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Chapter 10

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York University
Administrative Studies
ADMS 2511
Cristobal Sanchez- Rodriguez

Chapter 10 – Acquiring information systems and applications Planning for and Justifying IT applications - organizations must analyze the need for applications and then justify each application in terms of cost and benefits IT Planning - planning process for new IT applications begins with analysis of the organizational strategic - organizations strategic plan states the firm’s overall mission, the goals that follow from that mission, and the broad steps necessary to reach these goals - strategic planning process modifies the organization’s objectives and resources to meet its changing markets and opportunities - the organizational strategic plan and existing IT architecture provide the inputs in developing the IT strategic plan - the IT architecture delineates the way an organizations information resources should be used to accomplish its mission - encompasses both technical and managerial aspects of information resources - technical aspects include hardware and operating systems, networking, data management systems and applications software - the managerial aspects specify how managing the IT department will be accomplished, how functional area managers will be involved and how IT decisions will be made - the IT strategic plan is a set of long range goals that describe the IT infrastructure and identify the major IT initiatives needed to achieve the goals of the organization - the IT strategic plan must meet three objectives: 1. must be aligned with the organizations strategic plan 2. must provide for an IT architecture that enables users, applications, an databases to be seamlessly networked and integrated 3. must efficiently allocate IS development resources among competing projects so the projects can be completed on time and within budget and have the required functionality - the IT steering committee is very important in organizations, consists of group of managers and staff representing various organizational units, is set up to establish IT priorities and to ensure that the MIS function is meeting the needs of the enterprise - major tasks are to link corporate strategy and IT strategy, approve allocation of resources for the MIS function, and establish performance measures for the MIS function and see that they are met - important committee since ensures that you get the information systems and applications that you need to do your job - after company has agreed on an IT strategic plan, it next develops the IS operational plan, this plan consists of a clear set of projects that the IS department and the functional area managers will execute in support of the IT strategic plan - typical IS operational plan contains the following elements: - Mission: the mission of the IS function (derived from IT strategy) - IS environment: summary of the information needs of the functional areas and of the organization as a whole - Objectives of the IS function: best current estimate of the goals of the IS function - Constraints on the IS function: technological, financial, personnel, and other resource limitations on the IS function - The application portfolio: prioritized inventory of present applications and a detailed plan of projects to be developed or continued during the current year - Resource Allocation and Project Management: listing of who is going to do what, how and when Evaluating and Justifying IT Investment: Benefits, Costs and Issues - developing an IT plan is the first step in the acquisition proces - justifying IT investment involves assessing the costs, asasessing the benefits (values) and comparing the two - comparision referred to as cost benefit analysis Assessing the Costs - placing dollar value on the cost of IT investments may not be as simple as it sounds - major challenges that companies face is to allocate fixed costs among different IT projects - Fixed costs are those costs that remain the same regardless of any change in the activity level - IT fixed costs include: infrastructure cost, cost of IT services, and IT management cost - another complication is that the cost of system does not end when the system is installed - costs for maintaining, debugging, and improving the system can accumulate over many years Assessing the Benefits - benefits may be harder to quantify, especially because many of them are intangible (for example improved customer or partner relations or improved decision making) - fact that organizations use IT for several different purposes further complicates benefit analysis - to obtain to return from an IT investment, the company must implement the technology successfully - reality, many systems are not implemented on time, within budget or with all features originally envisioned Conducting Cost Benefit Analysis - after company has assessed the costs and benefits of IT investments, it must compare the two - common procedure (1) net present value (2) return on investment (3) breakdown analysis and (4) business case approach - organizations often use Net Present Value calculations for cost benefit analysis, analysts convert future values of benefits to their present value equivalent by ‘discounting’ them at the organizations cost of funds. Can compare present value of the future benefits to the cost required to achieve those benefits and determine whether the benefits exceed the costs - ROI: measures management’s effectiveness in generating profits with its available assets. Measure is a percentage, and the higher the percentage return, the better. ROI calculated by dividing net income, attributable to a project by the average assets invested in the project - Break Even Analysis: determines the point at which the cumulative dollar value of the benefits from a project equals the investment made in the project - Business Care Approach: written document that managers use to justify funding one or more specific applications or projects - purpose not only to get approval and funding but also to provide the foundation for tactical decision making and technology risk management - helps clarify how the organization can best use its resources to accomplish its IT strategy. Use this to embark on new IT projects Strategies for Acquiring IT Applications - 6 options are (1) buy the applications (2) lease them (3) use open source software (4) use software as a service (5) develop them in house (6) outsource them Buy the Applications (off the shelf approach) - this can be cost effective, time saving strategy compared with developing it in house - should be carefully considered to make sure that the software contains all the features needed to address the companys current and future needs - company may need to purchase multiple packages to fulfill different needs - buy option attractive if software vendor allows the company to modify the technology to meet its needs - this option may not be attractive in cases where customization is the only method of providing the necessary flexibility to address the company’s needs - also not the best strategy when the software is very expensive or likely to become obsolete in short time Advantages of Buy Option - Many different types of off the shelf software are available - software can be tried out - much time can be saved by buying rather than building - company can know what it is getting before it invests in the product - the company is not the first and only user - purchased software may avoid the need to hire personnel specifically dedicated to a project Disadvantages - software may not exactly meet the company’s needs - software may be difficult or impossible to modify, or it may require huge business process changes to implement - company will not have control over software improvements and new versions - purchased software can be difficult to integrate with existing systems - vendors may drop a product or go out of business - software is controlled by another company with its own priorities and business considerations - there may be a lack of intimate knowledge in the purchasing company about how the software works and why it works that way Lease the Applications - this option can save company both time and money - interested companies can apply the 80/20 rule when evaluating vendor software, if software meets 80 percent of company’s needs then the company should seriously consider changing its processes to resolve the remaining 20 percent - attractive to small medium sized enterprises that can not afford major investments in IT software - they lease (or buy) applications from external resources to establish a quicker presence in the market - can lease in three ways, can lease the application from a software developer and install it on the company’s premises - the second way, using an application service provider (ASP) - the third is to utilize software as a service Use Open Source Software - organization can obtain a license to use an open source software product and either use it as is or customize it, to develop applications Software As a Service - refers to a method of delivering software in which a vendor hosts the applications - customers can access these applications over a network, typically the internet, and have no control over the applications - customers pay to use it, they do not own the software Develop The applications In- House - more time consuming, and costly then buying or leasing, often leads to a better fit with specific organizational requirements - in house development can make use of various methodologies, basic backbone is the systems development life cycle (SDLC) The Traditional Systems Development Life Cycle - the systems development life cycle (SDLC) is the traditional systems development method that organizations use for large scale IT projects - structured framework that consists of sequential processes by which information systems are developed - these processes are systems investigation, systems analysis, systems design, programming, testing, implementation, operation and maintenance - systems development projects produce desired results through team efforts which include users, systems analysts, programmers and technical specialists - SDLC has three major advantages: control, accountability and error detection - problem with systems development is that the later in the development process that errors are detected, the more expensive they are to correct - Disadvantages: due to its structure nature, it is relatively inflexible, also time consuming and expensive and discourages changes to user requirements once they have been established Systems Investigation - initial stage in SDLC - systems development professionals agree that the more time they invest in (a) understanding the business problem to be solved (b) the technical options for systems (c) problems that are likely to occur during development the greater the chances of success - for these reasons, systems investigation begins with business problems (or business opportunity) followed by the feasibility analysis Feasibility Analysis - organizations have three basic solutions to any business problem relating to an information system (1) do nothing and continue to use the existing system unchanged (2) modify or enhance the existing system or (3) develop a new system - Feasibility Study: analyzes which of these three solutions best fits the particular business problem - determines the probability that proposed systems development will succeed, also gives rough assessment of the projects, technical, economic, behavioral and organizational feasibility - study important since it can prevent organizations from making costly mistakes - Technical Feasibility: determines if the hardware, software, and communications components can be developed and /or acquired to solve the business problem, also determines if organizations existing technology can be used to achieve the projects performance objectives - Economic Feasibility: determines if the project is acceptable financial risk and if the organization can afford the expenses and time needed to complete the project. Addresses two questions (1) do the benefits outweigh the costs of the project? (2) can the company afford the project? - common methods to determine economic feasibility: NPV, ROI, Break even Analysis and the business case approach - Behavioral Feasibility: addresses human issues of the project – people fear change – overt resistance - Organizational Feasibility: refers to an organizations ability to accept the proposed project Go/No GO Decision - after feasibility analysis is considered, a go/no go decision is reached by the steering committee if there is one or by top management - if the decision is “no go” then the project either is put on the shelf until conditions are more favorable or is discarded - if the decision is ‘go’ then project proceeds and the systems analysis phase begins Systems Analysis - is the examination of the business problem that the organization plans to solve with an information system - this stage defines the business problem in more detail, the causes, solution and the information requirements that the solution must satisfy - main purpose of the systems analysis stage is to gather information about the existing system in order to determine the requirements for an enhanced or new system - systems analysis stage produces the following information (1) strength and weaknesses of the existing system (2) functions that the new system must have in order to solve the business problem (3) user information requirements for the new system Systems Design - describes how the system will accomplish this task - encompasses two major aspects of the new system: logical and physical system design - 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 - logical design specifications include the design of outputs, inputs, processing databases, telecommunications, controls, security, and IS jobs - physical design specifications include design of hardware, software, databases, and telecommunications - scope creep occurs during development when users add to or change the information requirements of a system after those requirements have been ‘frozen’ Programming - if organization decides to construct the software in house, then programming begins - involves translating the design specifications into computer code, process can be lengthy and time consuming, because writing computer code is an art Testing - thorough and continuous testing occurs throughout the programming stage - testing is the process that checks to see if the computer code will produce the expected and desired results under certain conditions - requires large amount of time, effort and expense - testing designed to detect errors, or bugs, in the computer code - two types of errors: syntax, and logic - Syntax errors: (example misspelled word) easier to find and will not permit the program to run - Logic Errors: permit program to run but cause it to generate incorrect output, difficult to detect because the cause is not so obvious Implementation - process of converting from the old system to the new system - organizations use three major conversion strategies: direct, pilot and phased - Direct Conversion: the old system is cut off and the new system is turned on at a certain point in time, least expensive but the riskiest - Pilot conversion: introduces the new system in one part of the organization, such as in one plant or in one functional area - Pha
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