development strategies development strategies dr. yan xiong college of business csu sacramento...

Development StrategiesDevelopment Strategies

Dr. Yan XiongDr. Yan XiongCollege of BusinessCollege of BusinessCSU SacramentoCSU Sacramento

10/12/0310/12/03

AgendaAgenda Software PackagesSoftware Packages In-house DevelopmentIn-house Development OutsourcingOutsourcing Business Process Business Process

Reengineering (BPR)Reengineering (BPR) PrototypingPrototyping

Purchase SoftwarePurchase Software Canned software:Canned software: written by computer manufacturers written by computer manufacturers

or software development companies or software development companies Sold on open market to broad range of users with similar Sold on open market to broad range of users with similar

requirementsrequirements Turnkey systemsTurnkey systems:: combination of software and hardware sold as combination of software and hardware sold as

a packagea package

Purchasing SoftwarePurchasing Software Companies that buy rather than develop AIS software Companies that buy rather than develop AIS software

still go through systems development life cycle (SDLC) still go through systems development life cycle (SDLC) Implementation phase is reduced:Implementation phase is reduced:

less codingless coding less testingless testing

This is most costly This is most costly

Purchasing SoftwarePurchasing Software Companies that buy rather than develop AIS software Companies that buy rather than develop AIS software

still go through systems development life cycle (SDLC) still go through systems development life cycle (SDLC) Implementation phase is reduced:Implementation phase is reduced:

less codingless coding less testingless testing

This is most costly SDLC phase This is most costly SDLC phase

Systems Acquisition ProcessSystems Acquisition Process

Will packagemeet needs?

Developsoftware

internally

Send RFP forhardware,

if necessary

Evaluateproposal

No

Yes

Investigatesoftwarepackages

Can packagebe modified?

Send RFP forsoftware and

hardware

No

Yes

Select bestcombination

Alternative Screening Alternative Screening MatrixMatrix Use for screening, Use for screening,

not selectionnot selection Beware of implying too much Beware of implying too much

accuracyaccuracy

Alternative Screening Alternative Screening MatrixMatrix Example:Example:

Vendor A score 4.35Vendor A score 4.35 Vendor B score 4.25Vendor B score 4.25 Vendor C score 3.25Vendor C score 3.25

Vendor C out; Vendors A and B Vendor C out; Vendors A and B too close to call too close to call

Alternative Screening MatrixAlternative Screening Matrix

Evaluation Criteria

Crit.Weight

Alternatives to be Compared

A1 A2 An. . . .

1.00Total T1 T2 Tn

C1

C2

Cm

.

.

.

M Evaluation Criteria N Alternatives

Wc1

Wc2

Wcm

.

.

.

. . . .

Determining WeightsDetermining Weights Rank factors in importance Rank factors in importance

with most important with most important receiving highest numberreceiving highest number

Total the ranksTotal the ranks Divide each factor weight by the totalDivide each factor weight by the total Make individual weight adjustments Make individual weight adjustments

if necessaryif necessary

Weighting ExampleWeighting Example

CRITERIACRITERIA RANKRANK CALCULATIONCALCULATION WEIGHTWEIGHT

CostCost 44 4/154/15 .27 .27

ScalabilityScalability 22 2/152/15 .13.13

Ease of UseEase of Use 55 5/155/15 .33.33

ServiceService 33 3/153/15 .20.20

UpgradesUpgrades 11 1/151/15 .07.07

TOTAL 15TOTAL 15 TOTAL 1.00TOTAL 1.00Most important criterion gets highest rankMost important criterion gets highest rank

AgendaAgenda Software PackagesSoftware Packages In-house DevelopmentIn-house Development OutsourcingOutsourcing Business Process Business Process

Reengineering (BPR)Reengineering (BPR) PrototypingPrototyping

In-house DevelopmentIn-house Development In the past, most organizations had In the past, most organizations had

information system departments develop information system departments develop custom custom softwaresoftware, , because canned software fitting specific needs because canned software fitting specific needs not availablenot available

Developing custom software difficult and error-proneDeveloping custom software difficult and error-prone Also consumes a great deal of time and resourcesAlso consumes a great deal of time and resources

