Information Systems:
Creating Business Value
John Wiley & Sons, Inc.
Mark Huber, Craig Piercy, and
Patrick McKeown
Copyright 2007 John Wiley & Sons, Inc.
Chapter 6:
Creating IS Solutions
Copyright 2007 John Wiley & Sons, Inc.
What We Will Cover:
• The Big IS Development Questions
• The Stages and Activities of System
Development
• The People Who Develop IS
• IS Methodology
• Managing the IS Project
• IS Tools for IS Development
Copyright 2007 John Wiley & Sons, Inc.
Student ROI (Return on Investment)
Your investment of time and effort in this course will result in
your being able to answer these questions:
1. What major decisions do organizations make in
obtaining an IS?
2. What important activities must an organization consider
within each of the seven stages of an IS life cycle?
3. What considerations are important when creating an IS
project team?
4. What methods do organizations use to ensure that they
obtain the best IS to help meet their goals?
5. How do organizations provide effective and efficient
management of IS projects?
6.
What IT tools do many organizations rely on to obtain
an IS that best meets its objectives?
Copyright 2007 John Wiley & Sons, Inc.
Feasibility
Financial/Economic
Feasibility
Can we afford it, and
do benefits outweigh
costs?
Technical
Feasibility
Does the capability
exist in our company
to build it?
Organizational
Feasibility
Is it a good fit with
the organization?
Legal/Ethical
Feasibility
Should we do this?
Is it Legal?
The Big IS Development
Questions
• In order to support a complex organization,
businesses need complex information systems
that must be obtained in some way.
• Questions that must be asked:
–
–
–
–
?
?
?
?
Copyright 2007 John Wiley & Sons, Inc.
The Big Questions
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IS Project Feasible?
• If it is decided that an IS is needed, then the next step is
a __________ _______ which is a detailed investigation
and analysis of a proposed project.
• Is the project __________ _______ , that is, the
technology is available to solve the IS problem and the
company is technically capable of acquiring and using
the technology.
• IS the project __________ _______ , that is, is the
company is able to pay for the project, and the project
represents a good use of financial resources.
Copyright 2007 John Wiley & Sons, Inc.
Determining Financial Feasibility
• Organizations use financial measures to determine
financial feasibility. Examples of these include
– return on investment (ROI) – net present value (NPV) – internal rate of return (IRR) – payback period • Some costs and benefits are ________ and some are
________.
Copyright 2007 John Wiley & Sons, Inc.
Using Spreadsheets to Determine Financial
Feasibility
Copyright 2007 John Wiley & Sons, Inc.
Measuring Benefits and
Costs
• Infrastructure versus specific applications
– IT infrastructure provides the foundations for IT applications
•
•
•
•
data center
Networks
data warehouse
knowledge base
– Long-term, shared investments, spread across
– IT applications are specific systems and programs for specific tasks
• Payroll
• inventory control
• order taking
– Some departments, not others
• Evaluating IT investments
– Value of information in decision-making
– Traditional Cost-Benefit analysis (tangibles)
– Scoring Matrix or Scorecard (intangibles)
Evaluating the value of
information
• Difference between the net benefits (benefits
adjusted for costs) of decisions made using
information and the net benefits of decisions
made without information
• Assumption: Systems that provide relevant
information to support decision making will result
in better decisions, and therefore they will
contribute toward ROI. However, this may not
always be the case.
How to justify IT economically
• Financial Cost-benefit analyses
– Net Present Value (NPV)
• convert future values of benefits to their present-value eqivalent
• Discounted at the organization’s cost of funds
• Compare the present value of the figure benefits to the cost
required to achieve these benefits
– Return on Investment (ROI)
• measures the effectiveness of management in generating profits
with its available assets
• Calculated by dividing net income attributable to a project by the
average assets invested in the project
• How do you decide the costs and benefits, particularly of
options not taken?
“Costing” IT Investments evaluating
• Placing a dollar value on the cost of IT investments is
not simple – consider fixed costs.
