Business Driven Information Systems 2e
CHAPTER 11
SYSTEMS DEVELOPMENT
AND PROJECT
MANAGEMENT
McGraw-Hill/Irwin
©2009 The McGraw-Hill Companies, All Rights Reserved
SECTION 11.1
DEVELOPING
ENTERPRISE
APPLICATIONS
McGraw-Hill/Irwin
©2009 The McGraw-Hill Companies, All Rights Reserved
11-3
Nike SCM Failure
• The US-based Nike Corporation announced that it
had generated profits of $97.4 million, around $48
million below its earlier forecast for the third quarter
ended February 28, 2001.
• The company said that the failure in the supply
chain software installation by i2 Technologies was
the cause of this revenue shortfall.
11-4
Nike SCM Failure
• This admission of failure also affected the company's
reputation as an innovative user of technology.
– The supply chain software implementation was the first part of a huge
project to install an integrated ERP system from SAP, and customer
relationship management (CRM) software from Siebel Systems
– For over a year, Nike reeled as a result of this failure. i2 and Nike
blamed each other in public for the failure and this led to a further
downslide in the share price of both the companies.
– Analysts pointed to lapses in project management, too much
customization and an over reliance on demand forecasting software.
Nike insiders raised doubts about the Single Instance Strategy being
followed by Nike.
• Single Instance Strategy refers to one ERP application with one data
store that serves the entire company. Everything a company needs from
financials, order entry, supply chain to CRM comes from a single vendor.
11-5
Nike SCM Failure
• However, the company remained firm and relentlessly
pursued its Single Instance Strategy for SAP
implementation. The guiding instruction as put across by
Gordon Steele (Steele), CIO of Nike was that the "Single
Instance was a decision not a discussion."
• By 2004, the company had successfully implemented its
Nike Supply Chain (NSC) project, indicating that its
centralized planning, production and delivery processes
were right for the Single Instance Strategy. With this
success, Nike's Single Instance Strategy became the
desired approach for many companies implementing ERP
software. Nike used SAP for 95% of its global business.
11-6
DEVLOPING SOFTWARE
• Software that is built correctly can support agile
organizations and can transform as the
organization and its business transforms
• Software that effectively meets employee needs
will help an organization become more
productive and enhance decision making
• Software that does not meet employee needs
may have a damaging effect on productivity and
can even cause a business to fail
11-7
DEVELOPING SOFTWARE
• As organizations’ reliance on software grows, so do
the business-related consequences of software
successes and failures including:
– Increase or decrease revenue –Nike’s poorly designed SCM
software delayed orders, increased excess inventories, and caused
third quarter earnings to fall 24% below expectations
– Repair or damage to brand reputation – H&R Block customers
were furious when the company accidentally posted passwords and
social security numbers to its Web site
– Prevent or incur liabilities – FoxMeyer sued SAP for $500 million
for an ERP failure
– Increase or decrease productivity – Defective software accounts
for 45% of computer downtime and cost U.S. businesses $100 billion
in 2003
11-8
THE SYSTEMS DEVELOPMENT
LIFE CYCLE (SDLC)
• Systems
development life
cycle (SDLC) – the
overall process for
developing
information systems
from planning and
analysis through
implementation and
maintenance
11-9
THE SYSTEMS DEVELOPMENT
LIFE CYCLE (SDLC)
1. Planning phase – involves establishing a
high-level plan of the intended project and
determining project goals
2. Analysis phase – involves analyzing enduser business requirements and refining
project goals into defined functions and
operations of the intended system
•
Business requirement – detailed set of business
requests that the system must meet in order to be
successful
11-10
THE SYSTEMS DEVELOPMENT
LIFE CYCLE (SDLC))
3. Design phase – involves describing the
desired features and operations of the system
including screen layouts, business rules,
process diagrams, pseudo code, and other
documentation
4. Development phase – involves taking all of
the detailed design documents from the
design phase and transforming them into the
actual system
11-11
THE SYSTEMS DEVELOPMENT
LIFE CYCLE (SDLC)
5. Testing phase – involves bringing all the
project pieces together into a special testing
environment to test for errors, bugs, and
interoperability and verify that the system
meets all of the business requirements
defined in the analysis phase
6. Implementation phase – involves placing the
system into production so users can begin to
perform actual business operations with the
system
11-12
THE SYSTEMS DEVELOPMENT
LIFE CYCLE (SDLC)
7. Maintenance phase – involves
performing changes, corrections,
additions, and upgrades to ensure the
system continues to meet the business
goals
11-13
SOFTWARE DEVELOPMENT
METHODOLOGIES
•
There are a number of different software
development methodologies including:
–
–
–
–
–
–
Waterfall
Agile
Rapid application development (RAD)
Extreme programming