In-house DevelopmentIn-house Development Custom software usually developed and written in houseCustom software usually developed and written in house Alternatively, can engage outside company to develop package Alternatively, can engage outside company to develop package

or assemble it from their inventory of program modules ( or assemble it from their inventory of program modules (objectsobjects)) called “called “outsourcingoutsourcing””

When contracting with outside organization, must maintain control over When contracting with outside organization, must maintain control over the development processthe development process

In-house DevelopmentIn-house Development Outsourcing management:Outsourcing management:

– carefully select developercarefully select developer– Vendor Screening MatrixVendor Screening Matrix

– sign contractsign contract– plan and monitor each stepplan and monitor each step– maintain effective communicationmaintain effective communication– control all costscontrol all costs

AgendaAgenda Software PackagesSoftware Packages In-house DevelopmentIn-house Development OutsourcingOutsourcing Business Process Business Process

Reengineering (BPR)Reengineering (BPR) PrototypingPrototyping

OutsourcingOutsourcing Hiring outside company to handle all or part of an Hiring outside company to handle all or part of an

organization’s IT activitiesorganization’s IT activities In In mainframe outsourcingmainframe outsourcing agreementagreement, outsourcers buy , outsourcers buy

client’s computers and hire all or most of client’s employeesclient’s computers and hire all or most of client’s employees Electronic Data Services (EDS)Electronic Data Services (EDS)

OutsourcingOutsourcing In client/server (PC) outsourcing agreement, In client/server (PC) outsourcing agreement,

firm contracts for: firm contracts for: particular serviceparticular service segment of its businesssegment of its business particular function particular function PC supportPC support

Outsourcing TypesOutsourcing Types Professional services Professional services

((consulting)consulting) Services (Services (training / data entrytraining / data entry)) Temporary employeesTemporary employees

contract programmerscontract programmers Transactions (Transactions (credit reportscredit reports)) Systems integratorsSystems integrators

OutsourcingOutsourcing

Benefits of Outsourcing

A business solution Asset utilization

Access to greater expertise and more advanced technology

Lower costs Improved development time

Elimination of peaks and valleys usage Facilitation of downsizing

OutsourcingOutsourcing

Risks of Outsourcing Inflexibility

Loss of control Reduced competitive advantage

Locked-in system

Not tied to corporate goals

When to Outsource When to Outsource Activity not strategicActivity not strategic Save at least 15%Save at least 15% Need technology specialistsNeed technology specialists Increase financial flexibilityIncrease financial flexibility

capital to operating expensescapital to operating expenses Free personnel for developmentFree personnel for development Acquire new technologies quickerAcquire new technologies quicker

Outsource FailuresOutsource Failures DT Study, 1997DT Study, 1997 Vendor expertise and Vendor expertise and

sophisticationsophistication Improved delivery qualityImproved delivery quality Cost reductionCost reduction Increased focus on Increased focus on

core competenciescore competencies Transition to new technologiesTransition to new technologies

Raleys Raleys

Prefer to acquire talented, Prefer to acquire talented, retail-oriented staffretail-oriented staff

Augments IT projects with Augments IT projects with consultants, contractorsconsultants, contractors

Outsource professional services Outsource professional services such as training and data entrysuch as training and data entry

AgendaAgenda Software PackagesSoftware Packages In-house DevelopmentIn-house Development OutsourcingOutsourcing Business Process Business Process

Reengineering (BPR)Reengineering (BPR) PrototypingPrototyping

ReengineeringReengineering

Hammer / ChampyHammer / Champy“ “ . . . . . . fundamental fundamental rethinking rethinking andand radicalradical redesign of redesign of

business processesbusiness processes to achieve to achieve dramaticdramatic

improvements . . .”improvements . . .”

BPRBPR Reduces company to essential processes Reduces company to essential processes Focuses on Focuses on whywhy they are done rather than on the they are done rather than on the

details of details of howhow they are done they are done Completely reshapes organizational work practices and Completely reshapes organizational work practices and

information flows to take advantage of technological information flows to take advantage of technological advancementsadvancements

Business ProcessBusiness Process“…“…set of tasks that directly set of tasks that directly

support the achievement support the achievement of of business objectivesbusiness objectives by by providing a providing a product or serviceproduct or service for a for a customer customer who is outside who is outside the organization or in a different the organization or in a different organizational unit”organizational unit”

