Chapter 12 – Acquiring Information
Systems and Applications
INFORMATION TECHNOLOGY PROJECT MANAGEMENT – projects are short-term efforts
to create a specific business related outcome. IS Project management is a directed effort to
plan, organize and manage resources for successful achievement of IS goals. All project have
three constraints: time, cost, and scope. Time is the window of opportunity, cost is the resources
including cash and labor and scope is the processes in order to complete the work.
The Project Management Process – traditionally, this includes five phases:
• Project initiation – define the problem and the resources required including the costs and
benefits of the project.
• Project planning – project objectives and activities are identified and tools like PERT
(program evaluation and review technique) and CPM (critical path method) are used.
• project execution – the work defined is performed according to project plan
• Project monitoring and control – this is to assess whether the project is progressing as
planned or not. This can be done in three ways
o monitoring ongoing project activities
o comparing project variables with the actual plan
o identifying corrective actions
• Project completion – when the project is formally accepted by the organization, it is
completed. All contracts are fulfilled and settled and all files are archived.
Project Management Failure – analysts have found that only 29 percent of all IS projects are
completed on time. The reasons why the projects do not deliver their potential value are:
• Lack of sufficient planning
• Difficulties with technology compatibility
• Lack of commitment by management providing the necessary resources
• Poorly defined project scope
• Lack of sufficient time to complete the project
PLANNING FOR AND JUSTIFYING IT APPLICATIONS – organizations must justify both costs
and benefits when planning. A list of both existing and potential IT applications is created, called
the application portfolio. IT Planning – the organization’s strategic plan states overall mission and the planning process
begins with analysis of the organizational strategic plan. The IT Architecture has both technical
and managerial aspects of information resources. IT Strategic plan is a set of long-range goals
that describe the IT infrastructure and identify the major IT initiative needed to achieve the
organization’s goals. The IT strategic plan must:
• Be aligned with the organization’s strategic plan
• Must be seamlessly networked and integrated
• Efficiently allocate IS development resources among competing projects to ensure within
budget and on-time completion.
After an IT strategic plan, an IS Operation Plan needs to be developed. This is in support of the
IT strategic plan. It contains:
• IS environment – a summary of information needs
• Objectives of the IS function – the best current estimate of the goals of the IS function
• Constraints on the IS function –
• The application portfolio
• Resource allocation and project management
Evaluating and Justifying IT Investments: Benefits, Costs, and Issues – companies must
be able to justify investing in some areas, including IT. The comparison of the costs and benefits
is known as cost benefit analysis.
• Assessing the costs – companies must assess the fixed costs involved in projects, for
e.g. the salaries etc. costs do not end upon installation of a system. Maintenance costs
must be factored in as well.
• Assessing the benefits - since benefits are mostly intangible, the might be hard to
identify. Returns from IT investments must be identified.
• Conducting Cost-Benefit Analysis – after assessing the costs and benefits, they must be
compared. The common approaches are:
o Using the net present value (NPV) – future values are converted into present
values equivalent. The present values are compared with the present costs to
see if benefits exceed the costs
o Return on investment (ROI) – calculated by dividing net income for a project by
the average assets invested in the project. The higher the percentage, the better o Breakeven analysis – this refers to a point where the dollar value of the benefits
equal the investments made in the project
o Business case approach – this is when a case is written to justify the projects.
The cases describe what is done, how it is done and how a new system is
STRATEGIES FOR ACQUIRING IT APPLICATIONS – Once the IT system is successfully
justified, it must be decided how to pursue it. Several IT applications acquiring options are:
Buy the applications (Off-the-Shelf Approach) – companies can buy software packages off
the shelf but need to make sure that it contains all the features required to address the
company’s current and future needs. Option is attractive if software is customizable.
Lease the application – this can save company time and money. Company can decide which
features of a software are necessary. Good for small to medium sized companies. Leasing can
be done through a software developer, to use an application service provider (ASP), or to utilize
Software-as-a-service – SAAS is a method where the vendor hosts the applications and
provides them as a service to customers over a network. Companies pay to use it but do not
own it. This saves money. Databases for the vendor protect customer privacy.
Use open-Source Software – this can be used to develop applications in-house.
Outsourcing – outside contractors can help gain access to unavailable resources. However,
corporate data may be under control of the outsourcing vendor. Companies like IBM and Oracle
offer outsourcing services for IT applications. Offshoring is a growing trend as well.