1. Managing the Systems Development Life Cycle
Chapter 13
Managing
the Systems Development Life Cycle 1

2. Objectives for Chapter 13
Identify the key stages in the SDLC
How a firm’s business strategy shapes its information system
The relationship between strategic systems planning and legacy systems
What transpires during systems analysis
The TELOS model for assessing project feasibility
Cost-benefit analysis issues related to information systems projects
The role of accountants in the SDLC 31

3. The Systems Development Life Cycle (SDLC)
A logical sequence of activities used to identify new systems needs and to develop new systems to support those needs.
A model for reducing risk through planning, execution, control, and documentation of key activities
The SDLC model may be understood as comprising five stages.
We’ll look at the first two in this chapter and the remaining three in chapter 14. 2 2

4. Systems Development Life Cycle
Business Needs and
Strategy
Legacy Situation
Business Requirements
1. Systems Strategy - Assessment - Develop Strategic Plan
Feedback: User requests for New Systems
System Interfaces, Architecture and User Requirements
High Priority Proposals undergo Additional Study and Development
2. Project Initiation
- Feasibility Study - Analysis
- Conceptual Design
- Cost/Benefit Analysis
Feedback: User requests for System Improvements and Support
Selected System Proposals go forward for Detailed Design
NOTE: This is used also as Figure 14-1.
3. In-house Development - Construct - Deliver
4. Commercial Packages - Configure - Test - Roll-out
New and Revised Systems Enter into Production
5. Maintenance & Support - User help desk
- Configuration Management
- Risk Management & Security

5. Overview of Phases 1 and 2 Phase 1 - systems strategy
understand the strategic business needs of the organization
examine the organization’s mission statement
analyze competitive pressures on the firm
examine the nature of current and anticipated market conditions
consider the information systems’ implications pertaining to legacy systems
consider concerns registered through user feedback
produce a strategic plan for meeting these various and complex needs
produce a timetable for implementation of selected systems 2 2

6. Overview of Phases 1 and 2 Phase 2 - project initiation
assess systems proposals for consistency with the strategic systems plan
evaluate feasibility and cost-benefit characteristics of proposals
consider alternative conceptual designs
select a design to enter the construct phase of the SDLC
examine whether the proposal will require in-house development, a commercial package, or both. 2 2

7. Participants in Systems Development
Systems Professionals - gather and analyze facts about problems with the current system and formulate a solution
systems analysts
systems designers
programmers
End Users - the primary users’ needs are solicited
Stakeholders - individuals who have an interest in the system but are not end users. 5

8. Systems Steering Committee
The steering committee provides guidance and reviews the status of systems projects and typically includes the CEO, CFO, CIO, senior management from user areas and computer services, and an internal auditor.
Typical responsibilities are:
resolving conflicts
reviewing projects and assigning priorities
budgeting funds
reviewing the status of projects
determining whether projects should be continued

9. Phase 1
Systems Strategy 1

10. Assessing Strategic Information Needs
Strategic systems planning involves the allocation of systems resources at the macro level.
usually a time frame of three to five years
Key inputs in developing a sound systems strategy include:
the strategic business needs of the organization
the legacy system situation
user feedback. 5

11. Strategic Business Needs
Vision and mission
systems strategy requires an understanding of top management’s vision, which has shaped the organization’s business strategy
Industry and competency analysis
industry analysis: the driving forces that affect the industry and their organization’s performance, such as important trends, significant risks, and potential opportunities
competency analysis: a complete picture of the organization’s effectiveness as seen via four strategic filters: resources, infrastructure, products/services, and customers 5

12. Legacy Systems
Use legacy components to help develop an architecture description. 5

13. User Feedback…
involves identifying areas of user needs, preparing written proposals, evaluating each proposal’s feasibility and contribution, and prioritizing individual projects.
at this point pertains to substantial perceived problems rather than minor systems modifications
has five key phases at this point in the SDLC:
recognizing the problem
defining the problem
specifying system objectives
determining project feasibility
preparing a formal project proposal 5