AAmerican Management Systemsmerican Management Systems

Core ProcessesCore Processes 4 or 5 in any organization4 or 5 in any organization Can be broken down into Can be broken down into

sub-processessub-processes Critical to organization’s successCritical to organization’s success Focus redesign on these processesFocus redesign on these processes

Financial Core ProcessesFinancial Core Processes

Product New loan, savings Product New loan, savings Development checking plan Development checking plan

Sales and New accounts, Sales and New accounts, Marketing acquisitionsMarketing acquisitions

Order Deposits, loans, Order Deposits, loans, Fulfillment withdrawalsFulfillment withdrawals

Customer Financial planning, Customer Financial planning, Service inquiries Service inquiries

Pharmaceuticals Pharmaceuticals Core ProcessesCore ProcessesProduct R & D testing Product R & D testing

DevelopmentDevelopmentSales and Market segmenta- Sales and Market segmenta-

Marketing tion, contracts Marketing tion, contracts Order Contract manage- Order Contract manage-

Fulfillment ment, shipping Fulfillment ment, shippingCustomer Claims analysis Customer Claims analysis

ServiceService

BPR ExamplesBPR Examples From Martin, From Martin, Analysis Analysis

and Design of Business and Design of Business Information Systems,Information Systems, (Prentice Hall, 1995)(Prentice Hall, 1995)

All focused on Data Flow All focused on Data Flow Diagrams (DFDs)Diagrams (DFDs)

OutsourcingOutsourcing

A. GM Process Flows BeforeA. GM Process Flows BeforeA. GM Process Flows BeforeA. GM Process Flows Before

B. Outsourcing Delivery to ContrailB. Outsourcing Delivery to ContrailB. Outsourcing Delivery to ContrailB. Outsourcing Delivery to Contrail

ProduceProduceProduceProduce DeliverDeliverDeliverDeliver DeliveryDeliveryVendorVendorDeliveryDeliveryVendorVendor

ProduceProduceProduceProduce ConrailConrailDeliveryDeliveryConrailConrailDeliveryDelivery

Customer FocusCustomer FocusBefore:Before:

After:After:

Cust.Cust.Cust.Cust. P1P1P1P1 Cust.Cust.Cust.Cust.P3P3P3P3P2P2P2P2

Cust.Cust.Cust.Cust. Cust.Cust.Cust.Cust.P1P1P1P1 P2P2P2P2 P3P3P3P3

Case Case Mgr.Mgr.

BufferingBuffering3.53.5EditEdit

OrderOrder

3.53.5EditEdit

OrderOrder

3.63.6ShipShip

ProductProduct

PendingPendingOrder File Order File

After:After:

Before:Before: 3.63.6ShipShip

ProductProductOrderOrder

3.13.1VerifyVerifyOrderOrder

3.23.2CreditCreditCheckCheck

3.23.2CreditCreditCheckCheck

Order (Copy 2)

Order (Copy 2)

CustomerCustomerCustomerCustomer

3.13.1VerifyVerifyOrderOrderOrder (C

opy 1)

Order (Copy 1)

CustomerCustomerCustomerCustomer

Before:Before:

After:After:

OrderOrder OrderOrder

Parallel Processing Parallel Processing

Geographic BalancingGeographic Balancing

11

33

22

Building ABuilding A Building BBuilding B

Before:Before:

Geographic BalancingGeographic Balancing

11

33 22

Building ABuilding A Building BBuilding B

After:After:

BPR ChallengesBPR Challenges• TraditionTradition• ResistanceResistance

• e.g., senioritye.g., seniority• Time requirementsTime requirements• Lack of management supportLack of management support• RiskRisk

• most crucial processesmost crucial processes• on-going organizationon-going organization

BPR ChallengesBPR Challenges• ControlsControls

• often sacrificed for sake of efficiencyoften sacrificed for sake of efficiency• e.g., eliminating verification processe.g., eliminating verification process

• Accountants must ensure that what is gained Accountants must ensure that what is gained by BPR is not lost through fraud, errors, etc.by BPR is not lost through fraud, errors, etc.

