9781423901785_PPT_ch13

Management Information Systems, Sixth EditionChapter 13: Choices in Systems Acquisition

Management Information Systems, Sixth Edition

Management Information Systems, Sixth Edition*ObjectivesExplain the differences among the alternatives to tailored system development: outsourcing, licensing ready-made software, using software as a service, and encouraging users to develop their own applicationsList the business trade-offs in the various methods of acquiring systems


Management Information Systems, Sixth Edition*Objectives (continued)Describe which systems acquisition approach is appropriate for a particular set of circumstancesDiscuss organizational policies on employee computer use


Management Information Systems, Sixth Edition*Options and PrioritiesThere are four alternatives to in-house development:OutsourcingLicensingUsing software as a service (SaaS)Having users develop the systemThe deciding factor is usually cost when the desired application is available from multiple sourcesLicensing is preferred due to low cost and immediate availability


Management Information Systems, Sixth Edition*Options and Priorities (continued)If licensing is not available:Application service provider (ASP) is the next best choiceSystem is immediately available for a small start-up feeThird best choice is allowing users to develop their systemLast choice is to outsource, if non-IT employees cannot develop IS


Options and Priorities (continued)Many factors must be considered in addition to cost and qualityAlternatives are not fully comparable, and often cannot be simply prioritizedManagement Information Systems, Sixth Edition*


Management Information Systems, Sixth Edition*Options and Priorities (continued)


Management Information Systems, Sixth Edition*OutsourcingOutsourcing has two meanings in the IT arena:To commission the development of an application to another organizationTo hire the services of another company to manage all or parts of the services usually rendered by an IT unit in the organizationMay not include development of new applications


Management Information Systems, Sixth Edition*Outsourcing Custom-Designed ApplicationsCustom-designed (tailored) software: software developed specifically for the needs of an organizationSeveral advantages:Good fit to needGood fit to cultureDedicated maintenanceSmooth interfaceSpecialized securityPotential for strategic advantage


Outsourcing Custom-Designed Applications (continued)Disadvantages:High costThe organization must fund all development costsStaff may be diverted from other projectsSoftware is less likely to be compatible with other organizations systemsManagement Information Systems, Sixth Edition*


Management Information Systems, Sixth Edition*Outsourcing Custom-Designed Applications (continued)


Management Information Systems, Sixth Edition*Outsourcing Custom-Designed Applications (continued)Must deal with an inherent conflict when outsourcing software development:Client wants a firm contract and set of requirementsSpecific requirements may mean that no deviation is allowed if changes are needed later as development progressesChanges may involve hefty additional chargesOffshoring: outsourcing to other countries such as India, China, Philippines, etc.


Management Information Systems, Sixth Edition*Outsourcing IT ServicesMany businesses turn to IT companies for long-term services, including:Purchasing and maintaining hardwareDeveloping, licensing, and maintaining softwareInstalling communications networksMaintaining and operating Web sitesStaffing help desksRunning IT daily operationsManaging customer and supplier relationsBusiness process outsourcing: outsourcing routine processes, such as order entry or HR


Management Information Systems, Sixth Edition*Outsourcing IT Services (continued)Some companies realize IT is not their core competency and should not be a focus of their effortsPace of development in IT requires a high level of expertiseA growing portion of IS budgets are being allocated for outsourced servicesPopular IT service providers include:IBMEDSAccentureUnisys


Management Information Systems, Sixth Edition*Outsourcing IT Services (continued)


Management Information Systems, Sixth Edition*Outsourcing IT Services (continued)Outsourcing companies are known as vendorsIT outsourcing contracts are typically long-term contractual relationships, usually for seven to 10 yearsClients sometimes find themselves bound by obsolete contracts, and must renegotiate


Management Information Systems, Sixth Edition*Advantages of Outsourcing IT ServicesSeveral advantages of outsourcing:Improved financial planningClient knows the exact cost of IS functionsReduced license and maintenance feesIS professional firms pay discounted prices for tools and can pass on the savings to their clientsIncreased attention to core businessExecutives can concentrate on their companys core business


Management Information Systems, Sixth Edition*Advantages of Outsourcing IT Services (continued)Advantages of outsourcingShorter implementation cyclesIT vendors can complete new applications fasterReduction of personnel and fixed costsIncreased access to highly qualified know-howAvailability of ongoing consulting as part of standard supportSometimes outsourcing does not save the client money


Management Information Systems, Sixth Edition*Advantages of Outsourcing IT Services (continued)


Management Information Systems, Sixth Edition*Risks of Outsourcing IT ServicesDisadvantages of outsourcing:Loss of controlHigh risk in a quickly changing industryLoss of experienced employeesUsually involves transferring employees to vendorRisks of losing a competitive advantageMay disclose trade secretsHigh priceCan be more expensive than keeping the tasks in-houseImportant to clearly define contract terms


Management Information Systems, Sixth Edition*Risks of Outsourcing IT Services (continued)


Management Information Systems, Sixth Edition*Risks of Outsourcing IT Services (continued)Service-level agreementThe most important element of an outsourcing agreementLists all services expected of the vendorDefines the metrics to be used to measure vendor performanceThe client must develop the service level and metrics list, not the vendor


Management Information Systems, Sixth Edition*Licensing ApplicationsPurchasing software usually means purchasing licenses to use the softwareThere is a large selection of high-quality packaged software availableTwo groups of ready-made software:Relatively inexpensive software that helps in the workplace, such as office suitesLarge applications that support entire organizational functions, such as HR or financial managementTypically cost millions of dollars


