2010 foster business school acctg. 320 ais l.ducharme 1 ais development strategies chapter 19

2010 Foster Business School Acctg. 320 AIS L.DuCharme 1

AIS Development Strategies

Chapter 19


Overview

Today we will cover:

(1) Three ways to obtain a new IS:

Purchase Software, Develop in-house, Outsource

(2) Three ways to improve the development

process: Business process reengineering (BPR),

Prototyping, Computer-aided software engr. (CASE) tools


INTRODUCTION

• Companies can experience a number of difficulties in developing an AIS internally, including:– Projects are backlogged for years because of the high

demand for resources.– The newly designed system doesn’t meet user needs.– The process takes so long that by the time it’s complete,

it’s obsolete.– Users can’t adequately specify their needs.– Changes to the AIS are often difficult to make after

requirements have been written into the specifications.


Alternatives to in-house

• Purchase software• Hire outside company to develop &

maintain system


Purchase Software

• Canned software sold on the open market to users with similar requirements– General purpose software AIS (SAP, Oracle, Great

Plains, Peachtree, Quick Books).– Software also developed to meet the needs of particular

businesses.• Difficulties of canned software:

– 3rd party software rarely meets all needs.– Need to upgrade to new versions.– Loss of control.


Purchase--Turnkey Systems

• The vendor installs the entire system (both hardware and software) and sells as package.

• Many vendors specialize in particular industries (e.g., video rental)


Application Service Providers (ASPs)

Web-based software delivered over the Internet. “Rent” rather than buy the software. Can reduce costs, and allow companies to focus on core competencies, not software.

E.g., Internet version of TurboTax


Purchasing Software and the SDLC

• SDLC still followed.• Systems analysis: companies should conduct an initial

investigation, survey, and feasibility analysis to determine requirements.

• Conceptual systems design: determining if software that meets requirements is already available.


Purchasing Software and the SDLC (continued)

• Physical design: if software is purchased, some of the physical design phase (coding) can be omitted. It may be necessary to modify the purchased software to meet company needs, and controls and reports still need to be defined.

• Implementation and conversion: still need to convert systems, install and test hardware and software, select and train personnel, and document the new system. Do NOT develop & test software or document computer program.

• Operation and maintenance: still necessary. Vendor typically maintains.


Selecting a Vendor

• Is the software applicable to your business? How long will it meet your needs? Will the vendor be around?

• Finding a vendor: Look in phone book, Obtain referrals, Scan computer or trade magazines, Attend conferences, Use search organizations


Acquiring hardware and software

Once AIS requirements have been defined, the organization can buy software and hardware.

Companies needing only a PC and some office software can usually complete their own research and make a selection.

When buying large or complex systems, a request for proposal (RFP) should be prepared.


Request for proposal (RFP)

The RFP is an invitation to bidders to propose a system by a specific date.

The more information a company provides to a vendor, the better the company’s chances of receiving a system that meets its requirements. Be sure to distinguish between mandatory and desirable requirements. (General RFPs)

Each proposal is evaluated.

Finalists are investigated in depth.


Evaluating proposals and selecting a system

– Eliminate any proposals that:• Are missing important information.• Fail to meet minimum requirements.• Are ambiguous.

– Those that pass the preliminary screening should be compared with the proposed AIS requirements to determine:• If they meet all mandatory requirements.• How many desirable requirements they meet.

– Finalists can be invited to demo their system using company-supplied data.


Evaluating proposals (contin.)

• In reviewing the proposals, you need to evaluate:–Hardware–Software–Vendors


Hardware Evaluation

• Criteria to evaluate hardware include:• Cost• Ability to run required software• Processing speed and

capabilities• Secondary storage capability• Input and output speeds• Communication capabilities• Expandability• Recency of technology

• Availability• Compatibility with existing

hardware, software, and peripherals

• Performance compared to competitors

• Cost and availability of support and maintenance

• Warrantees and guarantees• Financing arrangements• Ability to meet mandatory

requirements


Software Evaluation

• Criteria to evaluate software include:

• Conformity with specifications• Need for modification• Performance (speed, accuracy,

reliability)• Use by other companies• Satisfaction of other users• Documentation• Compatibility with existing

software

• User-friendliness• Ability to be demonstrated and

test-driven• Warranties• Flexibility and maintainability• Capability for online inquiry of

files and records• Vendor upgrades


Vendor Evaluation

• Criteria to evaluate vendors include:

• Size• Financial stability and security• Experience• Quality of support and

warranties• Regularity of updates• Ability to provide financing• Willingness to sign contract• Willingness to provide

references

• Reputation for reliability and dependability

• Hardware and software support and maintenance

• Implementation and installation support

• Quality and responsiveness of personnel

• Willingness to provide training• Responsiveness and timeliness

of support


System Performance

Approaches to comparing system performance:– Benchmark problem– Point scoring– Requirements costing


Benchmarking

Benchmark problem– The new AIS performs a data processing task

with input, processing, and output jobs typical of what would be required of the new system.