Rational unified process (RUP)
Scrum
11-14
Waterfall Methodology
•
Waterfall
methodology –
an activity-based
process in which
each phase in the
SDLC is
performed
sequentially from
planning through
implementation
and maintenance
11-15
Waterfall Methodology
• The waterfall methodology is one of the oldest software
development methods and has been around for over 30
years
• The success rate for software development projects that
follow this approach is only about 10 percent, or 1 in 10
• The biggest problem with the waterfall methodology is that it
assumes users can specify all business requirements in
advance
• It also assumes that business requirements do not
change over time
• If you ever find yourself on a software development project
that is using the waterfall methodology, do everything you
can to change the methodology
11-16
Agile Methodology
•
Agile methodology – aims for customer
satisfaction through early and continuous
delivery of components developed by an
iterative process
– An agile project sets a minimum number of
requirements and turns them into a deliverable
product
– Iterative development – consists of a series of
tiny projects
11-17
Agile Methodology
•
The Agile Alliance http://www.agilealliance.org/ is a group of
software developers whose mission is to improve software
development processes and whose manifesto includes
the following:
– Satisfy the customer through early and continuous
delivery of valuable software
– Welcome changing requirements, even late in
development
– Business people and developers must work together daily
throughout the project
– Build projects around motivated individuals
– The best architectures, requirements, and designs
emerge from self-organizing teams
– At regular intervals, the team reflects on how to become
more effective, then tunes and adjusts its behavior
accordingly
11-18
DEVELOPING SUCCESSFUL
SOFTWARE
•
Primary principles for successful agile software
development include:
–
–
–
–
–
Slash the budget – Small budgets force developers and users to
focus on the essentials
If it doesn’t work, kill it – Bring all key stakeholders together to
evaluate and assess the software
Keep requirements to a minimum – Start each project with what
the software must absolutely do
Test and deliver frequently – As often as once a week, and not
less than once a month, complete a part of the project or a piece of
software
Assign non-IT executives to software projects – Non-IT
executives should coordinate with the technical project manager,
test iterations to make sure they are meeting user needs, and act
as liaisons between executives and IT
11-19
Agile Methodology
11-20
Rapid Application Development
Methodology (RAD)
•
Rapid application development methodology
(RAD) – emphasizes extensive user involvement
in the rapid and evolutionary construction of
working prototypes of a system to accelerate the
systems development process
•
The prototype is an essential part of the analysis
phase when using a RAD methodology
–
Prototype – a smaller-scale representation or working
model of the users’ requirements or a proposed design
for an information system
11-21
Rapid Application Development
Methodology (RAD)
• RAD is a more popular route for system
development projects
• Fundamentals of RAD
– Focus initially on creating a prototype that
looks and acts like the desired system
– Actively involve system users in the analysis,
design, and development phases
– Accelerate collecting the business
requirements through an interactive and
iterative construction approach
11-22
Extreme Programming
Methodology
•
Extreme programming (XP) methodology – breaks a project into tiny
phases, and developers cannot continue on to the next phase until the
first phase is complete
–
The primary difference between the waterfall and XP methodologies is
that XP divides its phases into iterations with user feedback
11-23
Extreme Programming
Methodology
• XP emphasizes that the faster the
communication or feedback, the better the
results
• Stresses customer satisfaction and empowers
the developers to respond to changing customer
and business requirements even late in the
systems development life cycle
• Managers, developers and customers are all
part of a team dedicated to to delivering quality
software
11-24
Extreme Programming
Methodology
• XP consists of
• Planning – user stories, stand-up meetings
and small releases
• Design – stresses not to add functionality
until it is needed
• Coding – user is always available for
feedback, developers work in pairs and the
code is written to an agreed standard
• Testing – tests are written before the code
11-25
Rational Unified Process
(RUP) Methodology
• Rational Unified Process (RUP) – provides a
framework for breaking down the development
of software into four gates
– Gate One: Inception –inception of the business
case, assures all stakeholders have a shared
understanding of the system
– Gate Two: Elaboration – details of the system,
architecture to support system
– Gate Three: Construction
– Gate Four: Transition – ownership and training
11-26
Rational Unified Process
(RUP) Methodology
• Because RUP is an iterative methodology, the
user can reject the product and force the
developers to go back to gate one.
