Lecture 4

IS Planning & Acquisition To be covered: To be covered: – IS planning and its importance Cost-benefit analysis Cost-benefit analysis Funding of IS Funding of IS – Software acquisition options – Project management 2

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Forces that determine the need for a new system Forces Business environment - Increased competition - New government regulation Within the business itself -Growth is beyond the capacity of the current system - New product identified Introduction of new and innovative technology Arise the opportunities to automate: - Cost reduction -Management Info. - Better customer services 4

Procedure for Introducing new IS to the Organization Identify the needs for a new IS Plan carefully for the integration of the new IS within the organization Plan to provide good ROI (Return On Investment) effective project management 5 ROI: Ratio of benefits to the money invested ROI: Ratio of benefits to the money invested

IS Planning The various components of an organization’s IS need to be successfully integrated in order to provide the right information at the right time and place 6

IS Planning Process Clear identification of the application needs of the business (information required by management) IS department activities (e.g. prioritizing & scheduling of sys. dev. project) should be in line with business goal Alternative software products and acquisition options need to be evaluated Evaluation of computer hardware on the basis of its compatibility with existing and future systems 7 Other Issues: - Availability of technical support - Estimation of operating cost - The financing method (rent or buy)

Cost-benefit Analysis 8 Why to assess and prioritize new system development projectsto assess and prioritize new system development projects How Measuring the financial impact of proposed systemsMeasuring the financial impact of proposed systems Intangible Benefits Tangible Benefits Reduction of bad debts Higher processing volume Improved cash flow Reduced inventory and administration costs Better decision- making Improved customer satisfaction N.B. Difficult to measure but could be of significant value

Typical Costs to be Considered in Evaluating Projects Development Costs: Staff trainingStaff training Conversion from previous systemConversion from previous system Equipment Costs: Space requirementsSpace requirements Air-conditioning requirementsAir-conditioning requirements Operating Costs: StaffingStaffing InsuranceInsurance PowerPower 9

Why do we undertake Cost-benefit Analysis To ensure that over System’s lifetime, its benefits will exceed its costs, Even though during the initial stage, costs are likely to exceed the benefits 10 Costs Benefits

Funding of Organization’s IS 3 Basic Options for IS Funding Profit Center Unallocated Cost Center Cost Center 11

Funding of IS Continue  12 As an Unallocated cost center IS is regarded as an organizational costs An annual budget is allocated in order to meet the costs of system development and maintenance Other department can have little influence over the spending of the IS budget, prioritization, and the standard of service As an Allocated cost center Internal accounting is used to allocate IS costs to the department using them Makes it easier to identify areas of demand within the organization Reduce the number of requests for unnecessary projects As a Profit Center IS department must compete with outside vendors in providing IS services to the organization It is often increase efficiency of the IS department May reduce the time spent on less profitable developmental work And Reduce the ability to provide innovative and strategic IS capabilities

Software Acquisition Options In-house Development Commercial Packages Outsourcing 13 End-user Computing

In-house Development Most Organization have their own IS Department Responsible for development and support of systems that support the company’s strategic goal Demand of the approach Depend on highly skilled employees Because of time and costs involved Often results in backlog of projects awaiting development 14 If IS staff is busy to attend the low priority projects or do not have the necessary technical expertise Then alternatives development method should be considered

Commercial Packages: Off-the-shelf software packages Commercial Packages: Off-the-shelf software packages Where development cost are spread over number of usersWhere development cost are spread over number of users Lower-cost alternative to in- house approach Software can be examined and tested prior to purchase Minimize the risks involved User training and support often availableUser training and support often available A package could be installed quicklyA package could be installed quickly In addition 15

Outsourcing Involves the purchasing of a service, in this case software development, from another company It become difficult to maintain high level of expertise in-house because  Firm can focus on its core competencies While Benefiting from the expertise Of the outsourcing company In many cases organizations will outsource only their more general systems, while retaining control over strategic projects Rapid change in technology + High turnover in IS staff rates Application Service Providers (ASPs) - cost-effective for the provision of software that is used infrequently or from varying locations 16

End-user computing - Applications tend to be personal or departmental in function - Do not adhere to organizational standard - Data validation and security may be poor, - Backup and recovery are missing - Backup and recovery are missing - Lack of documentation Users attempt to develop their own systems Frustrating backlogs in the IS department - Inspired by the opportunities presented by new technologies - Increased computer literacy - Low cost of computer hardware & user-friendly tools Motivation 17

Project Management 18 resources towards the successful completion of a project goals and objectives 1Planning 4Managing 3Securing 2Organizing

Project Management What is the difference between Project Management and Business Management? What is the difference between Project Management and Business Management? 19 Project Management

Previous experience has limited affect Once-off Effort Affected by the high degree o interaction between participants and tasks Project Complexity Define Scope of the project, Tasks to be accomplished Order in which tasks should be done Project Manager (PM) 20

DONE DONE Thank you for listening Any Questions?? Any Questions?? Please Read Book_1, Chapter (11), Please Read Book_1, Chapter (11),p.( ) 21