– Processing times are calculated and compared.– The AIS with the lowest time is judged most

efficient.


Point Scoring

– A weight is assigned to each criterion used to evaluate the system, based on the relative importance of that criterion.

– Each criterion is rated for each product.– Each rating is multiplied times the weight

assigned to the criterion to develop a weighted score.

– The weighted scores are added for each product.


Point Scoring -- Example

– O’Neil Co. is evaluating systems offered by three different vendors: Able Co., Baker Co., and Cook Co.

– O’Neil has determined three criteria that they will use to evaluate the different systems: cost, speed, and vendor reliability.

– They have provided the following weights to each criteria, with vendor reliability being the most critical:• Vendor reliability—9• Cost—6• Speed—4



O’Neil examined the packages offered by the three vendors and rated them based on these three criteria. Ratings were from 1–5 with 5 being the highest score.

Criteria Able Co. Baker Co. Cook Co.

Vendor reliability (9) 2 5 4

Cost (6) 5 3 4

Speed (4) 3 4 2

WEIGHTED SCORES

Criteria Able Co. Baker Co. Cook Co.

Vendor reliability (9) 18 45 36

Cost (6) 30 18 24

Speed (4) 12 16 8



The weighted scores for each company are summed:– Able = 60 points– Baker = 79 points– Cook = 68 points

Based on the preceding scores, the bid would probably be awarded to Baker Co.



The preceding example is a simplification. In a real-life scenario, several factors would be different:– There would probably be many more criteria

being considered.– Several people would be rating the criteria, and

the final scores for each vendor would probably be a composite of those individual scores.


Requirements costing

Estimates cost of purchasing or developing features that are not included in a particular AIS.

The total AIS cost is calculated by adding the acquisition cost to the purchasing and development costs.

Total cost = cost of system with all required features.Focus is on having lowest cost while meeting

requirements (efficiency).


Test-drive

Verify that the AIS that looks best on paper is actually the best in practice: Test-drive the software. Contact other users for references. Evaluate vendor personnel. Confirm details of the proposal.


In-house

Developing custom software is difficult, but some companies prefer this approach—particularly if the company is large, has unique needs, and believes their systems provide a competitive advantage.

(1) software developed by IS staff.

(2) software developed by End users.

Accountants help contribute by being project supervisors, users, or development team members.


End-user-Developed Software

• One approach to developing software in-house is to take the lion’s share of the effort out of the hands of the IS department and place it in the laps of the ultimate information users.


End-user-developed software

– End-user computing (EUC) is the hands-on development, use, and control of computer-based information systems by users.

– With EUC, individuals use IT to meet their own IS needs rather than rely on systems professionals.

– Why?• The demand for information systems has grown exponentially

since the introduction of the computer.• One solution to meeting these needs is to have end users meet

their own information needs.


End-user development

• Technology has evolved to automate much of the system development process. Factors contributing to EUC are:– Increased computer literacy.– Easier-to-use programming languages.– Inexpensive PCs.– A variety of powerful and inexpensive software

packages.


End-user Computing

• As end users began to meet their initial needs, two things happened:– Users realized computers could be used to meet

more and more information needs.– Increased access to data created many new uses

and needs for information.

• Result: A tremendous growth in end-user computing that is expected to continue.


End-user Development

End User Development occurs when information users, such as managers, accountants, and internal auditors, develop their own applications using computer specialists as advisors. Inappropriate for very complex systems. May be appropriate for simpler projects.


EUC -- Benefits

• Benefits of end-user computing:– User creation, control, and implementation– Systems that meet user needs– Timeliness– Freeing up systems resources– Versatility and ease of use


EUC -- Risks

• Risks of end-user computing:– Logic and development errors– Inadequately tested applications– Inefficient systems– Poorly controlled and documented systems– System incompatibilities– Duplication of systems and data and wasted resources– Increased costs


Managing and controlling EUC

Provide help-desks Train users in how risks and benefits of EUC Evaluate new hardware and software products Set standards for developing and implementing

software Control corporate data


Outsourcing the system

Outsourcing: hiring an outside company to handle all or part of an organization’s data processing activities. Rapidly growing business.

Sometimes entire IT organizations are transferred to another company.