• Life Cycle Cost; costs for keeping it running, dealing
with bugs, and for improving and changing the
system
• There are multiple kinds of values (tangible and
intangible)
– Improved efficiency
– Improved customer relations
– The return of a capital investment measured in dollars or
percentage
– etc.
• Probability of obtaining a return depends on the
probability of implementation success
Intangible benefits –
evaluating
• Intangible benefits
–
–
–
–
–
–
–
increased quality
faster product development
greater design flexibility
better customer service
improved working conditions for employees.
Difficult to quantify them with a monetary value
Complex but potentially substantial
• Evaluating Intangible Benefits
– Make rough estimates of monetary values for all intangible
benefits, and then conduct a NVP or similar financial
analysis.
– Scoring Matrix or Scorecard
Make or Buy/Lease
•
Organizations usually choose one of three primary
options for obtaining an IS:
1.
2.
3.
Acquisition
Lease
Build
•
Building an IS from scratch often ensures the best
match of IS with an organization’s requirements and is
the best option for obtaining competitive advantage.
•
Building an IS can also be a long and costly process.
•
When time and cost are most important criteria,
organizations then pursue acquisition or leasing.
Copyright 2007 John Wiley & Sons, Inc.
Acquisition, Leasing, or Building
Development Advantages
Choice
Disadvantages
Acquisition
Leasing
Building
Copyright 2007 John Wiley & Sons, Inc.
In-House or Outsource
If an organization chooses to build a new system, the next
question is to whether to use its own staff (in-house
development) or hire another company to do it
(outsourcing).
IS Development Advantages
source
Disadvantages
In-house Development
Outsourcing
Copyright 2007 John Wiley & Sons, Inc.
Stages and Activities of System
Development
Information systems go through a life cycle
composed of 7 seven phases:
1.
2.
3.
4.
5.
6.
7.
Pre-inception
Inception
Elaboration
Construction
Transition
Production
Retirement
Copyright 2007 John Wiley & Sons, Inc.
Life Cycle of an IS
Copyright 2007 John Wiley & Sons, Inc.
Seven Phases of IS Development
1. Pre-Inception:
2. Inception:
3. Elaboration:
4. Construction:
Copyright 2007 John Wiley & Sons, Inc.
Seven Phases of IS Development (cont.)
5. Transition:
6. Production:
7. Retirement:
Copyright 2007 John Wiley & Sons, Inc.
IS Development Disciplines
• Development disciplines - the group of activities that are
focused on ____________________________.
– Examples include business modeling, requirements gathering,
analysis and design, implementation, testing and deployment.
• Support disciplines - support the system over the
__________________________________________.
– Examples include configuration and change management,
project management, environmental scanning, and operations
and support.
• Enterprise disciplines - most active prior to the
______________________________.
– Examples include readiness to use IS to improve their
processes, create a promising environment for an IS project.
Copyright 2007 John Wiley & Sons, Inc.
Systems Analysis and Design
(SAD)
•
•
The process of completing an IS project
is known as systems analysis and
design (SAD).
Any SAD project involves four essential
ingredients:
1.
2.
3.
4.
Copyright 2007 John Wiley & Sons, Inc.
The Pillars of IS Development
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People Who Develop IS
• The size of an IS development team varies with
specific characteristics of the project.
• Most IS development teams possess the
following skills:
–
–
–
–
–
–
–
Project strategy
Project management
Account management
Architecture and design
Programming
Specialists
Client interface
Copyright 2007 John Wiley & Sons, Inc.
Project Team Skill Requirements
• Project strategy:
• Project management:
• Account management:
• Architecture and design:
• Programming:
• Specialists:
• Client interface:
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IS Project Team Technical Roles
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Stakeholder Analysis
• Stakeholder attitudes toward the project can dramatically
impact the project’s eventual success or failure.
• A stakeholder analysis should begin as part of the
feasibility study and should be continued during the
course of the project.
• A stakeholder analysis begins with a list of stakeholders,
including what each has at stake, as well as the degree
of impact each stakeholder can have on the project.
