CHAPTER 11 Acquiring Information Systems and Applications

CHAPTER 11 Acquiring Information Systems and Applications
Copyright John Wiley & Sons Canada

CHAPTER 11 ACQUIRING INFORMATION SYSTEMS AND APPLICATIONS
11.1 Planning for and Justifying IT Applications 11.2 Strategies for Acquiring IT Applications 11.3 The Traditional Systems Development Life Cycle 11.4 Alternative Methods and Tools for Systems Development 11.5 Vendor and Software Selection Copyright John Wiley & Sons Canada

Copyright John Wiley & Sons Canada
LEARNING OBJECTIVES Define an IT strategic plan. Identify three objectives it must meet. Describe the four common approaches to cost-benefit analysis. Discuss the four business decisions that companies must make when they acquire new applications. Identify the six processes involved in the systems development life cycle. Explain the primary tasks and importance of each process. Copyright John Wiley & Sons Canada

LEARNING OBJECTIVES (CONTINUED)
Describe four alternative development methods and four tools that augment development methods. Identify at least one advantage and one disadvantage of each method and tool. Analyze the process of vendor and software selection. Copyright John Wiley & Sons Canada

Case 11.1 GE HEALTHCARE SWITCHES FROM SYSTEMS DEVELOPMENT LIFE CYCLE TO AGILE DEVELOPMENT The Business Problem GE Healthcare uses products developed by the company’s Imaging Solutions, one unit was experiencing several SDLC difficulties: traditional systems development life cycle was too long, taking from 18 to 24 months. SDLC approach followed a long and regimented process. many communication barriers existed among the various business functions, especially marketing and engineering. SDLC: Systems Development Life Cycle Copyright John Wiley & Sons Canada

Case 11.1 GE HEALTHCARE SWITCHES FROM SYSTEMS DEVELOPMENT LIFE CYCLE TO AGILE DEVELOPMENT The Solution To address these problems, Imaging Solutions replaced the SDLC process with an approach to software and product development called agile development. Agile is based on iterations—frequent and incremental changes made through collaboration at all stages—that usually result in shorter product cycles. Imaging Solutions implemented a scrum initiative based on agile development. Scrum maximizes the development team’s ability to deliver iterations quickly and to respond effectively to additional user requirements as they emerge. Copyright John Wiley & Sons Canada

Case 11.1 GE HEALTHCARE SWITCHES FROM SYSTEMS DEVELOPMENT LIFE CYCLE TO AGILE DEVELOPMENT The Results The pilot project was delivered successfully with the correct features and functionality. Imaging Solutions learned important lessons from the pilot project. The products it makes are highly regulated, meaning that engineers need to identify, plan for, and meet many additional quality and regulatory steps. Copyright John Wiley & Sons Canada

Case 11.1 GE HEALTHCARE SWITCHES FROM SYSTEMS DEVELOPMENT LIFE CYCLE TO AGILE DEVELOPMENT What We Learned From This Case The GE Healthcare case highlights several problems with systems development that employs the traditional systems development life cycle. The case also emphasizes the importance of early, frequent user input into the systems development process, which the agile development methodology encourages. Copyright John Wiley & Sons Canada

11.1 PLANNING FOR AND JUSTIFYING IT APPLICATIONS
The need for information systems is usually related to organizational planning and to the analysis of the organization’s performance vis-à-vis its competitors. The cost-benefit justification must determine whether investing in a specific IT application is preferable to spending the funds on alternative projects. Copyright John Wiley & Sons Canada

11.1 IT’S ABOUT BUSINESS ShopMyClothes: High Fashion Sales ShopMyClothes.com is a website so that people can post clothes for sale without haggling. To ensure quality control over the thousands of clothing items that are posted, each item is individually checked before posting. The company had high website development and maintenance costs, due to the complexity of the platform it used, Microsoft’s .net framework. They dealt with the high costs by moving from having totally local programming to outsourcing much of its programming to India and having local programming available on a standby basis. To get a functioning website after many delays, the company had to fire its previous contract programmer. Questions 1. Would acquiring a new information system for a small organization be a longer or shorter process than acquiring one for a large organization? Why or why not? Support your answer. 2. How does the selection of an underlying technology platform (such as Microsoft .net) affect programming choices? Copyright John Wiley & Sons Canada

FIGURE 11.1 THE INFORMATION SYSTEMS PLANNING PROCESS
The planning process for new IT applications begins with analyzing the organizational strategic plan, which is illustrated in this slide. Copyright John Wiley & Sons Canada

