Chapter 10: Developing and Implementing Effective Accounting Information Systems

Presentation OutlineThe Systems Development Life Cycle Systems Planning Systems Analysis - Procedures and data gathering Systems Design - Procedures - Design considerations

- Design methodologies - Factors affecting the selection of a vendor Systems Implementation - Performing preliminary actions - Executing activities leading to an operational system - Follow-up procedures

THE SYSTEMS DEVELOPMENT LIFE CYCLE

Developing a computer-based information system is a creative and demanding task that can and should produce economic benefits for an organization.

However, systems development can be a disaster, with labor and financial resources being expended with no observable return and perhaps even a system that cannot be completed.

Positive results are more frequently obtained if the process is formally structured, documented, and subject to management controls.

By far the most common methodology for building new information systems is the systems development life cycle approach. Systems Planning - organizing the project team and developing strategic plans for

performing the systems study Systems Analysis - analyzing the company’s current system to determine information needs

and identify the system’s strong and weak points Systems Design - making changes to the company's current system so that weak points can

be minimized or eliminated and strong points maintained Systems Implementation - acquiring resources for the new system and initial operation

THE SYSTEMS DEVELOPMENT LIFE CYCLE

System operation on a daily basis

Planning and preliminary investigation

Analysis of the system to determine the cause(s) of the problems

Design of system revisions to eliminate the

problems

Implementation and initial operation of the revised system

Follow-up studies to determine if the (newly designed) system is operating efficiently

SYSTEMS PLANNING

Planning for Success approach problems from a broad point of view use an interdisciplinary study team to evaluate information systems make the study team work closely with a steering committee

Broad Viewpoint in a Systems Study a systems approach aligned with mission, goals, and objectives.

The Study Team and the Steering Committee top management personnel critical to the success of a new system.

Investigating Current Systems Reports the problems or objectives the study team identified, solutions or alternatives it investigated, and further course(s) of action it recommends

Systems planning is a constant process that continues throughout all phases of the systems study.

The System Development Life Cycle

System operation on a daily basis

Analysis of the system to determine the cause(s) of the problems

Design of system revisions to eliminate the

problems

Implementation and initial operation of the revised system

Follow-up studies to determine if the newly designed system is operating efficiently

•Broad viewpoint•System study team•Steering committee

SYSTEMS ANALYSIS

The systems analysis phase begins following the recognition of problems in the company’s current system.

The purpose of systems analysis is to enable consultants to familiarize themselves with a client’s current operating system so they can make recommendations for improvement.

The phases in systems analysis are: understanding the goals of the organization using system survey techniques to acquire sufficient information

regarding problems analyzing data to suggest possible solutions

to the systems problems evaluating system feasibility

Understanding Organization Goals

General systems goals, awareness that benefits should exceed the costs, concern that the output should help in better decisions, designing to allow optimal access to information, and flexibility to accommodate to changing information needs.

Top management systems goals, and long-range budget planning data periodic performance reports short-range operating performance of subsystems

Operating management systems goals are normally easier to determine relate to well-defined and narrower organizational areas. are for the current business year are generated internally

The Systems Development Life Cycle

System operation on a daily basis

Planning and preliminary investigation

Analysis of the system to determine the cause(s) of the problems

Design of system revisions to eliminate the

problems

Implementation and initial operation of the revised system

Follow-up studies to determine if the newly designed system is operating efficiently

System Survey• Data Gathering: review document, observation, questionnaire, interviews• Data Analysis: work measurement, work distribution analysisSystem Analysis Report

System Analysis Procedures

Define the problem - symptoms of problems must be distinguished from the real problems, and consultants must understand the goals of the system.

Perform a systems survey - consultants look at the current system’s strengths and weaknesses in order to obtain a complete understanding of the system.

Prepare a systems analysis report - consultants suggest possible solutions to solve the problems of the present system.

The process of learning how the current system functions, determining the needs of users, and developing the logical requirements of a proposed system is referred to asA. Systems design. B. Systems feasibility study.C. Systems maintenance. D. Systems analysis. (CMA, adapted)

Systems Survey Data Gathering and Analysis

Data Gathering: Review of documentation - i.e., system flowcharts, organization charts

and company policy manuals Observation - involves watching employees performing their duties and

examining computer operations Questionnaires and Surveys - standard lists of “open-ended” or “closed-

ended” questions used to survey a large group of people when brief answers are desired

Review of internal control procedures Interviews - used to gather information in more depthData Analysis: creating summary statistics, developing flowcharts and/or process maps highlighting bottlenecks in information flows, reporting redundancy, and identifying missing information links.

SYSTEM DESIGN

If the client’s steering committee reacts positively to the systems analysis report, system design begins.