14. User Feedback: Recognizing the Problem
The need for a new, improved information system is manifested through various symptoms.
Symptoms may seem vague and innocuous or may go unrecognized initially.
The point at which the problem is recognized is often a function of management’s philosophy.
reactive management - responds to problems only when they reach a crisis state
proactive management - alert to subtle signs of problems and aggressively looks for ways to improve

15. User Feedback: Defining the Problem
Managers and users should…
avoid leaping to quickly to a single definition of the problem
keep an open mind and gather as many facts as feasible
learn enough to intelligently interact with systems professionals
An interactive process between managers/users and systems professionals is necessary to arrive at an accurate problem definition.
The next three stages of the user feedback process involve this interactive process.

16. User Feedback: Specifying System Objectives
The strategic objectives of the firm and the operational objectives of the information systems must be compatible.
At this point, the objectives only need to be defined in general terms.

17. User Feedback: Preliminary Project Feasibility TELOS
Technical feasibility - is the technology necessary available?
Economic feasibility - are the funds available and appropriate for the system?
Legal feasibility - does the system fall within legal boundaries?
Operational feasibility - can procedural changes be made to make the system work?
Schedule feasibility - can the project be completed by an acceptable time period?

18. User Feedback: Preparing a Formal Project Proposal
A systems project proposal provides management with a basis for deciding whether or not to proceed with the project.
It summarizes the findings of the study and makes a general recommendation.
It outlines the linkage between the objectives of the proposed system and the business objectives of the firm.

19. Strategic Systems Plan
After collecting input, the steering committee and systems professionals evaluate the pros and cons of each proposal.
Assessing each potential project’s:
benefits
costs
strategic impact
Development will proceed on proposals that show the greatest potential for supporting the organization’s business objectives at the lowest cost. 5

20. Relationship between Benefits, Costs, and Strategic Impact

21. Create an Action Plan: the Balanced Scorecard
The next step is to translate strategy into action
Many companies have found the balanced scorecard (BSC) a useful tool for this step.
The BSC recommends viewing an organization using four perspectives
the learning and growth perspective
the internal business process perspective
the customer perspective
the financial perspective

22. The Balanced Scorecard
Primary objective: capture information on orthogonal dimensions that are important to every organization
financial: how do we look to our shareholders?
customer: how do we look to our customers?
internal business process: what must we excel at?
learning and growth: can we continue to improve?
Second objective: prevent the proliferation of reports and information. Concentrate only on critical success factors to which everyone in the organization will pay attention.

23. BSC for On-Line Banking

24. Phase 2
Project Initiation 1

25. Project Initiation
The second phase in the SDLC, project initiation, involves:
a detailed understanding of the user problem
proposing multiple alternative solutions
assessing alternatives in terms of feasibility and cost-benefit characteristics
selecting the best option and proceed to the construct phase
examining whether the selected option will require in-house development, a commercial package, or both

26. Systems Analysis
A business problem must be fully understood before a solution can be formulated.
A defective analysis will lead to a defective solution.
System analysis is a two-step process
survey of the current system
an analysis of the users’ needs

27. Survey of Current System
Advantages
allows aspects of the old system which should be kept to be identified
aids in planning the implementation of the new system
may allow conclusive determination of the cause of the reported problem symptoms
Disadvantages
the current physical tar pit
can stifle new ideas

28. The Survey Step Facts must be gathered regarding:
data sources and data stores; users; processes; data flows; controls; transaction volumes; error rates; resource costs; bottlenecks and redundant operations
Fact-gathering techniques:
observation; task; participation; personal interviews; reviewing key documents

29. The Analysis Step
The systems analysis is an intellectual process that is commingled with fact gathering.
A formal systems analysis report, prepared and presented to the steering committee, contains:
reasons for system analysis
scope of study
problem identified with current system
statement of user requirements
resource implications
recommendations

