Chapter 16 Alternative Avenues for Systems Acquisitions

Learning Objectives When you finish this chapter, you will Recognize the differences among the alternatives to in-house system development. Be able to list the business trade-offs inherent in the various methods of acquiring systems. Understand why the alternatives to in-house development have become so popular. Know which systems acquisition approach is appropriate for a particular set of circumstances.

Sources of Information Figure 16.1 Alternatives to in-house development of ISs

Sources of Information Figure 16.2 Major information systems magazines

Sources for Information Outsourcing Short-term contractual relationship with a service firm to develop a specific application Long-term contractual relationship with a service firm to take over all or some of an organization’s IS functions Figure 16.3 Outsourced IS services

Outsourcing Advantages of Outsourcing Improved financial planning Reduced license and maintenance fees Increased attention to core business Shorter implementation cycles Reduction of personal and fixed costs Increased access to highly qualified know-how Availability of ongoing consulting as part of standard support Increased security

Outsourcing Figure 16.4 How IS executives rank outsourcing benefits

Outsourcing Risks of Outsourcing Loss of control Loss of experienced employees Risks of losing a competitive advantage

Outsourcing Figure 16.5 Risks of outsourcing are higher at higher levels of management.

The Information Systems Subsidiary IS service companies that are owned by and served by one large company Some grow large enough to service the market at large Some corporations purchase an IS consulting firm

Purchased Applications Why Purchase? Immediate system availability High quality Low price Available support

Purchased Applications Figure 16.6 The process of choosing ready-made software

Purchased Applications Steps in Purchasing Ready-made Software Identifying the problem Identifying potential vendors Soliciting vendor information Defining system requirements Requesting vendor proposals

Purchased Applications Reviewing proposals and screening vendors Visiting sites Selecting the vendor Benchmarking Negotiating a contract Implementing the new system Managing post-implementation support

Purchased Applications Figure 16.7 A system should be purchased only if all or most needs are met.

Purchased Applications Figure 16.8 How IS managers rank the importance of product purchase factors

Purchased Applications Benchmarking Codified comparison of performance measures between systems Ensures adopted application satisfies the organization's minimum requirements Learning from Experience

Purchased Applications Figure 16.9 The eight commandments of effective benchmarking

Purchased Applications Purchasing Risks Loose fit between needs and features Bankruptcy of the vendor High turnover of vendor personnel

Renting Software On-site Renting Renting Through the Web Client purchases a license to use a certain application for a specified time Renting Through the Web Application installed at vendor’s location; client accesses through the Web or leased line

Renting Software Figure 16.10 Benefits and risks of software rental through the Web

User Application Development Factors Encouraging User Application Development The programming backlog The widespread use of PCs The emergence of 4GLs Increasing popularity of prototyping Increasing popularity of client/server architecture

User Application Development Figure 16.11 Guidelines for end-user development of applications

User Application Development Figure 16.12 Graphical 4GLs, such as PowerBuilder 5.0, shown here, provide friendly tools for end users to develop their own applications.

User Application Development Figure 16.13 Graphical 4GLs

User Application Development Managing User-developed Applications Managing the reaction of IS professionals Providing support – help desk Compatibility – standard tool Managing access – database access

User Application Development Advantages of user application development Shortened lead times Good fit to needs Compliance with culture Efficient utilization of resources Acquisition of skills Free IS staff time – complex system development

User Application Development Risks of user application development Poorly developed applications Islands of information Duplication Security problems Poor documentation Futz factor

User Application Development Figure 16.14 The costs of end-user computing

Ethical and Societal Issues Computer Use Policies for Employees End-user computing encourages increased productivity, but business computers are often used for unproductive personal activities. Most state statutes do not address unauthorized use of computers. Employers should provide clear guidelines stating acceptable and unacceptable use of company computers.