Acquiring Information Systems and Applications CHAPTER 10 Acquiring Information Systems and Applications

CHAPTER OUTLINE 10.1 Planning for and Justifying IT Applications 10.2 Strategies for acquiring IT Applications 10.3 Traditional Systems Development Life Cycle 10.4 Alternative Methods and Tools for Systems Development 10.5 Outsourcing and Application Service Providers 10.6 Vendor and Software Selection

LEARNING OBJECTIVES Describe the IT planning process. BUSINESS OPPORTUNITIES: Technology can be used to create innovation and leadership in the organization’s field. BUSINESS RISKS: Information systems may not fit with the organizational strategy, resulting in ineffective systems.

LEARNING OBJECTIVES (continued) Describe the IT justification process and methods. BUSINESS OPPORTUNITIES: Choosing a process to select a system which matches the organization’s capabilities will help it to find a better information system. BUSINESS RISKS: Unexpected costs could result in information systems reducing organizational income to unacceptable levels.

LEARNING OBJECTIVES (continued) Discuss the advantages and disadvantages of acquisition strategies. BUSINESS OPPORTUNITIES: An organization can leverage the expertise of information systems technology organizations to meet its IT needs. BUSINESS RISKS: A company could pay too much for a customized system when a packaged system that already exists can meet its needs.

LEARNING OBJECTIVES (continued) Describe the SDLC and its advantages and limitations. BUSINESS OPPORTUNITIES: Customized systems can help the organization obtain a competitive advantage. BUSINESS RISKS: Poorly described systems, when programmed, will not meet the organization’s needs.

LEARNING OBJECTIVES (continued) Describe the major alternative methods and tools for building information systems. BUSINESS OPPORTUNITIES: Combining different methods of development can result in faster development times, while still satisfying organizational requirements. BUSINESS RISKS: Rapid design methods could result in systems that are poorly controlled or that contain errors.

LEARNING OBJECTIVES (continued) List the major IT acquisition options and the criteria for option selection. BUSINESS OPPORTUNITIES: New businesses or new systems can be rapidly created with outsourcing and a minimal investment. BUSINESS RISKS: Application service providers could go out of business, resulting in risks to ongoing service provision.

LEARNING OBJECTIVES (continued) Describe the roles of hosting vendors. BUSINESS OPPORTUNITIES: Data communications and other hardware or software services can be implemented rapidly, and at low cost. BUSINESS RISKS: Hosting services could be poorly secured, resulting in data security problems or data transmission problems.

LEARNING OBJECTIVES (continued) Describe the process of vendor and software selection. BUSINESS OPPORTUNITIES: Packaged software can provide a low-cost solution to information systems processing requirements. BUSINESS RISKS: A vendor could provide poor maintenance service, resulting in ongoing operational problems.

10.1 Planning of and Justifying IT Applications Organizations must analyze the need for the IT application Each IT application must be justified in terms of costs and benefits The application portfolio is a prioritized list of both existing and potential IT applications of a company

Information Systems Planning (continued) Organizational strategic plan states the firm’s overall mission, the goals that follow from that mission, and the broad steps necessary to reach these goals. IT architecture delineates the way an organization’s information resources should be used to accomplish its mission. Both are inputs in developing the IT strategic plan

IT Strategic Plan IT strategic plan is a set of long-range goals that describe the IT infrastructure and major IT initiatives needed to achieve the goals of the organization.

IT Steering Committee The IT Steering Committee, comprised of managers and staff representing various organizational units, establishes IT priorities and ensures that the MIS function meets the needs of the enterprise.

IT Operational Plan Consists of a clear set of projects that the IT department and functional area managers will execute in support of the IT strategic plan Contains the following elements: Mission IT environment Objectives of the IT function Constraints of the IT function Application portfolio Resource allocation and project management

Evaluating & Justifying IT Investment: Benefits, Costs & Issues Assessing the costs Fixed costs Total cost of ownership (TCO) Assessing the benefits (Values) Intangible benefits: Benefits from IT that may be very desirable but difficult to place an accurate monetary value on. Comparing the two

Conducting the Cost-Benefit Analysis Using Net Present Value (NPV) Return on investment Breakeven analysis The business case approach

10.2 Strategies for Acquiring IT Applications Buy the applications (off-the-shelf approach) Lease the applications Use Open-Source Software Software-as-a-service Developing the applications in-house

10.3 Traditional Systems Development Life Cycle Software Development Life Cycle (SDLC) is the traditional systems development method that organizations use for large-scale IT projects. SDLC processes are systems investigation, systems analysis, systems design, programming, testing, implementation, operation and maintenance. Waterfall approach is when tasks in one phase are completed before the work proceeds to the next stage.

The SDLC Major advantages Major drawbacks Control Accountability Error detection Major drawbacks Relatively inflexible Time-consuming and expensive Discourages changes once user requirements are done

SDLC – Systems Investigation Begins with the business problem (or opportunity) followed by the feasibility analysis Feasibility study Go/No-Go Decision

Feasibility Study Technical feasibility Economic feasibility Organizational feasibility Behavioral feasibility

SDLC – System Analysis Is the examination of the business problem that the organization plans to solve with an information system. Main purpose is to gather information about existing system to determine requirements for the new or improved system. Deliverable is a set of system requirements.

SDLC – Systems Design Describes how the system will accomplish this task. Deliverable is the technical design that specifies: System outputs, inputs, user interfaces. Hardware, software, databases, telecommunications, personnel & procedures. Blueprint of how these components are integrated.

SDLC – System Design (continued) Logical system design states what the system will do, using abstract specifications. Physical system design states how the system will perform its functions, with actual physical specifications. Scope creep is caused by adding functions after the project has been initiated.

SDLC – Programming & Testing Programming involves the translation of a system’s design specification into computer code. Testing checks to see if the computer code will produce the expected and desired results under certain conditions. Testing is designed to delete errors (bugs) in the computer code. These errors are of two types: Syntax errors ( e.g., misspelled word or a misplaced comma) Logic errors that permit the program to run but result in incorrect output

SDLC – Systems Implementation Implementation or deployment is the process of converting from the old system to the new system. Four major conversion strategies ; Direct Conversion Pilot Conversion Phased Conversion Parallel Conversion

SLDC – Operation & Maintenance Audits are performed to assess the system’s capabilities and to determine if it is being used correctly. Systems need several types of maintenance. Debugging Updating Maintenance

10.4 Alternative Methods & Tools for Systems Development Prototyping Joint application design (JAD) Integrated computer-assisted software engineering tools Rapid application development (RAD) Agile development End-user development Component-based development

10.5 Outsourcing & Application Service Providers Outsourcing is when an organization acquires IT applications or services from outside contractors or external organizations. Application Service Provider (ASP) is an agent or vendor who assembles the software needed by enterprises and packages the software with services such as development, operations and maintenance.

10.6 Vendor & Software Selection Step 1: Identify potential vendors. Step 2: Determine the evaluation criteria. Request for proposal (RFP) is a document sent to potential vendors to submit a proposal describing their software package and explain how it would meet the company’s needs. Step 3: Evaluate vendors and packages.

Vendor & Software Selection (continued) Step 4: Choose the vendor and package Step 5: Negotiate a contract. Step 6: Establish a service level agreement. Service Level Agreements (SLAs) are formal agreements that specify how work is to be divided between the company and its vendors.

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