System design is the creative phase of system development that involves specifying outputs, processing procedures, and inputs for the new system.

Design work includes a feasibility evaluation, a detailed system design, a specification report, a submission of the report to vendors, and the selection of a vendor.

The Systems Development Life Cycle

System operation on a daily basis

Planning and preliminary investigation

Analysis of the system to determine the cause(s) of the problems

Design of system revisions to eliminate the

problems

Implementation and initial operation of the revised system

Follow-up studies to determine if the newly designed system is operating efficiently

• Feasibility evaluation: technical, operational, schedule, legal, economic • Detailed system design: output, process, input• Specification report• Selection of a vendor

Evaluating System Feasibility: Narrowing of Design Alternatives

Operational feasibility - can and will the new system be used by the personnel for whom it is designed?

Economical feasibility - are the expected benefits expected to exceed the costs of the new system?

Time feasibility - can the new system be designed and implemented in the period scheduled?

Technical feasibility - is proven technology available to implement the design? Legal feasibility - is there a conflict between the design and the firm’s ability

to meet its legal obligations?

The feasibility evaluationA. is completed prior to detailed systems design.B. includes economic, schedule, technical, legal, and operational feasibility.C. both a and b are true D. neither a nor b is trueOrdinarily, the analysis tool for the systems analyst and steering committee to use in selecting the best system alternative is (CMA, adapted)A. Pilot testing. B. User selection.C. Decision tree analysis D. Cost-benefit analysis

Detailed Systems Design

Consultants prepare a detailed system design for each feasible proposal. Outputs are designed first, followed by the processing steps and inputs. Tools that are available to consultants in preparing structured designs

are Hierarchy Plus Input, Processing, and Output (HIPO) charts, Warnier-Orr diagrams, system flowcharts, and data flow diagrams.

The process of developing specifications for hardware, software, manpower, data resources, and information products required to develop a system is referred to asA. Systems analysis. B. Systems feasibility study.C. Systems maintenance. D. Systems design. (CMA, adapted)

The three major activities of systems design areA.User interface design, data manipulation, and output analysis.B.Process design, output design, and output analysis.C.User interface design, data design, and process design.D.Data design, input validation, and processing. (CMA, adapted)

Systems Specifications Report

System design specifications should be incorporated in a formal systems specifications report.

Higher-level management should review this report and give final approval. The report should contain all information needed by management to make a

sound decision concerning the proposed design. Historical background information about the company’s operating activities. Detailed information about the problems in the company’s current system. Detailed descriptions of the systems design proposals. Indication of what the vendors should include in their proposals to the company. Time schedule for implementing the new system.

Consultants choose which vendors will receive the Request for Proposal (RFP) and answer specific questions that arise regarding aspects of the report.

The major role of consultants during this decision-making process is to provide input regarding the pros and cons of each vendor’s proposal.

Although the consultants may provide a recommendation concerning a vendor’s proposal, the steering committee must ultimately make the decision.

Factors Affecting the Selection of a System

Performance capability of each proposed system in relation to the system’s cost (may be tested by using a benchmark problem)

Modularity, or the ease with which a system can be altered at a later date Compatibility of each proposed system to the company’s current system Reputation of vendors and the vendor’s ability to provide support in

implementation and subsequent operation

In selecting a new accounting information system, the steering committee should considerA. all expected costs and benefits of the new systems, including maintenance and operating costs.B. support that a vendor can provide, including training, maintenance, and backup.C. compatibility of a new system with existing systems.D. All of the above are considerations in selecting a new system.E. Only a and b are important considerations in selecting the new system.

Outsourcing

Under outsourcing, a company needing data processing services hires an outside organization to handle all or part of these services.

The degree to which a company outsources may range from routine assistance with a single application to running the entire info. system.

Outsourcing contracts are usually signed for five to ten years.Advantages: An attractive business solution Results in effective use of assets Causes cost savings that result from economies of scale Facilitates downsizing

Disadvantages: It could be difficult for a company to break its contract, resulting in inflexibility. The company may loose control of its information system and be exposed to possible

abuse. Over the long run, a company may loose sight of its information needs and how the

system can provide it with competitive advantage.

Outsourcing

Time-sharing organizations provide user companies with on-line capabilities.

Monthly fees are based on a fixed cost for terminal facilities and variable costs for file storage and communications.

Time-sharing is optimal for firms that require immediate feedback or have sporadic processing needs that require a lot of computing power.

Service bureaus typically provide user companies with batch processing of accounting data.

Fees are based on the time required to process the user company’s data.

An advantage of using service bureaus is that user firms obtain needed processing services without investing in its own computer system.

Disadvantages include data security problems and possible delays in receiving output information.