IT STRATEGIC PLAN The IT strategic plan must meet three objectives: aligned with the organization’s strategic plan. provide for an IT architecture that seamlessly networks users, applications, and databases efficiently allocate IS development resources among competing projects so that the projects can be completed on time and within budget and still have the required functionality. IT strategic plan is a set of long-range goals that describe the IT infrastructure and identify the major IT initiatives needed to achieve the organization’s goals. Copyright John Wiley & Sons Canada

IT STEERING COMMITTEE One critical component in developing and implementing the IT strategic plan is the [KT]IT steering committee. One critical component in developing and implementing the IT strategic plan is the [KT]IT steering committee. The committee’s major tasks are to link corporate strategy with IT strategy, to approve the allocation of resources for the MIS function, and to establish performance measures for the MIS function and ensure that they are met. Copyright John Wiley & Sons Canada

IS OPERATIONAL PLAN A typical IS operational 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 After a company has agreed on an IT strategic plan, it next develops the IS operational plan that consists of a clear set of projects that the IS department and the functional area managers will execute in support of the IT strategic plan. • Mission: mission of the IS function (derived from the IT strategy) • IS environment: summary of the information needs of the functional areas and of the organization as a whole • Objectives of the IS function: best current estimate of the goals of the IS function • Constraints on the IS function: Technological, financial, personnel, and other resource limitations on the IS function • Application portfolio: prioritized inventory of present applications and a detailed plan of projects to be developed or continued during the current year • Resource allocation and project management: listing of who is going to do what, how, and when Copyright John Wiley & Sons Canada

EVALUATING & JUSTIFYING IT INVESTMENT: BENEFITS, COSTS & ISSUES
Justifying IT investment involves: Assessing the costs Fixed costs Future costs Assessing the benefits Intangible benefits Comparing the two Justifying IT investment involves calculating the costs, assessing the benefits (values), and comparing the two. This comparison is frequently referred to as cost-benefit analysis. Fixed costs: are those costs that remain the same regardless of change in the activity level. For IT, fixed costs include infrastructure cost, cost of IT services, and IT management cost. Future costs for maintaining, debugging, and improving the system can accumulate over many years. Intangible benefits: Benefits from IT that may be very desirable but difficult to place an accurate monetary value on. Copyright John Wiley & Sons Canada

CONDUCTING THE COST-BENEFIT ANALYSIS
Four common approaches organizations use: Net Present Value (NPV) Return on Investment (ROI) Breakeven Analysis Business Case Approach Net present value (NPV): convert future values of benefits to their present-value equivalents by “discounting” them at the organization’s cost of funds then compare the present value of the future benefits with the cost required to achieve those benefits to determine whether the benefits exceed the costs. Return on investment (ROI): calculated by dividing the net income that a project generates by the average assets invested in the project. ROI is a percentage, and the higher the percentage return, the better. Breakeven analysis determines the point at which the cumulative dollar value of the benefits from a project equals the investment made in the project. Business case approach: system developers write a business case to justify funding one or more specific applications or projects. Copyright John Wiley & Sons Canada

11.2 STRATEGIES FOR ACQUIRING IT APPLICATIONS
Companies must make a series of fundamental business 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? Copyright John Wiley & Sons Canada

STRATEGIES FOR ACQUIRING IT APPLICATIONS
Purchase a Prewritten Application Customize a Prewritten Application Lease the Applications Application Service Providers and Software-as-a-Service Vendors Open-Source Software Outsourcing Custom Development Open-Source Software: organizations obtain a licence 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 external contractors or organizations. Custom Development: Companies may also decide to custom-build an application. They can either perform this operation in-house or outsource the process. Copyright John Wiley & Sons Canada

ADVANTAGES AND LIMITATIONS OF THE “BUY” OPTION
Many choices Test software Save time Familiar product Many users Eliminate need to hire specialized personnel Disadvantages: May not meet needs Difficult to modify No control over content Difficult to integrate May be discontinued Controlled by another company See Table 11.1 for a full list of advantages and limitations of the “buy” option. Copyright John Wiley & Sons Canada

FIGURE 11.2 OPERATION OF AN APPLICATION SERVICE PROVIDER (ASP)
An application service provider (ASP) is an agent or a vendor who assembles the software needed by enterprises and packages the software with services such as development, operations, and maintenance. The customer then accesses these applications via the Internet. Figure illustrates the operation of an ASP. Note that the ASP hosts an application and a database for each customer. Copyright John Wiley & Sons Canada

FIGURE 11.3 OPERATION OF A SOFTWARE-AS-A-SERVICE (SAAS) VENDOR
Software-as-a-service (SaaS) is a method of delivering software in which a vendor hosts the applications and provides them as a service to customers over a network, typically the Internet. Customers do not own the software; rather, they pay for using it. SaaS eliminates the need for customers to install and run applications on their own computers. Copyright John Wiley & Sons Canada