• The analysis should also to identify each stakeholder’s
attitude toward the project and any risks.
• A project manager should assign team members to
different stakeholders with an anticipated strategy for
dealing with each one.
Copyright 2007 John Wiley & Sons, Inc.
Example Stakeholder Analysis
Copyright 2007 John Wiley & Sons, Inc.
IS Methodology
• A methodology provides a framework for both the
management and technical processes of an IS project
• A methodology, sometimes known as a development
life cycle, provides a project team with structure to
ensure that everyone is working towards the same
project goals.
• The methodology will define most of the development
activities that are part of the plan developed by the
project manager.
• Initially, systems developers used an ad hoc approach
called the build-and-fix model in which the system was
built based on customer interview and then tested. It
often did not meet customer needs.
Copyright 2007 John Wiley & Sons, Inc.
Importance of Methodology to IS
Development
Advantages
Disadvantages
•Development fundamentals—methodologies help •Bureaucratic—Some
team use best practices.
methodologies can be overly
•Avoiding rework—process should avoid repeating rigid and bureaucratic
tasks in the event of changing requirements.
•Risk management—process helps to identify and
manage risks.
•Assures quality—helps detects errors earlier,
when they are easier to correct.
•Customer orientation—focuses on customers’
needs and desires
•Improved planning—makes it easy to identify and
organize the project activities
•Targeting resources—helps target resources
toward activities that need them.
Copyright 2007 John Wiley & Sons, Inc.
Traditional IS Methodology: the
Waterfall Model
• The first life cycle model to gain acceptance was
the Waterfall Model.
• Phases –
• Problems –
• Development activities -
Copyright 2007 John Wiley & Sons, Inc.
Traditional Waterfall Methodology
Copyright 2007 John Wiley & Sons, Inc.
Evolutionary Development Life Cycle
Copyright 2007 John Wiley & Sons, Inc.
Prototyping
• One approach to the evolutionary life cycle is to use
prototyping.
• What is prototyping?
• The prototyping process helps team members and users
better understand requirements.
• What problems can be associated with an evolutionary
life cycle approach?
Copyright 2007 John Wiley & Sons, Inc.
Two General Analysis
Strategies
• Asking Strategies
– Questionnaires
– Interviews
– Focus groups
• Deriving Strategies
– Form analysis
– Observation
A model of the prototyping
process
A rapid prototyping
development process versus
SDLC
IS Modeling
• You can think of a model as a simplified representation
of something real
– Examples of models in common use?
• Also, a model can be a set of mathematical equations, a
computer simulation, a graph or chart, or any of many
other types.
• For IS development, a model usually includes one or
more diagrams that developers use to examine,
evaluate, and adjust in order to understand the system
requirements and performance.
Copyright 2007 John Wiley & Sons, Inc.
Logical Analysis & Design
• Data Analysis & Design
– Entities & Relationships
– Tables
– E-R diagramming (we’ve already done this)
• Process Analysis & Design
– Procedures
– Programs
– Data Flow Diagrams (DFDs)
• Interface Design
–
–
–
–
Input Forms
Output Reports
Screens
We’ve done this already in Access
ERDs and Logical Data Models
Two types of models are commonly used to
designing the organization of relational
database:
• The Entity-Relationship Diagram (ERD) …
• The Logical Data Model …
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Partial (a) ERD and (b) Data Model for an
E-voting System
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Data Flow Diagrams
• A Data Flow Diagram is traditional IS
model that depicts how data move or flow
through a system.
• It includes
–
–
–
–
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Data Flow Diagram
Copyright 2007 John Wiley & Sons, Inc.
