chapter 11 introduction to information technology turban, rainer and potter john wiley & sons,...
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Chapter 11
Introduction to Information Technology Turban, Rainer and Potter John Wiley & Sons, Inc.Copyright 2005
Chapter 11
ACQUIRING AND IMPLEMENTING SYSTEMS
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Acquiring IT Applications and Infrastructure
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Chapter Outline
The landscape and framework of IT application acquisition.Planning for and justifying information system applications.Strategies for acquiring IT applications: available options.Outsourcing and application service providers.Criteria for selecting an acquisition approach.Vendor and software selection and other implementation issues. Connecting to databases and business partners.
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Learning Objectives
Describe the progress of IT acquisition or development. Describe the IT planning process. Describe the IT justification process and methods.List the major IT acquisition options and the criteria for options selection. Describe the use of criteria for selecting an acquisition approach.Describe the role of ASPs.Describe the process of vendor and software selection.Understand some major implementation issues .Understand the issue of connecting IT applications to databases, other applications, networks, and business partners.
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We include in “acquisition” all approach to obtaining systems: buying, leasing or building.
11.1The Landscape and Framework of IT Application Acquisition
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The Acquisition Process
Step 1: planning for and justifying information systems.
Step 2: IT architecture creation-A systems analysis approach.
Step 3: select a development option and acquire the application.
Step 4: installing, connecting, and more. Step 5: operation and maintenance.
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The progress of application acquisition
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First, It is necessary to explore the need for each systems.
Second , it is necessary to justify it from a cost- benefit point of view.
Application portfolio: The set of recommended applications resulting from the application development.
11.2 Planning for and Justifying Information System Applications
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The IS Planning Process
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A set of long range goals that describe the IT infrastructure and major IS initiatives needed to achieve the goals of the organization.
The IT plan must meet three objectives::It must be aligned with the organization’s strategic plan
It must provide for an IT architecture
It must efficiently allocate IS development resources among competing projects
The IT Strategic Plan
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Three Major Issues of IT Strategic Planning Efficiency Effectiveness Competitiveness
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The IT strategic plan must be aligned with overall organizational planning, whenever relevant, so that the IT unit and other organizational personnel are working toword the same goals, using their respective competencies.
IT alignment with organizational plans and IT strategy
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The alignment among business and IT strategies and IS operational plan
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The IS Operational Plan
The IS operational plan is a clear set of projects that will be executed by the IS department and by functional area managers in support of the IT strategic plan
Mission IS environment Objectives of the IS function Constraints on the IS function The application portfolio Resource allocation and project management
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Justifying IT investment includes three aspects: assessment of costs, assessment of benefits (values), and comparison of the two.
Evaluating and justifying IT investment
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IT investment categories
Investment in infrastructure and investment in specific applications:
The IT infrastructure: Include the physical facilities, components, services, and management.
The IT applications: are computer programs designed to support a specific task, a business process or another application program.
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A Model for Investment Justification
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Costing IT Investment
Fixed costs: are those costs that remain the same regardless of change in the activity level. For IT, fixed costs include infrastructure cost of IT services, and IT management cost
Total cost of ownership (TCO): Formula for calculating the cost of acquiring, operating and controlling an IT system.
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Intangible benefits. Benefits from IT that may be very desirable but difficult to place an accurate monetary value on.
Evaluating the Benefits
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Using NPV in cost-benefit Analysis. Using the NPV method, analysts convert future values of benefits to their present-value equivalent by discounting them at the organization’s cost of funds.
Return on investment. It measure the effectiveness of management in generating profits with its available assets.
The business case approach. A business case is one or more specific applications or projects. Its major emphasis is the justification for a specific required investment, but it also provides the bridge between the initial plan and its execution.
Conducting Cost-Benefit Analysis
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Cost-Benefit Analysis Methods
Method Description
Benchmarks Focuses on objective measures of performance. Metric benchmarks provide numeric measures of performance, best-practice benchmarks focus on how IS activities are actually performed by successful organization.
Management by maxim
Brings together corporate executives, business-unit managers, and IT executives to identify IT infrastructure investments that correspond to organizational strategies and objectives.
Real-option valuation
Stems form the field of finance. Looks for projects that create additional opportunities in the future, even if current costs exceed current benefits.
Balanced scorecard method
Evaluates the overall health of organizations and projects, by looking at the organization’s short- and long-term financial metrics, customers, internal business processes and learning and growth (Kaplan and Norton, 1996).
Activity- based costing approach
Applies principles of activity-based costing (ABC)( which allocates costs based on each product’s use of company activities in making the product) to IT investment analysis.
EIAC model Methodology for implementing IT payoff initiatives, composed of 9 phases, divided into four categories: exploration (E), involvement (I), analysis (A) and communication (C).
