E. Wainright Martin Carol V. Brown Daniel W. DeHayes Jeffrey A. Hoffer William C. Perkins MANAGINGINFORMATIONTECHNOLOGY FIFTH EDITION CHAPTER 11 M ETHODOLOGIES FOR P URCHASED S OFTWARE P ACKAGES

© 2005 Pearson Prentice-Hall Chapter T HE M AKE-OR- B UY D ECISION Page 406 Decision should be made jointly by business managers and IS professionals Advantages of purchasing:   Cost savings   Faster speed of implementation Disadvantages of purchasing:   Seldom exactly fits a company’s needs   Often forces trade-offs

© 2005 Pearson Prentice-Hall Chapter P URCHASING M ETHODOLOGY Page 407 The Purchasing Steps Figure 11.1 The Purchasing Process

© 2005 Pearson Prentice-Hall Chapter P URCHASING M ETHODOLOGY Page 407 Initiating the Purchasing Process Figure 11.2 Comparison of Costs and Building vs. Purchasing a System

© 2005 Pearson Prentice-Hall Chapter P URCHASING M ETHODOLOGY Page 408 Establish Criteria for Selection Figure 11.3 Key Criteria for Software Package Selection

© 2005 Pearson Prentice-Hall Chapter P URCHASING M ETHODOLOGY Page 409 Develop and Distribute the RFP Request for proposal (RFP) – a formal document sent to potential vendors inviting them to submit a proposal describing their software package and how it would meet the company’s needs

© 2005 Pearson Prentice-Hall Chapter Page 409 Develop and Distribute the RFP Figure 11.4 Sample RFP Table of Contents

© 2005 Pearson Prentice-Hall Chapter Page Evaluation steps:   Review vendors’ responses from RFPs   Request demonstrations of leading packages   Request references from users of software packages in other companies   Assess how well package capabilities satisfy company’s needs   Understand extent of any additional development efforts or costs to tailor software   Make decision P URCHASING M ETHODOLOGY Evaluate Vendor Responses to RFP and Choose Package

© 2005 Pearson Prentice-Hall Chapter Page 411 P URCHASING M ETHODOLOGY Evaluate Vendor Responses to RFP and Choose Package Figure 11.6 Matching Company Needs with Capabilities of the Package

© 2005 Pearson Prentice-Hall Chapter Page 413 If no software package modifications required:   Skip system design and building steps   Move directly to system testing   Develop any necessary process changes If software package is modified:   Consider contracting with vendor or a third party for changes versus modifying in-house   Determine if changes are required to other existing company systems P URCHASING M ETHODOLOGY Construction Phase

© 2005 Pearson Prentice-Hall Chapter Page   Business managers and users   IS professionals   Project manager – usually a business manager   Software vendor personnel   Sometimes includes a third-party implementation partner   Purchasing specialists   Attorneys P URCHASING M ETHODOLOGY Project Team for Purchasing Packages

© 2005 Pearson Prentice-Hall Chapter Page 416 P URCHASING M ETHODOLOGY Purchasing Advantages and Disadvantages Figure 11.7 Advantages and Disadvantages of Purchasing Packaged Software

© 2005 Pearson Prentice-Hall Chapter Page 417 S PECIAL C ASE: E NTERPRISE S YSTEM P ACKAGES Enterprise Resource Planning (ERP) system packages:   Companies purchase to achieve business benefits and IT platform benefits   Enables access to integrated data for better decision making   Often require heavy reliance on third-party consultants   Implementation efforts usually complex, and sometimes not successful

© 2005 Pearson Prentice-Hall Chapter Page 417 S PECIAL C ASE: E NTERPRISE S YSTEM P ACKAGES Factors that need to be managed well for ERP implementation to be successful:   Top management is engaged in the project, not just involved   Project leaders are veterans, and team members are decision makers   Third parties fill gaps in expertise and transfer their knowledge   Change management goes hand-in-hand with project planning   A satisfying mindset prevails Brown and Vessey, 2003

© 2005 Pearson Prentice-Hall Chapter Page 418 N EW P URCHASING O PTION: A PPLICATION S ERVICE P ROVIDERS (ASPs) New trend beginning 2000s Purchasing option: purchaser elects to use a “hosted” application rather than to purchase the software application and host it on its own equipment ASP is an ongoing service provider Company pays third party (ASP) for delivering the software functionality over the Internet to company employees and sometimes business partners

© 2005 Pearson Prentice-Hall Chapter Page N EW P URCHASING O PTION: A PPLICATION S ERVICE P ROVIDERS (ASPs) Some advantages:   Cost savings and faster speed of implementation   Usually involves monthly fees rather than large infrastructure investment Disadvantages:   Dependence on an external vendor for both software and ongoing operations   Good assessment of required service levels even more critical