1. Acquiring Information Systems and Applications
Chapter 14
Acquiring Information
Systems and Applications
Kajano/Shutterstock

2. Chapter Outline
14.1 Planning for and Justifying IT Applications 14.2 Strategies for Acquiring IT Applications 14.3 The Traditional Systems Development Life Cycle 14.4 Alternative Methods and Tools for Systems Development 14.5 Vendor and Software Selection

3. Learning Objectives
Discuss the different cost/benefit analyses that companies must take into account when formulating an IT strategic plan.
Discuss the four business decisions that companies must make when they acquire new applications.
Enumerate the primary tasks and importance of each of the six processes involved in the systems development life cycle.
Describe alternative development methods and tools that augment development methods.
Analyze the process of vendor and software selection.

4. Introduction
Opening Case: Anniston Orthopedics and Greenway Medical Technologies
Upgrading information systems is a complex task for organization of any size
System acquisition goes beyond building new systems in house
IT resources go beyond software and hardware

5. 14.1 Planning for and Justifying IT Applications
Organizations must analyze the need for applications and then justify each purchase in terms of costs and benefits
© Image Source/Age Fotostock America, Inc.

6. IT Planning Analyze the organization’s strategic plan
Identify the firm’s mission, goals, and steps required to reach these goals
Develop the IT strategic plan
IT strategic plan: A set of long-range goals describing IT infrastructure and identifying IT initiatives needed to reach the goals. The IT strategic plan…
Must be aligned with the organization’s strategic plan
Must provide for an IT architecture that seamlessly networks users, applications, and databases
Must efficiently allocate resources among competing projects so the projects can be completed on time and within budget and still have the required functionality
Steering committee helps develop and implement the IT strategic plan
Develop IS operational plan
Define a set of IS projects that will be executed to support the IT strategic plan

7. Figure 14.1 Analysis of the Organizational Strategic Plan

8. Figure 14.2 IT Architecture
Source:

9. Evaluating and Justifying IT Investment: Benefits, Costs, and Issues
Assessing the costs
Allocate fixed costs among different IT projects
Costs of a system do not end when the system is installed
Assessing the benefits
Intangible benefits are difficult to quantify
Conducting the Cost-Benefit Analysis
Four common approaches:
Net present value
Return on investment
Breakeven analysis
Business case approach

10. 14.2 Strategies for Acquiring IT Applications
Fundamental decisions
How much computer code does the company want to write?
How will the company pay for the application?
Where will the application run?
Where will the application originate?
System acquisition methods
Purchase a prewritten application
Customize a prewritten application
Lease the application
Use application service providers and software-as-a-service vendors
Use open-source software
Use outsourcing
Employ custom development

11. Customize a Prewritten Application
Attractive option if the vendor allows the company to modify the application to meet its needs
Disadvantages
Customizing a prewritten application can be extremely difficult, particularly for large, complex applications
May not be attractive if customization is the only way to address the company’s needs
Not the best strategy for very expensive software or when software is likely to become obsolete in a short time

12. Purchase a Prewritten Application

13. Lease the Application
Can save a company time and money compared to buying or in-house development
80/20 rule
If the software meets 80% of the needs, the company should consider changing its business processes so it can utilize the remaining 20%
Three approaches
Lease the application from a software developer, install it, and run it on the company’s platform
Vendor may help with installation and offer contract for the support and maintenance
Lease the application and run it on the vendor’s platform
Application service provider
Software-as-a-service

14. Use Application Service Providers and Software-as-a-Service Vendors
Application service provider (ASP)
An agent or a vendor who assembles the software needed by enterprises and packages the software with services such as development, operations, and maintenance
Software-as-a-service (SaaS)
A method of delivering software in which a vendor hosts the applications and provides them as a service to customers over the Internet
Customers do not own the software; they pay for using it

15. Figure 14.3 Operation of an Application Service Provider (ASP)

16. Figure 14.4 Organization of a SaaS Provider

17. Other Approaches Use open-source software
Organizations obtain a license to implement an open-source software product and either use it as is, customize it, or develop applications with it
Outsourcing
Acquiring IT applications from outside contractors or external organizations
Offshoring
Relocate these operations to other countries
Custom development
Can be developed in house or outsourced
More time consuming and expensive
Results in a better fit to organization’s requirements

18. 14.3 The Traditional Systems Development Life Cycle
Systems development life cycle (SDLC)
The traditional method used by organizations to develop large-scale IT projects
Each process has clearly defined tasks
Systems investigation
Systems analysis
Systems design
Programming and testing
Implementation
Operation and maintenance

19. Figure 14.5 Systems Development Life Cycle (SDLC) with Supporting Tools

20. Figure 14.6 Comparison of User and Developer Involvement over the SDLC

21. Systems Investigation
Understand the business problem to be solved
Specify the options for the systems
Do nothing; use the existing system unchanged
Enhance the existing system
Develop a new system
Conduct a feasibility study to analyze which solutions best fits the business problem
Technical feasibility determines whether the company can develop and/or acquire the system
Economic feasibility determines whether the project investment is worth the financial risks
Behavioral feasibility addresses the human issues of the systems development project
Anticipate the problems during development