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Buy the applications (off-the-shelf approach)Lease the applicationsDevelop the applications in–house (insourcing)End-user developmentOther acquisition options
11.3 Strategies for Acquiring IT Applications: Available Options
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Advantages and Limitations of the “Buy” Option
Advantages of the “Buy” option
Many different types of off-the-shelf software are available
Much time can saved by buying rather than building
The company is not the first and only user
the company can know what it is getting before it invests in the product
Purchased software may avoid the need to hire personnel specifically dedicated to a project.
Limitation of “ Buy” option
Software may not exactly meet the company’s need
Software may be difficult or impossible to modify, or it may require huge business process change to implement.
The company will not have control over software improvement and new versions.
Purchased software can be difficult to integrate with existing systems
Vendors may drop a product or go out of business
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Types of Leasing Vendors
to lease the application from an outsourcer and install it on the company’s premise. The vendor can help with the installation and frequency will offer to also contract for the operation and maintenance of the system. Many conventional application are leased this way.
using an application system provider (ASP).
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Unlimited computing power and storage capacity that can be obtained on demand and billed on a pay-per use basis.
Utility Computing
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Utility Computing
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In-House Development Approach
Build from Scratch: used for applications for which components are not available
Build from components. Companies with experienced IT staff can use standard components (e.g., secure Web server), some software languages ( e.g., Java, Visual basic, or Perl), and third-party subroutines to create and maintain application on their own.
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Building in-house Methodologies
System development life Cycle (SDLC) Prototyping methodology
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Other acquisition options
Join an e-marketplace or an E-Exchange
Join a third –party auction or reverse auction
Engage in joint ventures
Join a public exchange or a consortium
Hybrid approach
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11.4 Outsourcing and Application Service Providers Outsourcing: use of outside contractors or
external organizations to acquire IT services Several type of vendors offer services for
creating and operating IT system including e-commerce applications: Software houses Outsourcers and others Telecommunications companies
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An agent or vendor who assembles the software needed by enterprises and packages them with outsourced development, operations, maintenance, and other services.
Application Service Providers (ASP)
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Database format and portability . Application and data storage Scope of service Support services integration
Additional criteria for selecting an ASP vendor
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Criteria for determining which application development approach to use
The functionalities of package
How to measure benefits
Information requirement Personnel needed
User friendless Forecasting and planning for technological evolution
Hardware and software resources
Scaling
Installation Sizing
Maintenance services Performance
Vendor quality and track record Reliability
Estimated costs Security
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Advantage and disadvantage of various system acquisition method
Traditional system development (SDLC) force staff to systematically go through every step in a structure process Enforce quality by maintaining standardsHas lower probability of missing important issues in collecting user requirements.
may produce excessive documentation users may be unwilling or unable to study the specifications they approve takes too long to go from the original ideas to a working systemUser have trouble describing requirement for a proposed system.
Prototyping helps clarify user requirements helps verify the feasibility of the design promotes genuine user participation Promotes close working relationship between systems developers and users.Work well for ill-defined problems May produce part of the final system
may encourage inadequate problem analysis Not paractical with large number of usersUser may not give up the prototype when the system is complete. may generate confusion about whether the system is complete and maintainable system may be built quickly, which may result in lower quality
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Advantage and disadvantage of various system acquisition method cont…
End user development bypasses the IS department and avoids delaysUser controls the application and can change it as needed directly meets user requirementincreased user acceptance of new systemFrees up IT resourcesMay create lower-quality systems.
may eventually require maintenance assistance from IT department documentation may be inadequate poor quality control System may not have adequate inferences to existing systems
External acquisition (buy or lease) Software can be tried outSoftware has been used for similar problem in other organizationsReduces time spent for analysis, design and programming Has good documentation that will be maintained
controlled by another company with its own priorities and business considerations.Package’s limitations may prevent desired business processesMay be difficult to get needed enhancements. lack of intimate knowledge about how the software work and why it works that way
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Martin et al. (2000) identified six step in
selecting software vendor and an application package.
Step 1 : Identify potential vendors Step 2: determine the evaluation criteria Step 3: evaluate vendors and packages Step 4: choose the vendor and package Step 5: negotiate a contract.
11.6 Vendor and software selection and other implementation issues
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Criteria for selecting a software application package Cost and financial terms
Upgrade policy and cost
vendor’ reputation and availability for help
System flexibility
ease of Internet interface
Availability and quantity of documentation
Necessary hardware and networking resources
Required training (check if provide be vendor)
Security
Learning (speed of) for developers and users
Graphical presentation
Data handling
System- requirement hardware
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In-house or outsource Web site
Consider an ASP
Do a detailed IT architecture study
Security and ethics
Evaluate the alternatives to in-house systems development
Other Implementation Issues
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EC application must be connected to internal information systems, infrastructure, ERP, and so on.
They also must be connected and are referred to as “integration.”
11.7 Connecting to Databases and Business Partners
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Connecting to database
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