CHAPTER 10
Alternative Approach:
Purchasing Systems
10.1
© Prentice Hall 2002
SYSTEMS DEVELOPMENT
APPROACHES
• SYSTEMS DEVELOPMENT LIFE
CYCLE (SDLC)
• PROTOTYPING
• PURCHASED SOFTWARE
• OUTSOURCING (SYSTEMS
INTEGRATOR)
• END USER DEVELOPMENT
*
10.2
© Prentice Hall 2002
MAKE-OR -BUY DECISION
• ASSESS RISKS & BENEFITS
• MAKE: Use SDLC , prototyping, RAD if
organization has IS skills. Can save cost,
speed implementation
• BUY: If vendor offers acceptable product
and required support at lower cost, faster
time than in-house development could
provide. Usually system must be modified to
meet organization’s needs
10.3
*
© Prentice Hall 2002
THE PURCHASING
PROCESS
DEFINITION PHASE:
•
•
•
•
•
•
•
FEASIBILITY ANALYSIS
REQUIREMENTS DEFINITION
SHORT LIST OF PACKAGES
ESTABLISH EVALUATION CRITERIA
DEVELOP AND DISTRIBUTE RFP
CHOOSE PACKAGE
NEGOTIATE CONTRACT
10.4
*
© Prentice Hall 2002
THE PURCHASING
PROCESS
CONSTRUCTION PHASE:
• SYSTEM DESIGN: Package modification
• SYSTEM BUILDING: Package modification
• SYSTEM TESTING
IMPLEMENTATION PHASE:
• INSTALLATION
• OPERATIONS
• MAINTENANCE
10.5
*
© Prentice Hall 2002
REQUEST FOR PROPOSAL
(RFP)
• DOCUMENT SENT TO POTENTIAL
VENDORS INVITING THEM TO SUBMIT A
PROPOSAL TO FURNISH A SYSTEM
• PROVIDES DETAILED INFORMATION
ABOUT THE DESIRED SYSTEM, ITS
ENVIRONMENT, MATERIAL REQUIRED
FROM VENDOR, AND GENERAL CRITERIA
USED TO EVALUATE PROPOSALS
*
10.6
© Prentice Hall 2002
SAMPLE CONTENTS OF
RFP
1. INTRODUCTION:
A. STRUCTURE & SCOPE
B. OBJECTIVE
C. COMPANY BACKGROUND, PHILOSOPHY
D. HARDWARE/SOFTWARE ENVIRONMENT
E. CURRENT BUSINESS ENVIRONMENT
*
10.7
© Prentice Hall 2002
SAMPLE CONTENTS OF
RFP
II. GUIDELINES FOR RESPONSE:
A. GUIDELINES
B. VENDOR’S RESPONSE
C. GENERAL EVALUATION PROCESS
D. HARDWARE/SOFTWARE ENVIRONMENT
E. CURRENT BUSINESS ENVIRONMENT
*
10.8
© Prentice Hall 2002
SAMPLE CONTENTS OF
RFP
III. REQUIREMENTS:
A. VENDOR INFORMATION
B. VENDOR SUPPORT/TRAINING
C. DOCUMENTATION
D. PACKAGE HARDWARE & SYSTEM SOFTWARE
ENVIRONMENT
E. APPLICATION & DATABASE ARCHITECTURE
F. TUNING & MEASUREMENT
G. FUNCTIONAL REQUIREMENTS
10.9
*
© Prentice Hall 2002
SAMPLE CONTENTS OF
RFP
IV. COSTS:
A. SUMMARY
B.
C.
D.
E.
F.
NON-RECURRING
RECURRING
PRICE GUARANTEE
MAINTENANCE AGREEMENT
NEW RELEASES
V. SIGNATURE PAGE
*
10.10
© Prentice Hall 2002
MATCHING COMPANY NEEDS
WITH PACKAGE CAPABILITIES
COMPANY
NEEDS
PACKAGE
CAPABILITIES
IDENTIFY
DISCREPANCIES
CHOOSE
ALTERNATIVES
MODIFY
PACKAGE
10.11
CHANGE
COMPANY
LIVE WITH
PROBLEMS
© Prentice Hall 2002
ROLES FOR PURCHASING
PACKAGED APPLICATIONS
• PROJECT MANAGER: Manages process,
responsible for the success of the project, may be
user but IS expertise required
• VENDOR: Must be responsive to customer’s needs
• PURCHASING SPECIALIST: Helps prepare
RFP, assist in entire process
• ATTORNEYS: Oversee writing, approval of
contract
*
10.12
© Prentice Hall 2002
PURCHASING SOFTWARE
ADVANTAGES:
• REDUCED TIME TO IMPLEMENT
• LOWER OVERALL ACQUISITION
COSTS
• APPLICATION QUALITY
• REDUCED NEED FOR INTERNAL IS
RESOURCES
• INFUSION OF EXTERNAL
EXPERTISE
10.13
© Prentice Hall 2002
*
PURCHASING SOFTWARE
DISADVANTAGES:
• RISKS DUE TO LACK OF PACKAGE
KNOWLEDGE
• RISKS DUE TO EXTENT OF
ORGANIZATIONAL CHANGES
REQUIRED
• INITIAL & ONGOING DEPENDENCE
ON VENDOR
*
10.14
© Prentice Hall 2002
SPECIAL CASE: ENTERPRISE
RESOURCE PLANNING (ERP)
• INTERFACES CROSS SEPARATE
FUNCTIONAL SYSTEMS
• MUST SUPPORT CROSS-FUNCTIONAL
BUSINESS PROCESSES
• COMPLEX SYSTEMS TAKE YEARS TO
COMPLETE
• REQUIRES EXTENSIVE TRAINING
• HEAVY RELIANCE ON CONSULTANTS
*
10.15
© Prentice Hall 2002
CHAPTER 10
Alternative Approach:
Purchasing Systems
10.16
© Prentice Hall 2002