Agenda
-Developing a business case for software
-The make vs buy decision
-There is a broader theme in this decision which is usually referred to
as the boundary of the firm
-We will further discuss the decision of COTS vs customized software
Combining Customized and Packaged software
-There are a variety of sources for information systems.
Option 1:
Build Information System
Option 2:
Buy Prepackaged System
Option 3:
Outsource Development to Third Party
Option 4:
End-User Development
Making the business case
-What do we mean when we say the business case?
How does this create or make it more valuable (profitable)
-What are the questions we must ask?
-Will it decrease cost?
-Will it increase revenue?
-Will the change in profit outweigh the costs of development?
-With what certainty can we say that?
You can never know for certain because it is not measurable
before going into the system
-Will productivity be increased?
-How will we measure that?
The Productivity Paradox
-Recall, no correlation between IT investment and productivity has ever been
found
-Also recall Carr, how might we ensure that this does not happen to our firm?
-Actual Use
-Align the IT around the firm’s strategic advantage
-Minimize unintended use
Managing the Paradox
-Measurement
to see if this is successful
-Time Lags
learning curves, standardization of information
-Redistribution
We are really not growing but redistribute our resources, cannibalizes mail
order service to online service (ex. Netflix)
-Mismanagement
Strategic alignment in which we create problems on deployment
Making a Successful Business Case
-Faith- believe that is where the firm will go
Do you need a cost benefits analysis for an argument based on faith?
-Fear – If we don’t do this another firm will, what if this market dries up, etc
Do you need a cost benefits analysis for an argument based on fear?
Come on, how do you instill “fear” in an organization?
All customers die, competitive advantage is loss, etc
-Fact
A moment of disagreement
-I disagree rather strongly with the book here
-Faith and Fear arguments are powerful
-They can make you a lot of money
-Ultimately you will be more successful twinning these arguments with fact
-Example: Katrina and disaster recovery
Speculation remains the hallmark of a bankrupt intellect. Don’t sell you customers
snake oil.
The Systems Development Process
-Describe the systems development life cycle and its various phases.
Steps in Systems Development
Phase 1: System Identification, Selection, and Planning
Phase 2: System Analysis
Why do we move from here to here and what information is passed
Phase 3: System Design
When we design the firms we limit the amount of redundancies
To digitally align the firm around it’s strategic advantage
Phase 4: System Implementation
Critical Success Factors
Different levels of management
The most important person is the person on top and if he/she is on board it
is easy to get everyone else on board
System Conversion and Installation
-Parallel- Old and new systems are used at same time.
-Direct Old system is discontinued on one day, and the new is used on the
next.
-Phased- Parts of the new system are implemented over time.
-Pilot (single location)- Entire system is used in one location.
We might not want to build the system ourselves
Why?
-If this is not our core competency, why would we?
-Someone in the market can do it better for less!
Steps in External Acquisition
- Competitive bid process-find the best system for lowest possible price.
1. Systems planning and selection
2. Systems analysis
3. Development of a request for proposal
4. Proposal evaluation
5. Vendor selection
-The first two steps are similar to SDLC.
Development of a Request for Proposal (RFP)
We analysis the firm and figure out what is wrong
The proposal is sent out to all the
Proposal Evaluation
-Proposal evaluation- An assessment of proposals received from vendors.
-May include system demonstrations
-System benchmarking
-Standardized tests to compare different vendors
Vendor Selection
-Usually more than one system will meet the criteria
-Determine the best fit
-Need to prioritize/rank the proposed systems
-Best ranking system is chosen.
-Formal approach-devise a scoring system for the criteria
-Less formal approaches:
-Checklists
-Subjective processes
Multi-criteria Analysis
-Alternative projects and system design decisions can be assisted using
weighted multi-criteria analysis.
Ok, we have a vendor, what kind of system do we want?
-Three real ways to go
-SAAS
You can scale your software with your company
-Usually from an ASP
-COTS Solution
Low cost, standardized and packaged, and best practiced
-Customized implementation
It does exactly what the firm does
Application Service Providers (ASP)
-Problems we might be facing
Managing the software infrastructure is a complex task.
High operating costs
Scalability issues
-ASPs provide software as a service (SaaS)
Reduced need to maintain or upgrade software
Outsourcing Systems Development
Outsourcing systems development- Turning over responsibility for some or
all of an organization’s IS development and operations to an out side firm.
-Your IS solutions may be housed in their organization.
-Your applications may be run on their computers.
-They may develop systems to run on your existing computers (within your
organization)
Why Out sourcing?
-Cost and quality concerns
-Problems in IS performance
-Supplier pressure
-Simplifying, downsizing, and reengineering
-Financial factors
-Organizational culture
-Internal irritants
Managing the IS Outsourcing Relationship
-Ongoing management of an outsourcing alliance is needed