Controls ExampleControls Example BPR expert recommends BPR expert recommends

that you consolidate two that you consolidate two sequential processessequential processes reduce personnelreduce personnel reduce handoffs (errors)reduce handoffs (errors) increase job satisfactionincrease job satisfaction

But you will lose separation of dutiesBut you will lose separation of duties

Controls ExampleControls Example Calculate BPR consolidation Calculate BPR consolidation

savingssavings Calculate probable fraud costsCalculate probable fraud costs

Likelihood of threat (risk) Likelihood of threat (risk) times exposure $times exposure $

CompareCompare

Consolidate,Consolidate,Transfer Transfer InternallyInternally

Consolidate,Consolidate,Transfer Transfer InternallyInternally

Improve,Improve,LeverageLeverageImprove,Improve,LeverageLeverage

OutsourceOutsourceOutsourceOutsource RedesignRedesign(Reengineer)(Reengineer)

RedesignRedesign(Reengineer)(Reengineer)

““Best-Best-of-of-

Breed”Breed”

““Best-Best-of-of-

Breed”Breed”

NeedsNeedsImprove-Improve-

mentment

NeedsNeedsImprove-Improve-

mentment

QualityQualityQualityQuality

Non - CriticalNon - CriticalNon - CriticalNon - Critical CriticalCriticalCriticalCritical

ImportanceImportanceImportanceImportance

State of California GuidelinesState of California Guidelines

AgendaAgenda Software PackagesSoftware Packages In-house DevelopmentIn-house Development OutsourcingOutsourcing Business Process Business Process

Reengineering (BPR)Reengineering (BPR) PrototypingPrototyping

PrototypingPrototyping• Approach to systems development in which Approach to systems development in which

simplified working model of system simplified working model of system developeddeveloped

• Prototype (“first draft”) quickly and Prototype (“first draft”) quickly and inexpensively builtinexpensively built

• Provided to users for testing and trainingProvided to users for testing and training

Why Prototyping“When you’re working with

new system ideas with your users, you don’t want to go through the cost of developing a gigantic system which might take years; you’ll build a mock-up of it, which might take weeks.”

Brian Kilcourse, CIO Longs Drug Stores

Why PrototypingWhy Prototyping Experience at AT&T, Experience at AT&T,

TRW, and IBMTRW, and IBM 30% of system requirements 30% of system requirements

will change will change BEFOREBEFORE initial system deliveryinitial system delivery

Production error correction modelProduction error correction model

Error CorrectionError Correction

PrototypingPrototyping

Prototype Life Cycle Prototype Life Cycle

Analyze problemAnalyze problemAnalyze problemAnalyze problem

Develop Prototype Develop Prototype Develop Prototype Develop Prototype

Operationalize PrototypeOperationalize PrototypeOperationalize PrototypeOperationalize Prototype

Complete SystemComplete SystemComplete SystemComplete System

Refine PrototypeRefine PrototypeRefine PrototypeRefine Prototype

Prototype TypesPrototype Types IterativeIterative: Make series : Make series

of changes until prototype of changes until prototype becomes the final systembecomes the final system e.g., writing a poeme.g., writing a poem

Throw-awayThrow-away: Once user approves, : Once user approves, then abandon for construction then abandon for construction purposespurposes e.g., architect’s drawing of new e.g., architect’s drawing of new

househouse

PrototypePrototypeLanguageLanguagePrototypePrototypeLanguageLanguage

4 GL4 GL4 GL4 GL

3 GL3 GL3 GL3 GL

SDLC StageSDLC StageSDLC StageSDLC Stage OperationsOperationsLanguageLanguage

OperationsOperationsLanguageLanguage

4 GL4 GL4 GL4 GL

3 GL3 GL3 GL3 GL

IterativeIterativeIterativeIterative

IterativeIterativeIterativeIterative

AAAA DDDD

ThrowawayThrowawayThrowawayThrowaway

Prototype ModelsPrototype ModelsPrototype ModelsPrototype Models

PrototypingPrototyping

Advantages of Prototyping

Better definition of user needs Higher user involvement and satisfaction

Faster development time Fewer errors More opportunity for changes

Less costly

Better user/analyst communication

PrototypingPrototyping

Disadvantages of Prototyping Significant user time

Bypass Analysis Phase

Incomplete systems development Inadequately tested and

documented systems Negative behavioral reactions

Unending development

Topics CoveredTopics Covered Software PackagesSoftware Packages In-house DevelopmentIn-house Development OutsourcingOutsourcing Business Process Business Process

Reengineering (BPR)Reengineering (BPR) PrototypingPrototyping