1. Management Information Systems, 4 th Edition 1 Chapter 16 Alternative Avenues for Systems Acquisitions

2. Management Information Systems, 4 th Edition 2 Learning Objectives Explain the differences among the alternatives to professionally tailored system development: outsourcing, purchasing ready-made software, encouraging users to develop their own applications, and contracting with an application service provider List the business trade-offs inherent in the various methods of acquiring systems

3. Management Information Systems, 4 th Edition 3 Learning Objectives (Cont.) Explain why the alternatives to tailored development have become so popular Describe which systems acquisition approach is appropriate for a particular set of circumstances

4. Management Information Systems, 4 th Edition 4 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 an organization’s IS functions Application Service Provider –Allows use of applications via the Internet In-house use of development tools to create applications Sources of Information

5. Management Information Systems, 4 th Edition 5 Sources of Information (Cont.)

6. Management Information Systems, 4 th Edition 6 Sources of Information (Cont.)

7. Management Information Systems, 4 th Edition 7 Outsourcing An organization trusts all activities associated with its ISs to another company –Purchasing and maintaining hardware –Developing, purchasing, and maintaining software –Installing and maintaining communications networks –Developing, maintaining, and operating Web sites –Staffing help desks –Running the IS daily operations –Managing customer and supplier relations

8. Management Information Systems, 4 th Edition 8 Considerations –What are our core business competencies? Of the business we conduct, what specialties should we continue to practice ourselves? –What do we do outside our specialties that could be done better for us by organizations that specialize in that area? –Which of our activities could be improved if we created an alliance with IS organizations? –Which of our activities should we work to improve internally? Outsourcing (Cont.)

9. Management Information Systems, 4 th Edition 9 Outsourcing means two different things: –A short-term contractual relationship with a service firm to develop a specific application for an organization –A long-term contractual relationship with a service firm to take over all or some of an organization’s IS functions Outsourcing (Cont.)

10. Management Information Systems, 4 th Edition 10 Outsourcing (Cont.)

11. Management Information Systems, 4 th Edition 11 Advantages of Outsourcing Improved financial planning Reduced license and maintenance fees Increased attention to core business Shorter implementation cycles Reduction of personnel and fixed costs Increased access to highly qualified know-how Ongoing consulting as part of standard support Increased security

12. Management Information Systems, 4 th Edition 12 Advantages of Outsourcing (Cont.)

13. Management Information Systems, 4 th Edition 13 Risks of Outsourcing Loss of control Loss of experienced employees Risks of losing a competitive advantage High price

14. Management Information Systems, 4 th Edition 14 Risks of Outsourcing (Cont.)

15. Management Information Systems, 4 th Edition 15 Purchased Applications The first alternative to consider Huge variety of ready-made applications Two classifications of ready-made software: –Inexpensive applications to help in the office –Expensive, large applications that span an entire organization Human resource management Financial management

16. Management Information Systems, 4 th Edition 16 Immediate system availability High quality Low price Available support The Benefits of Purchased Applications

17. Management Information Systems, 4 th Edition 17 Steps in purchasing ready-made software Identifying the problem Identifying potential vendors Soliciting vendor information Defining system requirements Requesting vendor proposals Reviewing proposals and screening vendors

18. Management Information Systems, 4 th Edition 18 Steps in purchasing ready-made software (Cont.) Visiting sites Selecting the vendor Benchmarking Negotiating a contract Implementing the new system Managing post-implementation support

19. Management Information Systems, 4 th Edition 19 Purchased Applications

20. Management Information Systems, 4 th Edition 20 Purchased Applications (Cont.)

21. Management Information Systems, 4 th Edition 21 Purchased Applications (Cont.)

22. Management Information Systems, 4 th Edition 22 Purchased Applications (Cont.) Benchmarking –Codified comparison of performance measures between systems –Ensures adopted application satisfies the organization's minimum requirements Learning from Experience

23. Management Information Systems, 4 th Edition 23 Purchased Applications (Cont.) Purchasing Risks –Loose fit between needs and features –Bankruptcy of the vendor –High turnover of vendor personnel

24. Management Information Systems, 4 th Edition 24 Application Service Providers An organization that offers the use of software applications through communication lines Software is not installed on client’s computers Application, databases, and other files stored at ASP’s location –Option to store files produced at own site

25. Management Information Systems, 4 th Edition 25 Application Service Providers (Cont.)

26. Management Information Systems, 4 th Edition 26 Application Service Providers (Cont.) The ASP Industry

27. Management Information Systems, 4 th Edition 27 Caveat Emptor –Industry has been very unstable –Managers considering ASPs should follow these “commandments” for best results Check the ASPs history Check the ASP’s financial strength Ensure you understand the price scheme Get a list of the provider’s infrastructure Craft the service contract carefully Application Service Providers (Cont.)

28. Management Information Systems, 4 th Edition 28 ASP clients are: –Fast growing companies relying on software for their operations –Small companies without the cash to pay up front, but need office, telecommunications, and basic business operations applications Application Service Providers (Cont.)

29. Management Information Systems, 4 th Edition 29 ASP clients are: –Medium-sized companies that need expensive software, such as enterprise applications, for their operations, but cannot afford the immediate payment of large sums –Organizational units located where it is difficult to obtain desired software or personnel to install and maintain the software Application Service Providers (Cont.)

30. Management Information Systems, 4 th Edition 30 User Application Development Factors Encouraging User Application Development –The programming backlog and chargeback system –The widespread use of PCs –The emergence of 4GLs and Visual Programming Languages –Increasing popularity of prototyping –Increasing popularity of client/server architecture and intranets

31. Management Information Systems, 4 th Edition 31 User Application Development (Cont.)

32. Management Information Systems, 4 th Edition 32 User Application Development (Cont.)

33. Management Information Systems, 4 th Edition 33 Managing User-developed Applications –Managing the reaction of IS professionals –Providing support –Compatibility –Managing access User Application Development (Cont.)

34. Management Information Systems, 4 th Edition 34 User Application Development (Cont.) 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

35. Management Information Systems, 4 th Edition 35 User Application Development (Cont.) Risks of user application development –Poorly developed applications –Islands of information –Duplication –Security problems –Poor documentation

36. Management Information Systems, 4 th Edition 36 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

37. Management Information Systems, 4 th Edition 37 Summary There are several options available for systems acquisition: –Outsourcing –Ready-made software –User-developed applications –ASP There are trade-offs for each option Each set of circumstances will dictate the appropriate approach