Final Exam Scope Chap13 Preparing System Proposal

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Transcript of Final Exam Scope Chap13 Preparing System Proposal

  • Chapter 13Preparing The Systems ProposalSystems Analysis and DesignKendall and KendallFifth Edition

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Major TopicsSystems proposalDetermining hardware needsDetermining software needsDecision to rent, lease, or buyTangible and intangible costs and benefitsMethods for selecting alternatives

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Systems ProposalIn 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

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Ascertaining Hardware and Software NeedsSteps used to determine hardware and software needsInventory 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

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Hardware InventoryWhen 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

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Evaluating HardwareCriteria 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

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*People that Evaluate HardwareThe people involvedManagementUsersSystems analysts

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Purchasing, Leasing, or Renting DecisionThere are three options for obtaining computer equipment:BuyingLeasingRental

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Buying

    Copyright 2002 by Prentice Hall, Inc.

    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

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Leasing

    Copyright 2002 by Prentice Hall, Inc.

    Advantages

    Disadvantages

    No capital is tied up

    Company doesnt 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

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Renting

    Copyright 2002 by Prentice Hall, Inc.

    Advantages

    Disadvantages

    No capital is tied up

    Company doesnt own the computer

    No financing is required

    Easy to change systems

    Cost is very high because vendor assumes the risk (most expensive option)

    Maintenance and insurance are usually included

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Evaluating Hardware SupportWhen evaluating hardware vendors, the selection committee needs to considerHardware supportSoftware supportInstallation and training supportMaintenance support Performance of the hardware

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Software EvaluationUse the following to evaluate software packages:Performance effectivenessPerformance efficiencyEase of useFlexibilityQuality of documentationManufacturer support

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Identifying and Forecasting Costs and BenefitsMay forecast costs and benefits of a prospective system throughAnalysis of time series data including linear trendSeasonal trendCyclical trend

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Estimating TrendsTrends may be estimated usingGraphical judgmentThe method of least squaresMoving average method

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Costs and BenefitsSystems analysts should take tangible costs, intangible costs, tangible benefits, and intangible benefits into consideration to identify cost and benefits of a prospective system

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Tangible CostsTangible costs are those that can be accurately projected by systems analysts and the business' accounting personnelExamples:Cost of equipmentCost of resourcesCost of systems analysts' time

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Intangible CostsIntangible costs are those that are difficult to estimate, and may not be knownExamples:Cost of losing a competitive edgeDeclining company image

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Tangible BenefitsTangible benefits are advantages measurable in dollars that accrue to the organization through use of the information systemExamples:Increase in the speed of processingAccess to information on a more timely basis

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Intangible BenefitsIntangible benefits are advantages from use of the information system that are difficult to measureExamples:Improved effectiveness of decision-making processesMaintaining a good business image

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Selecting the Best AlternativeTo select the best alternative, analysts should compare costs and benefits of the prospective alternatives usingBreak-even analysisPaybackCash-flow analysisPresent value method

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Break-Even AnalysisBreak-even analysis is the point at which the cost of the current system and the proposed system intersectBreak-even analysis is useful when a business is growing and volume is a key variable in costs

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*PaybackPayback determines the number of years of operation that the system needs to pay back the cost of investing in itPayback is determined in one of two ways:By increasing revenuesBy increasing savings

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*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

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Cash-Flow AnalysisCash-flow analysis is used to examine the direction, size, and pattern of cash flow associated with the proposed information systemDetermine when cash outlays and revenues will occur for bothThe initial purchaseOver the life of the information system

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Present Value MethodAssess 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 benefitsUse present value when the payback period is long, or when the cost of borrowing money is high

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Selecting the Best AlternativeGuidelines to select the method for comparing alternativesUse break-even analysis if the project needs to be justified in terms of cost, not benefitsUse payback when the improved tangible benefits form a convincing argument for the proposed system

    Copyright 2002 by Prentice Hall, Inc.

  • Kendall & Kendall Copyright 2002 by Prentice Hall, Inc.13-*Selecting the Best AlternativeGuidelines to select the method for comparing alternatives (continued)Use cash-flow analysis when the project is expensive, relative to the size of the companyUse present value when the payback period is long

    Copyright 2002 by Prentice Hall, Inc.