• Approximately 500,000 developers have used
RUP in software projects of varying sizes in the
20 years it’s been available, according to IBM.
• RUP helps developers avoid reinventing the
wheel and focuses on rapidly adding or removing
reusable chunks of processes addressing
common problems.
11-27
SCRUM Methodology
• SCRUM – uses small teams to produce
small pieces of deliverable software using
sprints, or 30-day intervals, to achieve an
appointed goal
• Under this methodology, each day ends or
begins with a stand-up meeting to monitor
and control the development effort
11-28
SCRUM Methodology
• Primavera Systems, Inc., a software solutions company
was finding it increasingly difficult to use the traditional
waterfall methodology for development so it moved to an
agile methodology.
• Scrum’s insistence on delivering complete increments of
business value in 30-day learning cycles helped the
teams learn rapidly.
• It forced teams to test and integrate experiments and
encouraged them to release them into production.
• Primavera’s shift resulted in highly satisfied customers
and a highly motivated, energetic development
environment.
11-29
DEVELOPING SUCCESSFUL
SOFTWARE
•
Primary principles for successful agile software
development include:
– Slash the budget – Small budgets force developers and users to
focus on the essentials
– If it doesn’t work, kill it – Bring all key stakeholders together to
evaluate and assess the software
– Keep requirements to a minimum – Start each project with what
the software must absolutely do
– Test and deliver frequently – As often as once a week, and not
less than once a month, complete a part of the project or a piece of
software
– Assign non-IT executives to software projects – Non-IT
executives should coordinate with the technical project manager, test
iterations to make sure they are meeting user needs, and act as
liaisons between executives and IT
SECTION 11.2
PROJECT
MANAGEMENT
McGraw-Hill/Irwin
©2009 The McGraw-Hill Companies, All Rights Reserved
11-31
MANAGING SOFTWARE
DEVELOPMENT PROJECTS
• Analysts predict investment in IT projects worldwide
through 2010 will be over $1 trillion
• 70 percent will be lost due to failed projects
• The consequences of failed projects include:
–
–
–
–
–
Damaged brand
Lost goodwill
Dissolution of partnerships
Lost investment opportunities
Low morale
• According to the Standish Group, just 29 percent of IT
projects were completed on time, within budget, and
with features and functions originally specified by the
customer to deliver business value.
11-32
MANAGING SOFTWARE
DEVELOPMENT PROJECTS
• With so many skilled and knowledgeable IT
professionals at the helm of IT projects, how
can this happen?
– Organizations adopt projects that do not align
with mission-critical initiatives
– They over commit financial and human capital
– They sign off on low-value projects that consume
valuable and scarce resources
– They agree to support projects that are poorly
defined from requirements to planning.
11-33
The Triple Constraint
•
Project management interdependent variables
11-34
The Triple Constraint
• These three variables are interdependent
• You cannot change one without changing the
others
– For example, decreasing a project’s timeframe means
either increasing the cost of the project or decreasing
the scope of the project to meet the new deadline
– Increasing a project’s scope means either increasing
the project’s timeframe or increasing the project’s cost
– or both – to meet the increased scope changes
• Project management is the science of making
intelligent trade-offs among time, cost, and scope
11-35
The Triple Constraint
• Benjamin Franklin’s timeless advice - by failing to
prepare, you prepare to fail - applies to software
development projects
• A successful project is typically on time, within
budget, meets the business’s requirements, and
fulfills the customer’s needs.
