Dinesh Mirchandani University of Missouri – St. Louis Information Technology: Strategic Decision Making For Managers Henry C. Lucas Jr. John Wiley & Sons, Inc Dinesh Mirchandani University of Missouri – St. Louis Copyright 2004 John Wiley & Sons, Inc.

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Copyright 2004 John Wiley & Sons, Inc. Chapter 8 Choosing Technology Copyright 2004 John Wiley & Sons, Inc.

Technology and the Industry Operating an IT unit within an organization can be described as a “business within a business” Managers face a daunting array of choices for choosing the appropriate technology for their organizations The IT Industry too has changed Computer hardware is becoming a commodity Firms today prefer to buy rather than build IT applications A large service industry now exists to help organizations integrate technology Copyright 2004 John Wiley & Sons, Inc.

To Buy or Not: Major Applications Advantages of buying an application package include The application exists already with the option to buy as many functions or modules as needed The application has been already debugged Shorter time to implement Possibility to visit sites using the package for evaluation purposes Consultants are available to help guide implementation The application’s vendor continually improves and updates the product Copyright 2004 John Wiley & Sons, Inc.

To Buy or Not: Major Applications Disadvantages of buying an application package include High cost and high consulting fees The package may not perform functions exactly the way the organization wants Implementation time can extent to over a year in some cases Copyright 2004 John Wiley & Sons, Inc.

Issues in Buying Packages Customization of the package Modules Parameters Custom coding Establishing criteria and making a final decision Large applications such as ERP software require careful consideration due to their cost and time to implement Availability of shareware or freeware Copyright 2004 John Wiley & Sons, Inc.

Criteria in Evaluating Software Packages Functions included Integration with other packages; internal applications Modifications required Installation effort User interface Flexibility Response time Changes required in existing procedures Vendor support Updating from vendor Documentation Cost and terms Copyright 2004 John Wiley & Sons, Inc.

Copyright 2004 John Wiley & Sons, Inc. IT Services Consulting services Application integration Web hosting Application services provider (ASP) The general purpose outsourcer Software for rent Copyright 2004 John Wiley & Sons, Inc.

Copyright 2004 John Wiley & Sons, Inc. Outsourcing Factors that lead a firm to outsource: Reducing IT costs A way to lease rather than buy technology More professional and higher performing IT operation IT may not be the firm’s core competency Ability to learn from the outsourcer Staff time is freed up to develop new applications Copyright 2004 John Wiley & Sons, Inc.

Two Myths of IT Outsourcing Outsourcing vendors are strategic partners Outsourcing vendors are inherently more efficient that an internal IS department Copyright 2004 John Wiley & Sons, Inc.

Hidden Costs of Outsourcing Searching for and finding the right vendor and negotiating the contract Transitioning to the vendor Managing IT even after it has been outsourced Cost for possible transitioning after the end of an outsourcing agreement Copyright 2004 John Wiley & Sons, Inc.

A Scenario for the Future Large hardware installations will disappear, instead companies will pay for the technology they need to use Web services will increasingly integrate applications Copyright 2004 John Wiley & Sons, Inc.

Copyright 2004 John Wiley & Sons, Inc. Summary Evaluating IT is an ongoing task for most organizations Today most organizations are concerned with reducing the cost, time, and risks associated with custom applications Outsourcing is becoming increasingly popular for developing applications or for running all or part of a firm’s technology though some control is lost Purchasing packaged software requires great care Copyright 2004 John Wiley & Sons, Inc.