22. Systems Analysis
Examine the business problem that the organization plans to solve with an information system
Gather information about the existing system and create a set of system requirements
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23. Systems Design
Describes how the system will resolve the business problem
Technical system specifications include
System outputs, inputs, and user interfaces
Hardware, software, databases, telecommunications, personnel, and procedures
A blueprint of how these components are integrated
Scope creep
Adding system requirements after the project has been initiated

24. Programming and Testing
Translating the design specifications into computer code
Testing
Checking to see if the computer code will produce the expected and desired results and to detect errors in the computer code

25. Implementation Converting from an old computer system to a new one
Direct conversion
The old system is cut off and the new system is turned on at a certain time.
Pilot conversion
Introduces the new system in one part of the organization. If the system works properly, the system is implemented in other parts of the organization.
Phased conversion
Introduces components (modules) of the new system. If it works properly, other modules are introduced, until the entire new system is operational.
Parallel conversion
The old and new systems operate simultaneously for a time.

26. Operation and Maintenance
After the new system is implemented, it will operate for a period of time, until it no longer meets its objectives
Systems require several types of maintenance
Debugging the program
Continues throughout the life of the system
Updating
Modify the system to accommodate changes in business conditions
Adding new functions to the existing system without disturbing its operation

27. 14.4 Alternative Methods and Tools for Systems Development
Joint application design (JAD)
A group-based tool for collecting user requirements and creating system designs
Most often used within the systems analysis and systems design stages of the SDLC
Rapid application development (RAD)
Combines JAD, prototyping, and integrated computer-assisted software engineering (ICASE) tools to rapidly produce a high-quality system

28. Figure 14.7 A Rapid Prototyping Development Process versus SDLC
Source: datawarehousetraining.com/Methodologies/rapid-application-development

29. Alternative Methods and Tools for Systems Development
Agile development
A software development methodology that delivers functionality in rapid iterations
Requires frequent communication, development, testing, and delivery
Example: Scrum approach
End-user development
Organization’s end users develop their own applications with little or no formal assistance from the IT department

30. Tools for Systems Development
Prototyping
Defines an initial list of user requirements, builds a small version of the system (prototype), and then refines the system in several iterations based on users’ feedback
Integrated computer-assisted software engineering (ICASE)
Computer-aided software engineering (CASE) tools
A group of tools that automate many of the tasks in the SDLC
Upper CASE tools: Automate the early stages of the SDLC (systems investigation, analysis, and design)
Lower CASE tools: Automate later stages of the SDLC (programming, testing, operation, and maintenance)
Integrated CASE (ICASE) tool links upper and lower CASE tools

31. Tools for Systems Development
Component-based development
Uses standard components to build applications
Components
Reusable applications that generally have one specific function
Examples: Shopping cart, user authentication, a catalog
Object-oriented (OO) development
Focuses on aspects of the real world that must be modeled to perform that task

32. 14.5 Vendor and Software Selection
Step 1: Identify potential vendors through various sources
Software catalogs
Lists provided by hardware vendors
Technical and trade journals
Consultants and industry analysts experienced in the application area
Peers in other
Step 2: Determine the evaluation criteria
Include criteria in a request for proposal (RFP)
Characteristics of the vendor
Functional requirements of the system
Technical requirements that the software must satisfy
Amount and quality of documentation provided
Vendor support of the package

33. Vendor and Software Selection
Step 3: Evaluate vendors and packages
Step 4: Choose the vendor and package
Step 5: Negotiate a contract
Step 6: Establish a service-level agreement
A formal agreement that specifies how work is to be divided between the company and its vendors

34. Table 14.3 Criteria for Selecting a Software Application Package

35. What’s in IT for ME? Accounting
Performs the cost-benefit analyses on proposed projects
Finance
Helps with financial issues on systems development project
Marketing
Helps develop systems by providing information
Production/Operations Management
Participates on development teams
Human Resources Management
Acquiring new systems may require hiring new employees, changing job descriptions, or terminating employees
MIS
Leads the system development efforts

36. Closing Case 1: Tweak or Trash?
The Problem
The IT Solution
The Results
Questions
What are the risks associated with throwing out old information systems and replacing them with new information systems? Provide examples to support your answer.
Provide examples of a situation in which it would be better for an organization to tweak an existing information system rather than replace it with a new system.

37. Closing Case 2: Putting IT All Together
The Problem
The Solution
The Results
Questions
Review the section in Chapter 1 called “Managing Information Resources.” Based on your review, which information system capabilities should Chubb keep at the corporate level? Justify each one.
Based on your review, which information system capabilities should Chubb keep in the business units? Justify each one.