Acquiring Information Systems and Applications CHAPTER 12 Acquiring Information Systems and Applications

CHAPTER OUTLINE 12.1 Project Management for Information System Projects 12.2 Planning for and Justifying IT Applications 12.3 Strategies for Acquiring IT Applications 12.4 The Traditional Systems Development Life Cycle 12.5 Alternative Methods and Tools for Systems Development 12.6 Vendor and Software Selection

LEARNING OBJECTIVES Define project management and explain the triple constraints of project management. Explain how the IT planning process works. Discuss the IT justification process and methods. Describe the SDLC, and discuss its advantages and limitations.

LEARNING OBJECTIVES (continued) Identify the major alternative methods and tools for building information systems. List the major IT acquisition options and the criteria for option selection. Discuss the process of vendor and software selection.

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12.1 Project Management for Information Systems Projects Information System Project Management The Triple Constraints A project is a short-term effort to create a specific business-related outcome. Information system project management is a directed effort to plan, organize, and manage resources to bring about the successful achievement of specific IS goals. The triple constraints of project management are time, cost, and scope.

An IS Project Gone Astray A humorous look at an information systems project gone astray.

The Project Management Process Project Initiation Project Planning Project Execution Project Monitoring and Control Project Completion Project initiation: clearly defines the problem that the project is intended to solve and the goals that the project is to achieve. Project planning: every project objective and every activity associated with that objective is identified and sequenced. Project execution: work defined in the project management plan is performed to accomplish the project’s requirements. Project monitoring and control: determines whether the project is progressing as planned. Project completion: project is completed when it is formally accepted by the organization.

12.2 Planning for 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 The application portfolio is a prioritized list of both existing and potential IT applications of a company.

Information Systems Planning Process See Figure 12.1.

Information Systems Planning (continued) Organizational strategic plan IT architecture Both are inputs in developing the IT strategic plan. 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. 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 Steering Committee The IT Steering Committee The IT steering committee is comprised of managers and staff representing various organizational units. This committee establishes IT priorities and ensures that the MIS function meets the needs of the enterprise.

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 IS 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. 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.

12.3 Strategies for Acquiring IT Applications Buy the applications (off-the-shelf approach) Lease the applications Software-as-a-Service Use Open-Source Software Outsourcing Developing the applications in-house An application service provider 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. Software-as-a-Service 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. Outsourcing is acquiring IT applications from external contractors or organizations.

Operation of an Application Service Provider (ASP) Customer A Customer B Customer C Application Application Application See Figure 12.2. Database Database Database ASP Data Center

Operation of a Software-as-a-Service (SaaS) Vendor Customer A Customer B Customer C Application Figure 12.3 Customer A Customer B Customer C SaaS Vendor Data Center

12.4 Traditional Systems Development Life Cycle Software Development Life Cycle (SDLC) is the traditional systems development method that organizations use for large-scale IT projects.

Six-Stage Systems Development Life Cycle (SDLC) with Supporting Tools Prototyping Business Need Systems Investigation Deliverable: Go/No Go Decision Systems Analysis Deliverable: User Requirement Systems Design Deliverable: Technical Specification Programming and Testing Implement The System Operation and Maintenance Figure 12.4 Upper CASE Tools Joint Application Design (JAD) Lower CASE Tools

Traditional SDLC Processes Systems investigation Systems analysis Systems design Programming and testing Implementation Operation and maintenance

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 Deliverable: 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 the existing system to determine the requirements for the new or improved system. Deliverable is a set of system requirements, also called user 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) 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.

SDLC – Systems Implementation Implementation involves three major conversion strategies: Direct Conversion Pilot Conversion Phased Conversion Parallel Conversion (not used much today) 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 properly, 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.

12.5 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 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. 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. 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.

RAD versus SDLC

12.6 Vendor & Software Selection Step 1: Identify potential vendors. Step 2: Determine the evaluation criteria. Request for proposal (RFP) 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.

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