Management Information Systems, Sixth Edition*Software Licensing BenefitsLicensing benefits include:Immediate system availabilityHigh qualityLow price (license fee)Available supportBeta version: a prerelease version of software to be tested by companies who want to use itOften includes a period of up to one year of free serviceLarge applications require installation specialists


Management Information Systems, Sixth Edition*Software Licensing RisksSoftware licensing has risks including:Loose fit between needs and featuresMust determine if the software will comply with company needs and organizational cultureDifficulties in undertaking custom modificationsDissolution of the vendorMay be left without support and maintenanceHigh turnover of vendor personnelTurnover among IS professionals is highMay result in lowered support expertise from vendor


Management Information Systems, Sixth Edition*Steps in Licensing Ready-Made SoftwareSelecting software involves a large money investment and a long-term commitmentProject management team responsibilities:Identify problem or opportunityDefine functional requirementsIdentify potential vendorsSolicit vendor informationRequest for information (RFI): request for informal information about a vendors productDefine system requirements


Steps in Licensing Ready-Made Software (continued)Project management team responsibilities (continued):Request vendor proposalsRequest for proposal (RFP): a document that specifies all requirements and solicits a proposalReview proposals and screen vendorsVisit sites where the application is in useSelect a vendorBenchmark the application by comparing actual performance against specific quantifiable criteriaManagement Information Systems, Sixth Edition*


Steps in Licensing Ready-Made Software (continued)Project management team responsibilities (continued):Negotiate a contractShould define performance expectations and penalties for failure to meet expectationsImplement the new systemManage postimplementation supportManagement Information Systems, Sixth Edition*


Management Information Systems, Sixth Edition*Steps in Licensing Ready-Made Software (continued)


Management Information Systems, Sixth Edition*Software as a ServiceApplication service provider (ASP): an organization that offers software through communication lines (such as the Web)Software as a service (SaaS): applications available through the WebNo software is installed on a clients computersFiles may be stored on local storage devicesASPs may rent the software they offer


Management Information Systems, Sixth Edition*Software as a Service (continued)Renting software has benefits:No need to learn how to maintain the softwareNo large start-up feeStorage hardware is unnecessarySoftware is usually available soonerA good option for small companiesIs considered a software on demand approach


Software as a Service (continued)Renting software also has risks:Lack of control may be an issue, as the clients data is managed by the vendorVendor is unlikely to make many customized changes to the softwareResponse time is impacted by traffic levelsMay be security risks through a public network Many clients used leased lines instead of the Internet to limit security risks

Management Information Systems, Sixth Edition*


Management Information Systems, Sixth Edition*Software as a Service (continued)


Management Information Systems, Sixth Edition*Caveat EmptorASP may be disappointing in some areas:Scope of services providedLevel of reliabilityManager guidelines when selecting an ASP:Check the ASPs history: get referencesCheck the ASPs financial strengthEnsure you understand the price schemeGet a list of the providers infrastructureCraft the service contract carefully


Management Information Systems, Sixth Edition*Caveat Emptor (continued)Uptime: proportion of time that the ASPs systems and communications links are upNo ASP has 100% uptime99.9 % uptime = up to 500 minutes/year of downtime99.999% uptime = less than 5 minutes/year of downtimeRecommended for critical applications


Caveat Emptor (continued)Four categories of typical users of ASP services:Rapidly growing companies that rely on software for deployment of their operationsSmall companies without cash to pay up-front costs for softwareMedium-sized companies that need expensive softwareOrganizational units at remote locationsStorage service provider (SSP): rents storage space for remote storage of client filesManagement Information Systems, Sixth Edition*


Management Information Systems, Sixth Edition*User Application DevelopmentUser application development: nonprogrammer users write their own business applicationsUser-developed software is usually:Simple and limited in scopeSmall applications developed for immediate or brief needsMaintained by end users


Management Information Systems, Sixth Edition*User Application Development (continued)


Management Information Systems, Sixth Edition*Managing User-Developed ApplicationsChallenges of user-developed applications include:Managing the reaction of IT professionalsProviding supportCompatibilityManaging access


Management Information Systems, Sixth Edition*Managing User-Developed Applications (continued)


Management Information Systems, Sixth Edition*Advantages and RisksAdvantages of user development of applications:Shortened lead timesGood fit to needsCompliance with cultureEfficient utilization of resourcesAcquisition of skillsFreeing up IS staff time


Management Information Systems, Sixth Edition*Advantages and Risks (continued)Disadvantages of user-developed applications:Poorly developed applicationsIslands of informationDuplicationSecurity problemsPoor or no documentation


Management Information Systems, Sixth Edition*SummarySeveral alternatives to having applications developed in-house include outsourcing, licensing ready-made software, using software as a service, and allowing users to develop their own softwareOutsourcing can mean commissioning development or assigning services to vendorOutsourcing custom-designed applications might afford the organization a good fit of software to need


Management Information Systems, Sixth Edition*Summary (continued)Outsourcing IT services has great benefits, such as reduced cost and allowing the organization to focus on its core competencyOutsourcing IT services has potential risks, such as loss of control, loss of experienced employees, and loss of competitive advantageLicensing software advantages include software being immediately available and low-pricedDisadvantage of licensing software is often a loose fit to the organizations needs


Management Information Systems, Sixth Edition*Summary (continued)Software as a service, from an ASP, is a popular method of obtaining software for a monthly feeUser application development advantages include short lead time, good fit, freeing IT staffUser application development disadvantages include poor quality, islands of information, security problems, and poor documentationOver half of Americas office workers have rich computer resourcesPolicies must be established to prevent computer abuse by employees


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9781423901785_PPT_ch13

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