Outsourcing

Examples of outsourced activities:– Installation– Training– Maintenance– Help desk– Technical support


Outsourcing

• Most companies that outsource use several different companies rather than a single source in order to:– Increase flexibility– Foster competition– Reduce costs

• Most companies do not outsource:– Strategic management of their IT environment– Business process management– IT architecture


Outsourcing -- Benefits

– Provides a business solution– Asset utilization– Access to greater experience and more

advanced technology– Lower costs– Improved development time– Elimination of peaks-and-valleys usage– Facilitation of downsizing


Outsourcing -- Risks

– Inflexibility (long-term contracts)– Loss of control (system, confidential data)– Reduced competitive advantage– Locked in system (have to rebuild expertise)– Unfulfilled goals (benefits unrealized)– Poor service (slow response)– Increased risk (business risk)


Business Process Reengineering

• Business process reengineering (BPR) is the analysis and redesign of business processes and information systems to achieve significant performance improvements.– Reduces a company to its essential business

processes.– Reshapes organizational work practices and

information flows to take advantage of technological advancements.



• BPR:– Simplifies the system.– Makes it more effective.– Improves a company’s quality and service.

• Business Process Management (BPM) software has been developed to help automate many BPR tasks.



Michael Hammer has set forth several principles that help organizations successfully reengineer business processes:- Organize around outcomes, not tasks.- Require those who use the output to perform the

process.- Require those who produce information to process it.- Centralize AND disperse data.- Integrate parallel activities.- Empower workers, use built-in controls, and flatten the

organization chart.- Capture data once—at its source.


Challenges faced by reengineering efforts

Many BPR efforts fail or fall short of their objectives. A company must overcome the following obstacles:• Tradition (change culture & beliefs)• Resistance• Time and cost requirements (BPR costly, takes time)• Lack of management support• Skepticism (same thing, different box)• Retraining (costly)• Controls (keep important controls)


Prototyping

Prototyping is an approach to systems design in which a simplified working model of a system is developed.– The prototype (first draft) is built quickly at low cost

and provided to users for experimentation.– Playing with the prototype allows users to determine

what they do and do not like.– Developers modify the system in response to user

comments and re-present it to them.– The iterative process continues until users are satisfied

that the system meets their needs.


Prototyping

• Four steps are involved in developing a prototype:– (1) Identify basic requirements– (2) Develop an initial prototype– (3) Repeated iterations– (4) Use the system


When to use prototyping

• Users don’t fully understand their needs, or the needs change rapidly.• System requirements are difficult to define.• System inputs and outputs are not known.• The task to be performed is unstructured or semi-structured.• Designers are uncertain about what technology to use.• The system is crucial and needed quickly.• The risk of developing the wrong system is high.• The users’ reactions to the new system are important development

considerations.• Many design strategies must be tested.• The design staff has little experience developing this type of system

or application.• The system will be used infrequently so that processing efficiency is

not crucial.


Prototyping

Good candidates for prototyping:– Decision support systems.– Executive information systems.– Expert systems.– Information retrieval systems.– Systems that involve experimentation and trial-and-

error development.– Systems in which requirements evolve as the system is

used.


Prototyping

Prototyping is usually inappropriate for:– Large or complex systems that:

• Serve major organizational components; or• Cross numerous organizational boundaries.

– Standard AIS components, such as:• Accounts receivable• Accounts payable• Inventory management


Prototyping -- Advantages

– Better definition of user needs– Higher user involvement and satisfaction– Faster development time– Fewer errors– More opportunity for changes– Less costly


Prototyping -- Disadvantages

– Significant user time– Less efficient use of system resources– Incomplete system development– Inadequately tested and documented systems– Negative behavioral reactions– Never-ending development


Computer-aided software (or systems) engineering

• Computer-aided software (or systems) engineering (CASE) tools are an integrated package of computer-based tools that automate important aspects of the software development process.– Used to plan, analyze, design, program, and maintain

an information system.– Also used to enhance efforts of managers, users, and

programmers in understanding information needs.


CASE software

• CASE tools do not replace skilled designers, but provide developers with effective support for all SDLC phases.

• CASE software typically includes tools for:– Strategic planning– Project and system management– Database design– Screen and report layout– Automatic code generation


CASE -- Advantages

– Increased productivity (over 600%)– Improved program quality (maintain

consistency)– Cost savings (80-90%)– Improved control procedures– Simplified documentation (automatic)


CASE -- Disadvantages

• Problems with CASE technology:– Incompatibility with other systems– Cost (expensive up to $350,000 for tools)– Unmet expectations (fewer than 50% believe

expected benefits were obtained)

2010 foster business school acctg. 320 ais l.ducharme 1 ais development strategies chapter 19

Documents

foster business school

test software

purchased software

software applicable

office software

hardware software vendors

proposed ais requirements

purchase software hire