• A recent survey concluded that the failure rate of
IT projects is much higher in organizations that
do not exercise disciplined project management
11-36
The Triple Constraint
• The Hackett Group, an Atlanta-based
consultancy, analyzed its client database, which
includes 2,000 companies, including 81 Fortune
100 companies, and discovered:
– Three in 10 major IT projects fail
– 21 percent of the companies state that they
cannot adjust rapidly to market changes
– One in four validates a business case for IT
projects after completion
11-37
The Triple Constraint
•
Common reasons why IT projects fall
behind schedule or fail
11-38
PROJECT MANAGEMENT
FUNDAMENTALS
•
Project – temporary endeavor undertaken to
create a unique product, service, or result
•
Project management – the application of
knowledge, skills, tools, and techniques to
project activities to meet project requirements
–
Project management offers a strategic framework
for coordinating the numerous activities associated
with organizational projects
11-39
PROJECT MANAGEMENT
FUNDAMENTALS
• The Project Management Institute (PMI)
develops procedures and concepts
necessary to support the profession of project
management (www.pmi.org) and has three
areas of focus:
1. The distinguishing characteristics of a practicing
professional (ethics)
2. The content and structure of the profession’s
body of knowledge (standards)
3. Recognition of professional attainment
(accreditation)
11-40
PROJECT MANAGEMENT
FUNDAMENTALS
•
Project deliverable – any measurable, tangible,
verifiable outcome, result, or item that is
produced to complete a project
•
Project milestone – represents key dates when
a certain group of activities must be performed
•
Project manager – an individual who is an
expert in project planning and management
•
Project management office (PMO) – an
internal department that oversees all
organizational projects
11-41
PROJECT MANAGEMENT
FUNDAMENTALS
• Project management take all of these activities and ensure they flow
smoothly to develop and deliver a successful project
11-42
PROJECT MANAGEMENT
FUNDAMENTALS
11-43
CHOOSING STRATEGIC PROJECTS
• Project stakeholders - individuals and
organizations actively involved in the
project or whose interests might be
affected as a result of project execution or
project completion
• Executive sponsor - the person or group
who provides the financial resources for
the project
11-44
CHOOSING STRATEGIC PROJECTS
• Research has shown that the leadership strength of
the executive sponsor has more do to with the
success or failure of a project than any other critical
success factor.
• The executive sponsor communicates up the chain on
behalf of the project;
• He or she supports the project manager by
championing the project to others sharing the vision
and benefit of the successfully completed project;
• The executive sponsor demonstrates the commitment
and accountability necessary to survive a project.
– If a team has a hands-off sponsor who merely reviews
invoices and inquires as to the status of a project, then that
project surely is in trouble from the start
11-45
CHOOSING STRATEGIC PROJECTS
• Which technique is the most important
when choosing strategic projects?
1. Focus on organizational goals—Managers
are finding tremendous value in choosing
projects that align with the organization’s goals.
Projects that address organizational goals tend
to have a higher success rate since they are
important to the entire organization.
11-46
CHOOSING STRATEGIC PROJECTS
2. Categorize projects
–Problem, opportunity, and directives.
• Problems are undesirable situations that prevent an
organization from achieving its goals.
• Opportunities are chances to improve the organization.
• Directives are new requirements imposed by
management, government, or some other external
influence.
• It is often easier to obtain approval for projects that
address problems or directives because the
organization must respond to these categories to avoid
financial losses.
11-47
CHOOSING STRATEGIC PROJECTS
3. Perform a financial analysis—A number of
different financial analysis techniques can be
performed to help determine a project’s priority. A
few of these include
– net present value
–return on investment
–payback analysis.
These financial analysis techniques help determine
the organization’s financial expectations for the
project
11-48
UNDERSTANDING PROJECT
PLANNING
• After selecting strategic projects and
identifying a project manager the next
critical component is the project plan
• Building a project plan involves two key
components:
– Project charter
– Project plan
11-49
UNDERSTANDING PROJECT
PLANNING
• No one would think of building an office complex by turning
loose 100 different construction teams to build 100 different
rooms, with no single blueprint or agreed-upon vision of the
completed structure.
