data files. Process data. Make necessary computations and calculations. Produce real output.

PROTOTYPING When it’s not practical to modify the prototype to make a fully functional system, non-operational or throwaway prototypes can be used in several ways: They may be discarded, and the systems requirements identified in the process of building them can be used to develop a new system. If so, the SDLC is followed to develop the system, and the prototype is a model.

PROTOTYPING Alternately, they may be used as the initial prototype for an expanded system designed to meet needs of many users. As a final alternative, if users and developers decide the system is unsalvageable, the prototype can be discarded completely.

PROTOTYPING When to use prototyping Prototyping supports rather than replaces the SDLC. It is appropriate when: Users don’t fully understand their needs, or the needs change rapidly. System requirements are difficult to define. System inputs and outputs are not known. The task to be performed is unstructured or semi-structured. Designers are uncertain about what technology to use. The system is crucial and needed quickly. The risk of developing the wrong system is high.

PROTOTYPING The users’ reactions to the new system are important development considerations. Many design strategies must be tested. The design staff has little experience developing this type of system or application. The system will be used infrequently so that processing efficiency is not crucial.

PROTOTYPING Good candidates for prototyping: Decision support systems. Executive information systems. Expert systems. Information retrieval systems. Systems that involve experimentation and trial-and-error development. Systems in which requirements evolve as the system is used.

PROTOTYPING Prototyping is usually inappropriate for: Large or complex systems that: Serve major organizational components; or Cross numerous organizational boundaries. Standard AIS components, such as: Accounts receivable Accounts payable Inventory management

PROTOTYPING Advantages of prototyping: Better definition of user needs Because of intensive end-user involvement.

PROTOTYPING Advantages of prototyping: Better definition of user needs Higher user involvement and satisfaction

PROTOTYPING Advantages of prototyping: Better definition of user needs Higher user involvement and satisfaction Faster development time It may take days or weeks to get a prototype up vs. a year or more for a traditional system.

PROTOTYPING Advantages of prototyping: Better definition of user needs Higher user involvement and satisfaction Faster development time Fewer errors Errors are detected early because the users experiment with each version. It’s also easy to identify and terminate an infeasible AIS early.

PROTOTYPING Advantages of prototyping: Better definition of user needs Higher user involvement and satisfaction Faster development time Fewer errors More opportunity for changes

PROTOTYPING Advantages of prototyping: Better definition of user needs Higher user involvement and satisfaction Faster development time Fewer errors More opportunity for changes Less costly Some for 10–20% of the cost of traditional systems.

PROTOTYPING Disadvantages of prototyping: Significant user time

PROTOTYPING Disadvantages of prototyping: Significant user time Less efficient use of system resources Shortcuts in developing the system may result in: Poor performance and reliability High maintenance and support costs

PROTOTYPING Disadvantages of prototyping: Significant user time Less efficient use of system resources Incomplete system development

PROTOTYPING Disadvantages of prototyping: Significant user time Less efficient use of system resources Incomplete system development Inadequately tested and documented systems Who wants to do that stuff?

PROTOTYPING Disadvantages of prototyping: Significant user time Less efficient use of system resources Incomplete system development Inadequately tested and documented systems Negative behavioral reactions If the prototype is discarded, users may be upset about using it and losing it. May also be dissatisfied if all their suggestions are not incorporated or if they have to go through too many iterations.

PROTOTYPING Disadvantages of prototyping: Significant user time Less efficient use of system resources Incomplete system development Inadequately tested and documented systems Negative behavioral reactions Never-ending development If not managed properly, the development could get stuck in a terminal loop.

INTRODUCTION We’ll be discussing how to obtain a new information system by: Purchasing prewritten software Developing software in-house Outsourcing We’ll also discuss how to hasten or improve the development process through: Business process reengineering Prototyping Computer-aided software engineering (CASE) tools

Computer-Aided Software Engineering (CASE) Tools Traditionally, software developers have created software to simplify the work of others, but not for themselves. Computer-aided software (or systems) engineering (CASE) tools are an integrated package of computer-based tools that automate important aspects of the software development process. Used to plan, analyze, design, program, and maintain an information system. Also used to enhance efforts of managers, users, and programmers in understanding information needs.

Computer-Aided Software Engineering (CASE) Tools CASE tools do not replace skilled designers, but provide developers with effective support for all SDLC phases. CASE software typically includes tools for: Strategic planning Project and system management Database design Screen and report layout Automatic code generation

Computer-Aided Software Engineering (CASE) Tools Advantages of CASE technology: Increased productivity Can generate bug-free code from system specifications. Can automate repetitive tasks.

Computer-Aided Software Engineering (CASE) Tools Advantages of CASE technology: Increased productivity Improved program quality Can simplify enforcement of structured development standards, which: Improves quality of development. Reduces threat of serious design errors. Can check internal accuracy of design and detect inconsistencies.

Computer-Aided Software Engineering (CASE) Tools Advantages of CASE technology: Increased productivity Improved program quality Cost savings Cost savings of up to 80–90% are possible.

Computer-Aided Software Engineering (CASE) Tools Advantages of CASE technology: Increased productivity Improved program quality Cost savings Improved control procedures Encourages development early in the design process of: System controls Security measures System auditability Error handling procedures

Computer-Aided Software Engineering (CASE) Tools Advantages of CASE technology: Increased productivity Improved program quality Cost savings Improved control procedures Simplified documentation Automatically documents as the system development progresses.

Computer-Aided Software Engineering (CASE) Tools Problems with CASE technology: Incompatibility Some tools don’t interact effectively with some systems.

Computer-Aided Software Engineering (CASE) Tools Problems with CASE technology: Incompatibility Cost Some packages > $360,000.

Computer-Aided Software Engineering (CASE) Tools Problems with CASE technology: Incompatibility Cost Unmet expectations Only 37% of CIOs believe they achieved expected benefits.

SUMMARY AND CONCLUSIONS You’ve learned: How organizations buy software, hardware, and vendor services. How information systems departments develop custom software. How end users develop, use, and control computer-based information systems. Why organizations outsource their information systems, as well as the benefits and risks of doing so.

SUMMARY AND CONCLUSIONS You’ve also learned: What reengineering processes entail and when they are appropriate. How prototypes are used to develop an AIS and when it is advantageous to do so. What computer-aided software engineering is and how it’s used in systems development.