Final Exam Scope Chap13 Preparing System Proposal

Chapter 13Preparing The Systems Proposal

Systems Analysis and DesignKendall and Kendall

Fifth Edition

Kendall & Kendall Copyright © 2002 by Prentice Hall, Inc. 13-2

Major Topics

Systems proposalDetermining hardware needsDetermining software needsDecision to rent, lease, or buyTangible and intangible costs and

benefitsMethods for selecting alternatives


Systems Proposal

In order to prepare the systems proposal analysts must use a systematic approach to identify hardware and software needsAscertaining hardware and software needsIdentifying and forecasting costs and

benefitsComparing costs and benefitsChoosing the most appropriate alternative


Ascertaining Hardware and Software Needs

Steps used to determine hardware and software needs

Inventory computer hardware currently availableEstimate current and projected workload for the

systemEvaluate the performance of hardware and

software using some predetermined criteriaChoose the vendor according to the evaluationObtain hardware and software from the vendor


Hardware Inventory

When inventorying hardware checkType of equipmentStatus of equipment operationEstimated age of equipmentProjected life of equipmentPhysical location of equipmentDepartment or person responsible for

equipmentFinancial arrangement for equipment


Evaluating Hardware

Criteria for evaluating hardwareTime required for average

transactions (including time for input and output)

Total volume capacity of the systemIdle time of the central processing

unitSize of memory provided


People that Evaluate Hardware

The people involvedManagementUsersSystems analysts


Purchasing, Leasing, or Renting Decision

There are three options for obtaining computer equipment:BuyingLeasingRental


Buying

Advantages Disadvantages

Cheaper than leasing or renting over the long run

Initial cost is high

Ability to change system

Risk of obsolescence

Provides tax advantages of accelerated depreciation

Risk of being stuck if choice is wrong

Full control Full responsibility


Leasing


No capital is tied up Company doesn’t own the system when lease expires

No financing is required

Usually a heavy penalty for terminating the lease

Leases are lower than rental payments

Leases are more expensive than buying


Renting


No capital is tied up

No financing is required

Company doesn’t ownthe computer

Easy to change systems

Maintenance andinsurance are usuallyincluded

Cost is very highbecause vendor assumesthe risk (most expensiveoption)


Evaluating Hardware Support

When evaluating hardware vendors, the selection committee needs to considerHardware supportSoftware supportInstallation and training supportMaintenance support Performance of the hardware


Software Evaluation

Use the following to evaluate software packages:Performance effectivenessPerformance efficiencyEase of useFlexibilityQuality of documentationManufacturer support


Identifying and Forecasting Costs and Benefits

May forecast costs and benefits of a prospective system throughAnalysis of time series data including

linear trendSeasonal trendCyclical trend


Estimating Trends

Trends may be estimated usingGraphical judgmentThe method of least squaresMoving average method


Costs and Benefits

Systems analysts should take tangible costs, intangible costs, tangible benefits, and intangible benefits into consideration to identify cost and benefits of a prospective system


Tangible Costs

Tangible costs are those that can be accurately projected by systems analysts and the business' accounting personnel

Examples:Cost of equipmentCost of resourcesCost of systems analysts' time


Intangible Costs

Intangible costs are those that are difficult to estimate, and may not be known

Examples:Cost of losing a competitive edgeDeclining company image


Tangible Benefits

Tangible benefits are advantages measurable in dollars that accrue to the organization through use of the information system

Examples:Increase in the speed of processingAccess to information on a more

timely basis


Intangible Benefits

Intangible benefits are advantages from use of the information system that are difficult to measure

Examples:Improved effectiveness of decision-

making processesMaintaining a good business image


Selecting the Best Alternative

To select the best alternative, analysts should compare costs and benefits of the prospective alternatives usingBreak-even analysisPaybackCash-flow analysisPresent value method


Break-Even Analysis

Break-even analysis is the point at which the cost of the current system and the proposed system intersect

Break-even analysis is useful when a business is growing and volume is a key variable in costs


Payback

Payback determines the number of years of operation that the system needs to pay back the cost of investing in it

Payback is determined in one of two ways:By increasing revenuesBy increasing savings


Drawbacks of the Payback Method

The three drawbacks of the payback method areIt is strictly a short-term approach to

investment and replacement decisionIt does not consider the importance of

how repayments are timedIt does not consider total returns from

the proposed systems project that may go well beyond the payback year


Cash-Flow Analysis

Cash-flow analysis is used to examine the direction, size, and pattern of cash flow associated with the proposed information system

Determine when cash outlays and revenues will occur for bothThe initial purchaseOver the life of the information system


Present Value Method

Assess all the economic outlays and revenues of the information system over its economic life and to compare costs today with future costs and today's benefits with future benefits

Use present value when the payback period is long, or when the cost of borrowing money is high



Guidelines to select the method for comparing alternativesUse break-even analysis if the project

needs to be justified in terms of cost, not benefits

Use payback when the improved tangible benefits form a convincing argument for the proposed system



Guidelines to select the method for comparing alternatives (continued)Use cash-flow analysis when the

project is expensive, relative to the size of the company

Use present value when the payback period is long

Final Exam Scope Chap13 Preparing System Proposal

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