Logical Analysis & Design
• Data Analysis & Design
– Entities & Relationships
– Tables
– E-R diagramming (we’ve already done this)
• Process Analysis & Design
– Procedures
– Programs
– Data Flow Diagrams (DFDs)
• Interface Design
–
–
–
–
Input Forms
Output Reports
Screens
We’ve done this already in Access
Process Design - Context
DFD
KITCHEN
CUSTOMER
0
Customer Order
Receipt
Food
Ordering
System
Food Order
Management
Reports
RESTAURANT
MANAGER
Decomposition Diagram
0
Food
Ordering
System
1.0
Receive
Customer
Food Order
2.0
3.0
4.0
Update
Goods Sold
File
Update
Inventory
File
Produce
Management
Reports
Level 0 Data Flow Diagram
KITCHEN
CUSTOMER
Customer Order
Receipt
2.0
Update
Goods Sold
File
1.0
Receive
Customer
Food Order
Food Order
3.0
Update
Inventory
Goods
Inventory
File
Sold Data Data
Formatted
Formatted Goods
Inventory Data
Sold Data
D2 INVENTORY
GOODS
SOLD
FILE
D1
FILE
Daily Inventory
Daily Goods
4.0
Depletion Amounts
Sold Amounts
Produce
RESTAURANT
Management
Management MANAGER
Reports
Reports
Managing the IS Project
•
•
Project Management - “the application of knowledge
skills, tools, and techniques to project activities to meet
project requirements.”1
For IS development, a project manager oversees three
main project elements:
1.
2.
3.
1A
Guide to the Project Management Body of
Knowledge (PMBOK® Guide) 2000 Edition,
Chapter 1, p. 4, (2000)
Copyright 2007 John Wiley & Sons, Inc.
Elements of Project
Management
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Project Management Tasks
Four core functions lead to specific project
objectives:
1. Project scope management:
2. Time management:
3. Cost management:
4. Quality management:
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A Project Management
Framework
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Project Integration
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Project Time Management
Controlling the project schedule is second only to budgeting in
importance. The main activities of project time management
include:
– Activity definition:
– Activity sequencing:
– Activity duration estimating:
– Schedule development:
– Schedule control:
Copyright 2007 John Wiley & Sons, Inc.
Gantt Chart
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Risk Management
The job of risk management is to recognize,
address, and eliminate sources of risk before they
become a threat to the successful completion of the
project.
Common Areas of Project Risk
•Feature Creep
•Shortchanged quality
•Requirements gold-plating
•Overly optimistic schedule
•Inadequate design
•Silver-bullet syndrome
•Research-oriented
development
•Weak personnel
•Friction with customers
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Risk Management Matrix
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Responses to Risk
• Risk Transfer:
• Risk Deferral:
• Risk Reduction:
• Risk Acceptance:
• Risk Avoidance:
Copyright 2007 John Wiley & Sons, Inc.
Project Management Software
Project management (PM) software is designed to support and
automate the tasks of project management and to help project
managers make decisions.
•Low level packages: for entry-level users, include tools for basic
scheduling, project control, reporting, filtering and sorting.
Examples –
•Mid level packages: adds resource leveling, resource allocation,
cost control and flexible charting. For large projects with up to about
2,000 tasks.
Examples –
•High level packages: adds advanced functions including
scheduling by user-defined rules, programming languages, resource
management for multiple projects, and risk management.
Examples –
Copyright 2007 John Wiley & Sons, Inc.
PERT Chart
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Integrated Development Environments (IDEs)
Combines several important programming tasks into the same
package
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Modeling Tools and Code Generators
Copyright 2007 John Wiley & Sons, Inc.
Authoring Software Categories
Category
Description
Representative
Software
Database
(DBMS)
Oracle Database;
InterSystems
Caché, MySql, MS
Access
Web
Development
Macromedia
Dreamweaver; IBM
Websphere
Animation/video
Macromedia Flash
and Shockwave
Graphics
Adobe Photoshop
Audio Content
Adobe Audition
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Installation Conversion
Methods
Old System
New System
Old System
Old System
Old System
New System
New System
New System
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Parallel
Pilot
Phased
Plunge
CASE Tools
• What is Computer aided software
engineering (CASE)?
• CASE tools are integrated into a complete
package known as a CASE environment.
• A CASE environment can provide a
shared database, messaging system, and
support for consistent development style.
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CaseWise CASE Tool with Repository
Copyright 2007 John Wiley & Sons, Inc.