1. System Implementations American corporations spend about $300 Billion a year on software implementation/upgrade projects

2. System Changes Why? –To stay competitive –Growth/consolidation –Mergers or divestitures –Regulatory changes –Technology changes (better and/or cheaper) –Age of existing system

3. System Changes Benefits: –Improved business processes –Productivity gains –Increased growth capacity –Increased efficiency –Enhanced availability of information –Downsizing –Enhanced system controls

4. System Development Why should accountants care: –Users of the system: can help specify system requirements (system input types, adequate output) –Members of the development team: can ensure appropriate integration of data, identify shared data, highlight reporting requirements –Auditors: ensure integrity of information provided by system, including adequate internal controls, user access, regulatory compliance, and evidentiary concerns

5. System Development System Development Life Cycle (SDLC): The process organizations follow to obtain and implement a new and well designed AIS

6. System Development Life Cycle Components

7. System Analysis: Components Determine and document information and processing volume needs of system users and managers – current/future Define what new system should accomplish (what is currently working/what is not?) Define what is out of scope of system Determine available hardware, software and personnel Determine what is feasible and cost effective

8. System Analysis: Information Requirements Processes involved Data elements required Outputs – what types, timing, method Inputs – what, timing, how Constraints Controls

9. System Analysis: Information Gathering Tools Interviews Questionnaires Observation Existing System Documentation Policies and Procedures Desk Manuals Internal Control Frameworks

10. System Analysis: Documentation The information gathered during this phase must be documented so it can be used throughout the system development project Means of documentation: Data flow diagram Flowcharts-document/system Narratives Checklists Gantt/PERT charts

11. System Analysis Conclusion Confirmation of the understanding of information gathered in this phase is key: –Obtain appropriate user approval of documentation and conclusions –Confirm system understanding with IT –Obtain management sign-off of system requirements documents

12. Conceptual Design Phase Create general framework to implement user requirements and solve problems identified in the previous phase (Analysis). Three steps involved are: 1.Evaluation of design alternatives 2.Preparation of design specifications 3.Preparation of conceptual systems design report

13. Conceptual Design Phase - Evaluation Things to consider: –Hardcopy vs. electronic (input and output) –Centralized vs. distributed –Packaged software vs. in-house development –In-house vs. outsourcing –Modification vs. replacement

14. Conceptual Design Phase - Evaluation A variety of design alternatives should be identified and evaluated. Questions to be asked: –Organizational goals met? –System objectives obtainable? –Economically feasible? –Time constraints realistic? –Expertise available? Advantages and Disadvantages should be highlighted for each alternative

15. Conceptual Design Phase – Design Specifications Once design has been selected by steering committee conceptual design specifications are developed for: »Data inputs »Data processing »Data storage »Informational outputs

16. Conceptual Design Phase - Report Report prepared at end of Conceptual Design Phase to: »guide physical system design activities »communicate how management and user information needs will be met

17. Physical Design Phase How the conceptual AIS design is to be implemented. User requirements are translated into detailed specifications used to code and test computer programs

18. Physical Design Phase steps Output design File and Database Design Input Design Forms Design Computer screen Design Program Design Procedures Design Controls Design

19. Implementation/Conversion Phase Process of installing hardware and software Getting the AIS functional

20. Implementation/Conversion Phase Steps Developing a plan Preparing the site Installing and testing hardware/software Selecting and training personnel Completing documentation Testing the system

21. Implementation/Conversion Phase Approaches Ways to change from the old AIS to the new (including hardware, software, data files and procedures): –Direct –Parallel –Phase-in –Pilot

22. Operations/Maintenance Phase A post-implementation review should be conducted to ensure: –New AIS met its planned objectives –Users are satisfied –System is reliable, accurate and timely –Internal Controls are adequate and working as management intended –Documentation and training is adequate Any issues noted should be brought to management’s attention and remediation performed in a timely manner Final user acceptance sign-off should be obtained

23. System Implementation and Internal Controls During an IT modification, controls need to be in place to ensure the continuation of system: Reliability Security Confidentiality Integrity Availability

24. System Implementation and Internal Controls It is much easier to build controls into a system at the initial stage then to add them after the fact. Accountants and other control experts should be an important part of the team that develops or modifies an information system.

25. Cisco Case - Implementing an ERP Questions to be answered (pg 11): What factors made a difference between success and failure? Where had Cisco been smart? Where had Cisco been lucky? Could they do it again?