• Yet this is precisely the situation in which many large
organizations find themselves when managing information
technology projects.
• Organizations routinely overschedule their resources (human
and otherwise), develop redundant projects, and damage
profitability by investing in nonstrategic efforts that do not
contribute to the organization’s bottom line.
• Project management offers a strategic framework for
coordinating the numerous activities associated with
organizational projects.
11-50
Project Charter
• Project charter - a document issued by the
project initiator or sponsor that formally
authorizes the existence of a project and
provides the project manager with the
authority to apply organizational resources to
project activities and includes:
–
–
–
–
Project scope
Project objectives
Project constraints
Projects assumptions
11-51
Project Charter
• Project scope defines the work that must be
completed to deliver a product with the
specified features and functions.
• A project scope statement describes the
business need, justification, requirements,
and current boundaries for the project.
– The business need can be characterized by the
problem the results of the project will satisfy. This
is important in linking the project with the
organization’s overall business goals
– The project scope statement includes constraints,
assumptions, and requirements—all components
necessary for developing accurate cost estimates.
11-52
Project Charter
• Project objectives - quantifiable criteria that
must be met for the project to be considered a
success.
• Project constraints – specific factors that
can limit options. They include: budget,
delivery dates, available skilled resources,
and organizational policies.
• Project assumptions - factors that are
considered to be true, real, or certain without
proof or demonstration. Examples include
hours in a workweek or time of year the work
will be performed.
11-53
Project Charter
•
SMART criteria are useful reminders on
how to ensure that the project has created
understandable and measurable
objectives
11-54
Project Charter
• What happens when objectives are not SMART
–If an objective is not specific then it is open to
interpretation
–If an objective is not measurable then there is no way to
determine if the project is on track
–If an objective is not agreed upon then chances are high
the project will fail
–If an objective is not realistic then chances are high that
the project will fail
–If an objective does not include a time frame then there is
no way to determine if the project is on track
11-55
Project Charter
–Why is the following not SMART?
• I will work hard this semester to achieve my
goals?
• Does not state what the goals are
• Does not state how to measure working hard
• Might not be realistic depending on the goals
• Does have a time frame of a semester
11-56
Project Plan
•
Project plan – a formal, approved document that
manages and controls project execution
–
•
A project plan should be prepared by the team, rather
than by the individual project manager. WHY?
A well-defined project plan should be:
–
–
–
–
Easy to understand and read
Communicated to all key participants
Appropriate to the project’s size, complexity, and
criticality
Prepared by the team, rather than by the individual
project manager
11-57
Project Plan
11-58
Project Plan
•
Two primary diagrams used in project planning
include PERT and Gantt charts
–
PERT (Program Evaluation and Review Technique)
chart – a graphical network model that depicts a
project’s tasks and the relationships between those
tasks
– Dependency – a logical relationship between the project
tasks, or between a project task and a milestone
» Dependencies inform the project manager of tasks
associated with or affected by another task
– Critical path – a path from the start to the finish that passes
through all the tasks that are critical to completing the project
in the shortest amount of time
–
Gantt chart – a simple bar chart that depicts project
tasks against a calendar
11-59
Project Plan
•
PERT Chart EXPERT – PERT Chart Example
11-60
Project Plan
•
MS Project – Gantt Chart Example
11-61
MANAGING PROJECTS
• Project manager - an individual who is an
expert in project planning and management,
defines and develops the project plan, and
tracks the plan to ensure the projects is
completed on time and on budget
•
Project milestones - represent key dates
when a certain group of activities must be
performed
11-62
MANAGING PROJECTS
• Managing a project includes:
– Identifying requirements
– Establishing clear and achievable objectives.
– Balancing the competing demands of quality,
scope, time, and cost
– Adapting the specifications, plans, and
approach to the different concerns and
expectations of the various stakeholders
11-63
MANAGING PROJECTS
• A project manager can bring enormous
benefits to an organization such as reduced
project expense, high company morale, and
quicker time to market.