SYSTEMS IMPLEMENTATION

Systems implementation encompasses the consultant’s planning and controlling of the various activities needed to convert the company’s current system to the newly designed one.

Three major steps in system implementation are 1) performing preliminary actions, 2) executing activities leading to an operational system and 3) conducting follow-up activities and evaluations.

The Systems Development Life Cycle

System operation on a daily basis

Planning and preliminary investigation

Analysis of the system to determine the cause(s) of the problems

Design of system revisions to eliminate the

problems

Implementation and initial operation of the revised system

Follow-up studies to determine if the newly designed system is operating efficiently

• Prepare physical site•Determine functional changes•Select and assign personnel•Train personnel•Acquire and install equipment•Establish internal controls•Convert data files•Acquire and install software•Test software•Conversion

Performing Preliminary Actions

Plans concerning implementation activities should include cost budgets, time schedules, work plans, and project controls.

Two techniques often used for controlling systems projects are Gantt charts and network diagrams.

Behavioral issues, organization of the project team, and contractual negotiations with suppliers should also be addressed.

Gantt Charts

A Gantt chart is a bar chart with a calendar scale that is useful for scheduling and tracking the activities of systems

implementation projects for indicating progress directly on the Gantt chart in

contrast to the planned progress. Gantt charts are straightforward, easy to understand, and

best suited for projects that are not highly complex. A drawback of the Gantt chart is that it does not show

relationships among activities in systems implementation.

Network Diagrams

A network diagram schedules the sequence of activities that must be performed in the implementation of a new system.

Two major project planning and control techniques incorporate network diagrams: PERT (Program Evaluation and Review Technique) and CPM (Critical Path Method)

Two basic steps involved in constructing a network diagram are 1) estimating activity time and 2) linking activities together.

Which of the following statements is not true with respect to managing IT projects:a. Program evaluation and review technique (PERT) allows management to determine the shortest time it will take to implement a new system, and any slack time that might exist between implementation activities.b. An advantage of PERT is that it allows managers to identify the critical path in implementation.c. Both PERT and Gantt charts are manual techniques used in managing IT implementations.d. Gantt charts are useful in scheduling and implementing IT because they allow you to indicate actual progress versus planned progress directly on the chart.

System Implementation Activities

Personnel Selection - newly installed systems may require added personnel, job reengineering, or downsizing.

Personnel training - computer vendor personnel and consultants help to train personnel using methods such as video presentations and case studies.

Physical site preparation - sites of new systems may have to be constructed or modified.

Detailed system design - conceptual design must be converted from logical specifications to detailed physical requirements of a workable system.

Software development - firms may develop programs “in-house” or acquire commercial packages.

Program testing- known as “debugging” because the objective is to eliminate errors (or “bugs”) in programs; firms may use desk checking or string testing techniques.

System testing - testing the hardware with the software, sample data, inputs, and outputs; final testing consists of acceptance testing, which involves users of the system.

System Implementation Activities

Documentation - provides the basis for later system changes and aids new employees in performing their duties

Standards development - major system changes may call for new standards for data elements, codes, etc.

File conversion - steps to convert manual files to computer files or from one medium to another.

System Conversion - involves converting from the current system to a new system.

In which of the following phases of computer system development would training occur?A.Planning phase.B.Analysis phase.C.Design phase.D.Implementation phase. (CPA, adapted)

System Conversion Approaches

Direct conversion - the old system is immediately discontinued when the new system is implemented.

Parallel conversion - both the new and old system operate simultaneously for a certain period of time.

Modular conversion (or pilot) - consists of testing and converting the new system at one location initially.

Phased conversion - consists of converting segments of the new system until the entire system is operational.

Workwell Company operates in several regions, with each region performing its data processing in a regional data center. The corporate management information systems (MIS) staff has developed a database management system to handle customer service and billing. The director of MIS recommended that the new system be implemented in the Southwestern Region to ascertain if the system operates in a satisfactory manner. This type of conversion is called aA.Direct conversion. B. Prototype conversion.C. Parallel conversion. D. Pilot conversion. (CPA, adapted)

The least risky strategy for converting from a manual to a computerized accounts receivable system would be a (CMA, adapted)A.Direct conversion. B. Parallel conversion C. Pilot conversion. D. Database conversion

Systems Follow-up

Fine-tuning consists of uncovering and solving hidden problems that may arise as the system becomes operational.

A follow-up report summarizes the work the consultants performed in their follow-up study and recommendations for improving the client company’s info. system.

Operational activities consist mainly of maintenance of the system including software modifications and updates.

The process of monitoring, evaluating, and modifying a system as needed is referred to asA.Systems analysis.B.Systems feasibility study.C.Systems maintenance.D.Systems implementation. (CMA, adapted)