30. The Conceptualization Phase
Purpose: produce alternative conceptual solutions that satisfy the requirements identified during systems analysis
How much detail?
enough to highlight the differences between critical features of competing systems rather than their similarities

31. Alternative Conceptual Designs for a Purchasing System

32. Systems Evaluation and Selection
A critical juncture in the SDLC
a formal mechanism for selecting the one system from the set of alternative conceptual designs that will go forward for construction
an optimization process that seeks to identify the best system
A structured decision-making process that reduces uncertainty and the risk

33. The Role of Accountants in Evaluation and Selection
The accountant should ensure that:
only escapable costs are used in calculations of cost savings benefits
reasonable interest rates are used in measuring present values of cash flows
one-time and recurring costs are completely and accurately reported
realistic useful lives are used in comparing competing projects
intangible benefits are assigned reasonable financial values

34. Detailed Feasibility Study
Similar to the preliminary project feasibility analysis (TELOS), but now more detailed and oriented to deciding on a specific system design. Examine:
technical feasibility
economic feasibility
legal feasibility
operational feasibility
schedule feasibility

35. Cost-Benefit Analysis: Identify Costs

36. Cost-Benefit Analysis: Identify Benefits—Tangible

37. Cost-Benefit Analysis: Identify Benefits—Intangible

38. Comparing Costs and Benefits
Two common methods are used for evaluating the costs and benefits of information systems:
The Net Present Value Method: deduct the present value of the costs from the present value of the benefits over the life of the system. The optimal choice is the project with the greatest net present value.
The Payback Method: break-even analysis. Total costs consist of the one-time costs plus the present value of the recurring costs over the life of the project. Total benefits are the present value of the tangible benefits. The intersection of these values represents the number of years into the future when the project breaks even. Afterward, the system earns future profits. The optimal choice is the project with the greatest future profits.

39. How Do We Build It?
Once the optimal system is selected, decide how to construct the system:
develop the system in-house: best for systems that need to meet unique and proprietary business needs
purchase commercial software: best for systems that are expected to support “best industry practices”
a mix of the first two approaches: make in-house modifications, to varying degrees, of a commercial system to meet the organization’s unique needs
more on these in chapter 14

40. Announcing the New System Project…
can be the most delicate aspect of the SDLC.
All users need to be made to understand the objectives of the new system.
End user managers who view the new system as a potential benefit to their jobs, rather than a threat, are more likely to cooperate with the project.

41. Why Are Accountants Involved with SDLC?
The creation of an information system consumes significant resources and has financial resource implications.
The quality of accounting information systems and their output rests directly on the SDLC activities that produce them. 6

42. How are Accountants Involved with the SDLC?
Accountants are users and must provide a clear picture of their problems and needs.
Accountants are members of the development team.
Accountants are involved in systems development as auditors to ensure the system is designed with appropriate computer audit techniques. 7

43. The Accountant’s Role in Systems Strategy
Auditors should routinely review the organization’s systems strategy.
Careful systems planning is a cost-effective activity in reducing the risk of creating unneeded, unwanted, inefficient, and ineffective systems.
Both internal and external auditors have vested interests in this outcome.

44. The Accountant’s Role in Conceptual Design
Accountants should be responsible for the conceptual system and the systems professionals for the physical system.
If important accounting considerations are not conceptualized at this point, they may be overlooked, exposing the organization to potential financial loss.
The auditability of a system depends in part on its design characteristics.

45. The Accountant’s Role in Systems Selection
The economic feasibility of proposed systems is of primary concern to accountants. Specifically, the accountant should ensure that:
only escapable costs are used in calculations of cost-savings benefits
reasonable interest rates are used in measuring present values of cash flows
one-time and recurring costs are completely and accurately reported
realistic useful lives are used in comparing competing projects
intangible benefits are assigned reasonable financial values