CHAPTER 12. ACQUIRING INFORMATION SYSTEMS AND APPLICATIONS
Acquisition of new IT/ modifying existing ones -> improves efficiency and gain competitive advantage.
Acquisition: more than building new systems in house, hardware and software. Its more to do with decisions
about IT tasks being performed in-house or outsourced to an outsider.
INFORMATION TECHNOLOGY PROJECT MANAGEMENT
Projects: short term efforts to create a specific business-related outcome (product/service).e.g. Home depot
Inventory management system IS project.
I S project management: directed effort to plan, organize, and manage resources to bring about the successful
achievement of specific IS goals.
3 factors / triple constraints of project management: time, cost and scope.
Time: opportunity that has a time limit within which it would benefit the organization.
Cost: resources required for completion needs to be paid for to obtain benefit.
Scope: processes that ensure that project includes all the work required and only the work required to complete
the project successfully
Effective security of data and programs is needed to prevent unauthorized changes or access to programs and
The project management process
Traditional approach to project management divides every project into five distinct phases:
i. Project initiation: clearly define the problem that the project is intended to solve and the goals that it is to
achieve. Identify and secure the resources needed for the project, analyze the cost and benefits of the
project and identify potential risks.
Future users need to properly identify needs and be a part of the approval process before moving to
ii. Project planning: every project objective and every activity associated with that objective must be
identified and sequenced.
Tools used: dependence diagrams, program evaluation and review technique (PERT), critical path
method (CPM), and a timeline diagram called the Gantt chart.
Purpose: ensure activities are performed in a logical sequence and be able to determine the length of
each activity and the project as a whole.
Managers can evaluate the project and see whether it is working as per the plan. It also helps review
iii. Project execution: project management plan is performed to accomplish the projects requirements. Work
involves coordination of resources, integration and working with the plan.
iv. Project monitoring and control: determine whether the project is progressing as planned, Involves: a. Monitoring ongoing project activities
b. Comparing project variables with actual plan
c. Identifying corrective actions, changes usually approved by user management.
v. Project completion: completed when it is formally accepted by the organization. All activities are
finalized, contracts are fulfilled and settled and all files are archived and lessons learned are
Project management failure
Runaway projects- they are so far over budget and past deadline that they must be abandoned incur large
monetary loss. Reasons for IS projects not being able to deliver their potential value:
Lack of sufficient planning at the start.
Difficulties with technology compatibility
Lack of commitment by management in providing the necessary resources
Poorly defined project scope
Lack of sufficient time to complete the project
JUSTIFYING IT APPLICATIONS
Important: carefully plan IT acquisition that is consistent with organizations IT strategic plan and overall
organizations strategic plan.
Evaluating and justifying IT investment: benefits, costs, and issues
Limited resources makes it necessary for organization to justify IT investment which involves assessing cost,
benefits and comparing them( process is called cost-benefit analysis)
Assessing the costs: major challenge faced- allocate fixed costs among different IT projects.
- Fixed costs: cost that remains regardless of any change in activity level.
- Cost of a system does not only include installation cost, but maintenance cost, cost of debugging and
improving the system accumulate over years.
- E.g. Unanticipated expenses for year 2000 reprogramming projects, unanticipated changes to tax
systems due to change in rates and process etc.
Assessing the benefits: most benefits are intangible making it hard for calculations. Multiple use of IT
makes it difficult to analyze benefits. Moreover benefits depend on successful implementation. Problems
with Project management would affect organizations ability to gain benefits from the implementation.
Conducting Cost-Benefit Analysis: four common approaches to this analysis:
a. Using the net Present value (NPV) method: convert future values of benefits to their present-value
equivalent by discounting them at the organizations cost of funds. Compare NPV with cost
incurred at present. b. Return on Investment (ROI): measures managements effectiveness in generating profits with its
available assets. ROI=net income attributable to a project/ average assets invested. More ROI, more
c. Break-even Analysis: determines the point at which the cumulative dollar value of benefits from a
project= investment made. Simple analysis but disadvantage: ignores the value of system benefits
after the break-even point.
d. Business case approach: system developers write a business case to justify funding one or more
specific applications or projects. It helps clarify how the organization could best allocate its resources
to accomplish IT strategy, concentrate on justifying the investment, focuses on risk management and
STRATEGIES FOR ACQUIRING IT APPLICATIONS
How to pursue it. 6 Common options:
1. Buy the applications( off-the-shelf approach)
- Standard features required by most IT applications
- Cost-effective and time-saving
- Careful planning is required to see that selected package contains all the features necessary for the
companys current and future needs.
- Company must decide which features a selected package must have to be suitable.
- Rarely: one package meets all needs. So company opt for multiple packages and integrating these
with existing software.
- Good buy option: vendor allows company to modify the technology to meet their needs
Option is less attractive software will need to be customized every time the package is upgraded. It is
poor strategy- software is either very expensive or likely to become obsolete in a short time.
TABLE 12.1 ADVANTAGES AND LIMITATIONS OF THE BUY OPTION OF
Many different types of offtheshelf software Software may not exactly meet the company's needs.
Software can be tried out before purchase. Software may be difficult or impossible to modify, or it may
require huge business process changes to implement.
Much time can be saved by buying rather than The company will not have control over software
building. improvements and new versions.
The company can know what it is getting Purchased software can be difficult to integrate with existing
before it invests in the product. systems.
The company is not the first and only user, so Vendors may drop a product or go out of business.
software has been tested.
Purchased software may avoid the need to hire Software is controlled by another company with its own