11.3 Traditional Systems Development Life Cycle (SDLC)
The SDLC is a structured framework that consists of sequential processes: Systems Investigation Systems Analysis Systems Design Programming and Testing Implementation Operation and Maintenance The systems development life cycle (SDLC) is the traditional systems development method that organizations use for large-scale IT projects. See Table 11.2 in the textbook for a comprehensive list of the advantages and disadvantages of the SDLC Copyright John Wiley & Sons Canada

SIX-STAGE SYSTEMS DEVELOPMENT LIFE CYCLE (SDLC) WITH SUPPORTING TOOLS
Systems analysts are IS professionals who specialize in analyzing and designing information systems. Programmers are IS professionals who either modify existing computer programs or write new ones to satisfy user requirements. Technical specialists are experts on a specific type of technology, such as databases or telecommunications. Systems stakeholders include everyone who is affected by changes in a company’s information systems; for example, users and managers. Copyright John Wiley & Sons Canada

FIGURE 11.5 COMPARISON OF USER AND DEVELOPER INVOLVEMENT OVER THE SDLC
Figure 11.5 indicates that users have high involvement in the early stages of the SDLC, lower involvement in the programming and testing stage, and higher involvement in the later stages. Copyright John Wiley & Sons Canada

SDLC – Systems Investigation
The feasibility study is the main task of the Systems Investigation phase. The feasibility study helps the organization choose between 3 options: Do nothing and continue to use the existing system unchanged. Modify or enhance the existing system. Develop a new system. The initial stage in a traditional SDLC is systems investigation. Systems development professionals agree that the more time they invest in (1) understanding the business problem to be solved, (2) specifying the technical options for the systems, and (3) anticipating the problems they are likely to encounter during development, the greater the chances of success. Copyright John Wiley & Sons Canada

FEASIBILITY STUDY The Feasibility Study provides a rough assessment of the project’s: Technical feasibility Economic feasibility Behavioral feasibility Technical feasibility determines whether the company can develop and/or acquire the hardware, software, and communications components needed to solve the business problem. Economic feasibility determines whether the project is an acceptable financial risk and, if so, whether the organization has the necessary time and money to successfully complete the project. Behavioural feasibility addresses the human issues of the systems development project. After the feasibility analysis is completed, a “Go/No-Go” decision is reached by the steering committee, if there is one, or by top management in the absence of a committee. If the decision is “No-Go,” the project either is put on the shelf until conditions are more favourable, or it is discarded. If the decision is “Go,” the project proceeds, and the systems analysis phase begins. Copyright John Wiley & Sons Canada

SDLC – SYSTEM ANALYSIS 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, also called user requirements. User requirements identify the specific requirements that the system must satisfy. Systems Analysis: The examination of the business problem that the organization plans to solve with an information system. Copyright John Wiley & Sons Canada

SDLC – SYSTEMS DESIGN The deliverable is a set of technical system specifications, which specifies the following: System outputs, inputs, calculations or processing, and user interfaces Hardware, software, databases, telecommunications, personnel, and procedures A blueprint of how these components are integrated Systems design describes how the system will resolve the business problem. The system specifications, when approved by all participants, are “frozen”; that is, they should not be changed. Adding functions after the project has been initiated causes Scope creep, which endangers the project’s budget and schedule. Copyright John Wiley & Sons Canada

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. Copyright John Wiley & Sons Canada

SDLC – SYSTEMS IMPLEMENTATION
Implementation involves three major conversion strategies: Direct Conversion Pilot Conversion Phased Conversion Implementation or deployment is the process of converting from the old system to the new system. Four major conversion strategies: Direct conversion. Implementation process in which the old system is cut-off and the new system turned on at a certain point in time. Pilot conversion. Implementation process that introduces the new system in one part of the organization on a trial basis, when new system is working property, it is introduced in other parts of the organization. Phased conversion. Implementation process that introduces components of the new system in stages, until the entire new system is operational. NOTE: Parallel conversion. Implementation process in which the old system and the new system operate simultaneously for a period of time. Rarely used today if at all. Copyright John Wiley & Sons Canada

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 Adding new functions Debugging: A process that continues throughout the life of the system. Updating: Updating the system to accommodate changes in business conditions. Maintenance: That adds new functionally to the system –adding new features to the existing system without disturbing its operation. Copyright John Wiley & Sons Canada

