Acquiring Information Systems and Applications

CHAPTER OUTLINE Planning for and Justifying IT Applications Strategies for acquiring IT Applications Traditional Systems Development Life Cycle Alternative Methods and Tools for Systems Development Outsourcing and Application Service Providers Vendor and Software Selection

LEARNING OBJECTIVES Describe the IT planning process. Describe the IT justification process and methods. Describe the SDLC and its advantages and limitations. Describe the major alternative methods and tools for building information systems.

LEARNING OBJECTIVES (continued) List the major IT acquisition options and the criteria for option selection. Describe the roles of hosting vendors. Describe the process of vendor and software selection.

Chapter Opening Case The “open source” logo is that of the Open Source Initiative. Clicking on the logo will take you to their homepage. Clicking on the Zappos’ image above will take you to its homepage.

11.1 Planning of and Justifying IT Applications Organizations must analyze the need for the IT application. Each IT application must be justified in terms of costs and benefits. The application portfolio is a prioritized list of both existing and potential IT applications of a company.

Information Systems Planning Process

Information Systems Planning (continued) Organizational strategic plan states the firm’s overall mission, the goals that follow from that mission, and the broad steps necessary to reach these goals. IT architecture delineates the way an organization’s information resources should be used to accomplish its mission. Both are inputs in developing the IT strategic plan.

IT Strategic Plan IT strategic plan is a set of long-range goals that describe the IT infrastructure and major IT initiatives needed to achieve the goals of the organization. IT Strategic Plan: 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 IT development resources among competing projects, so that projects can be completed on time and within budget and the have the required functionality.

IT Steering Committee The IT Steering Committee, comprised of managers and staff representing various organizational units, establishes IT priorities and ensures that the MIS function meets the needs of the enterprise.

IT Operational Plan Consists of a clear set of projects that the IT department and functional area managers will execute in support of the IT strategic 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 Mission – derived from IT strategy. IT environment – summary of information needs of the functional areas and of the organization as a whole. Objectives of the IT function – best current estimate of the goals. Constraints of the IT function – technological, financial, personnel and other resource limitations. Application portfolio – prioritized inventory of present applications and a detailed plan of projects to be developed or continued. Resource allocation and project management – listing of who is going to do what, how and when.

Evaluating & Justifying IT Investment: Benefits, Costs & Issues Assessing the costs Fixed costs Total cost of ownership (TCO) Assessing the benefits (Values) Intangible benefits: Benefits from IT that may be very desirable but difficult to place an accurate monetary value on. Comparing the two 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 Total cost of ownership (TCO): Formula for calculating cost of acquiring, operating and controlling an IT system.

Conducting the Cost-Benefit Analysis Using Net Present Value (NPV) Return on investment Breakeven analysis The business case approach The Net Present Value (NPV) method converts future values of benefits to their present-value equivalent by discounting them at the organization’s cost of funds. Return on investment measures the effectiveness of management in generating profits with its available assets. Breakeven analysis determines the point at which the cumulative dollar value of the benefits from a project equals the investment made in the project. The business case approach: A business case is one or more specific applications or projects. Its major emphasis is the justification for a specific required investment, but it also provides the bridge between the initial plan and its execution.

11.2 Strategies for Acquiring IT Applications Buy the applications (off-the-shelf approach) Lease the applications Use Open-Source Software Software-as-a-service Developing the applications in-house

11.3 Traditional Systems Development Life Cycle Software Development Life Cycle (SDLC) is the traditional systems development method that organizations use for large-scale IT projects. SDLC processes are systems investigation, systems analysis, systems design, programming, testing, implementation, operation and maintenance. Waterfall approach is when tasks in one phase are completed before the work proceeds to the next stage.

Traditional Systems Development Life Cycle (SDLC)

The SDLC Major advantages Major drawbacks Control Accountability Error detection Major drawbacks Relatively inflexible Time-consuming and expensive Discourages changes once user requirements are done

SDLC – Systems Investigation Begins with the business problem (or opportunity) followed by the feasibility analysis. Feasibility study Go/No-Go Decision The feasibility study is the main task of the Systems Investigation phase. The feasibility study helps the organization choose between 3 options: (1) Do nothing and continue to use the existing system unchanged. (2) Modify or enhance the existing system. (3) Develop a new system.

Feasibility Study Technical feasibility Economic feasibility Organizational feasibility Behavioral feasibility Technical feasibility: Assessment of whether hardware, software and communications components can be developed and /or acquired to solve a business problem. Economic feasibility: Assessment of whether a project is an acceptable financial risk and if the organization can afford the expense and time needed to complete it Organizational feasibility: Organization’s ability to access the proposed project. Behavioural feasibility: Assessment of the human issues involved in a proposed project, including resistance to change and skills and training needs.

SDLC – System Analysis Is the examination of the business problem that the organization plans to solve with an information system. 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.

SDLC – Systems Design Describes how the system will accomplish this task. Deliverable is the technical design that specifies: System outputs, inputs, user interfaces. Hardware, software, databases, telecommunications, personnel & procedures. Blueprint of how these components are integrated.

SDLC – System Design (continued) Logical system design states what the system will do, using abstract specifications. Physical system design states how the system will perform its functions, with actual physical specifications. Scope creep is caused by adding functions after the project has been initiated.

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. These errors are of two types: Syntax errors ( e.g., misspelled word or a misplaced comma) Logic errors that permit the program to run but result in incorrect output.

SDLC – Systems Implementation Implementation or deployment is the process of converting from the old system to the new system. Four major conversion strategies ; Direct Conversion Pilot Conversion Phased Conversion Parallel 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. 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.

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 Maintenance 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.

11.4 Alternative Methods & Tools for Systems Development Prototyping Joint application design (JAD) Integrated computer-assisted software engineering tools Rapid application development (RAD) Agile development End-user development Component-based 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. Joint application design (JAD). A group –based tool for collecting user requirements and creating system designs. 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. 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. Component-Based Development: Uses standard components to build applications.

RAD versus SDLC

11.5 Outsourcing & Application Service Providers Outsourcing is when an organization acquires IT applications or services from outside contractors or external organizations. Application Service Provider (ASP) is an agent or vendor who assembles the software needed by enterprises and packages the software with services such as development, operations and maintenance.

11.6 Vendor & Software Selection Step 1: Identify potential vendors. Step 2: Determine the evaluation criteria. 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. Step 3: Evaluate vendors and packages.

Vendor & Software Selection (continued) Step 4: Choose the vendor and package Step 5: Negotiate a contract. Step 6: Establish a service level agreement. Service Level Agreements (SLAs) are formal agreements that specify how work is to be divided between the company and its vendors.

Chapter Closing Case Northeast Northwest Eastern London Southern The image shows the five regions referred to in the case and the four firms involved in the case. Clicking on the logos will take you to the respective homepages.