11.4 ALTERNATIVE METHODS AND TOOLS FOR SYSTEMS DEVELOPMENT
Joint application design (JAD) Rapid application development (RAD) Agile development End-user development Joint application design (JAD). A group –based tool for collecting user requirements and creating system designs. Rapid Application Development (RAD) is a development method that uses special tools and an iterative approach to rapidly produce a high-quality system. Agile Development: Development method that delivers functionality in rapid iterations requiring frequent communication, development, testing, and delivery. End-User Development is a development method that has the actually user develop their own application(s) for use. Copyright John Wiley & Sons Canada

RAD VERSUS SDLC The development process in RAD is iterative, similar to prototyping; that is, requirements, designs, and the system itself are developed and then undergo a series, or sequence, of improvements. RAD uses ICASE tools to quickly structure requirements and develop prototypes. As the prototypes are developed and refined, users review them in additional JAD sessions. RAD produces the functional components of a final system, rather than prototypes. The development process in RAD is iterative, similar to prototyping; that is, requirements, designs, and the system itself are developed and then undergo a series, or sequence, of improvements. RAD uses ICASE tools to quickly structure requirements and develop prototypes. As the prototypes are developed and refined, users review them in additional JAD sessions. RAD produces the functional components of a final system, rather than prototypes. Copyright John Wiley & Sons Canada

AGILE DEVELOPMENT The scrum approach contains sets of practices and predefined roles. The primary roles are: The Scrum Master: maintains the processes (typically replaces a project manager) The Product Owner: represents the business users and any other stakeholders in the project The Team: a cross-functional group of about seven people who perform the actual analysis, design, coding, implementation, testing, etc. One type of agile development uses the scrum approach. A key principle of scrum is that during a project users can change their minds about what they want and need. Scrum acknowledges that a development problem cannot be fully understood or defined from the start. Copyright John Wiley & Sons Canada

TOOLS FOR SYSTEMS DEVELOPMENT
Prototyping Integrated Computer-Assisted Software Engineering Tools (ICASE) Component-Based Development Object-oriented Development Prototyping. Approach that defines an initial list of user requirements, builds a prototype system and then improves the system in several iterations based on users’ feedback. Computer-Assisted Software Engineering (CASE) is a development approach that uses specialized tools to automate many of the tasks in the SDLC; upper CASE tools in SDLC automate the early stages of the SDLC, and lower case tools automate the later stages. Integrated Computer-Assisted Software Engineering (ICASE) Tools . CASE tools that provide links between upper CASE and lower CASE tools. Component-Based Development: Uses standard components to build applications. Object-oriented development does not begin with the task to be performed, but with aspects of the real world that must be modeled to perform that task. Copyright John Wiley & Sons Canada

VENDOR AND SOFTWARE SELECTION
Steps in selecting a software vendor and an application package: identify potential vendors determine evaluation criteria evaluate vendors and packages choose the vendor and package negotiate a contract establish service-level agreements 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. Service Level Agreements (SLAs) are formal agreements that specify how work is to be divided between the company and its vendors. Copyright John Wiley & Sons Canada

13.5 VENDOR & SOFTWARE SELECTION
Step 1: Identify potential vendors. Step 2: Determine the evaluation criteria. 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. 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. Service Level Agreements (SLAs) are formal agreements that specify how work is to be divided between the company and its vendors. Copyright John Wiley & Sons Canada

CHAPTER CLOSING There are three objectives an IT strategic plan must meet. There are four common approaches to cost-benefit analysis. There are four business decisions that companies must make when they acquire new applications. There are six processes involved in the systems development life cycle: systems investigation, systems analysis, systems design, programming and testing, implementation, operation and maintenance. There are four alternative development methods and four tools that augment development methods. 1. The IT strategic plan must meet three objectives: • It must be aligned with the organization’s strategic plan. • It must provide for an IT architecture that enables users, applications, and databases to be seamlessly networked and integrated. • It must efficiently allocate IS development resources among competing projects. The four common approaches to cost-benefit analysis are: The net present value (NPV) method, Return on investment (ROI),Breakeven analysis ,business case approach 2. 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? Alternative Methods: Joint application design (JAD) , Rapid application development (RAD, End-user development , Agile development The Tools: prototyping approach , Integrated computer-aided software engineering (ICASE) , Component-based development , Object-oriented development Copyright John Wiley & Sons Canada

CHAPTER CLOSING (CONTINUED)
The process of vendor and software selection is composed of six steps: identify potential vendors, determine evaluation criteria, evaluate vendors and packages, choose the vendor and package, negotiate a contract, and establish service-level agreements. Copyright John Wiley & Sons Canada

CHAPTER 11 Acquiring Information Systems and Applications

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