• A competent project manager sets the
correct expectations early in the project with
achievable milestones
• A project manager must focus on managing
three primary areas to ensure success:
– Managing people
– Managing communications
– Managing change
11-64
MANAGING PROJECTS
• Managing People
– Managing people is one of the hardest and most critical efforts a
project manager undertakes. Resolving conflicts within the team
and balancing the needs of the project with the personal and
professional needs of the team are two of the challenges facing
project managers.
• Managing Communications
– While many companies develop unique project management
frameworks based on familiar project management standards, all
of them agree that communication is the key to excellent project
management. This is quite easy to state, but not so easy to
accomplish!
• Managing Change
– Change, whether it comes in the form of a crisis, a market shift,
or a technological development, is challenging for all
organizations. Successful organizations and successful people
learn to anticipate and react appropriately to change.
11-65
MANAGING PROJECTS
•
Change management – a set of techniques
that aid in evolution, composition, and policy
management of the design and
implementation of a system
–
–
Change management system – a collection of
procedures to document a change request and
define the steps necessary to consider the change
based on the expected impact of the change
Change control board (CCB) – responsible for
approving or rejecting all change requests
11-66
MANAGING PROJECTS
• Common reasons change occurs
–
–
–
–
–
–
–
–
–
–
–
An omission or misunderstanding in defining initial scope
Availability of better technology
Shifts in planned technology
Users needs and requests
A resources quits or becomes ill
Management reducing funding
Company changes strategic direction
Leadership changes
Environment changes
Regulations or laws change
Problems with external vendor
11-67
Preparing for Change
•
Guidelines for effectively dealing with change
management
1. Institute change management polices -Create
clearly defined policies and procedures that must
be followed each time a request for change is
received
2. Anticipate change - View change as an
opportunity and embrace it
3. Seek change - Every 6 to 12 months look for
changes that may be windows of opportunity.
Review successes and failures to determine if
there are any opportunities for innovation
11-68
OUTSOURCING PROJECTS
• Insourcing (in-house-development) – a common
approach using the professional expertise within an
organization to develop and maintain the
organization's information technology systems
• Outsourcing – an arrangement by which one
organization provides a service or services for
another organization that chooses not to perform
them in-house
– BP Petroleum cut IT costs by 40% globally over the first 3
years of outsourcing and continueat a 10% reduction
year after year, leading to hundreds of millions of dollars
of savings
• Internet Tutors from India Aid U.S. Kids with Math
– http://www.npr.org/templates/story/story.php?storyId=4497026
11-69
OUTSOURCING PROJECTS
11-70
OUTSOURCING PROJECTS
• Reasons companies outsource
11-71
OUTSOURCING PROJECTS
• Onshore outsourcing –
engaging another company
within the same country for
services
• Nearshore outsourcing –
contracting an outsourcing
arrangement with a company
in a nearby country
• Offshore outsourcing –
using organizations from
developing countries to write
code and develop systems
11-72
OUTSOURCING PROJECTS
• Big selling point for offshore outsourcing “inexpensive
good work”
– Does outsourcing always guarantee inexpensive good work?
11-73
OUTSOURCING PROJECTS
• Factors driving outsourcing growth
include:
– Core competencies
– Financial savings
– Rapid growth
– Industry changes
– The Internet
– Globalization
11-74
OUTSOURCING PROJECTS
• Core competencies.
– Many companies have recently begun to
consider outsourcing as a means to fuel
revenue growth rather than just a cost-cutting
measure.
– Outsourcing enables an organization to
maintain an up-to-date technology
infrastructure while freeing it to focus on
revenue growth goals by reinvesting cash and
human capital in areas offering the greatest
return on investment.
11-75
OUTSOURCING PROJECTS
• Financial savings.
– It is typically cheaper to hire workers in China
and India than similar workers in the United
States.
– Technology is advancing at such an
accelerated rate that companies often lack the
resources, workforce, or expertise to keep up.
– It is close to impossible for an IT department
to maintain a “best-of breed” status, especially
for small and medium-sized enterprises where
cost is a critical factor.
11-76
OUTSOURCING PROJECTS
• Rapid growth.
– A company’s sustainability depends on both
speed to market and ability to react quickly to
changes in market conditions.
– By taking advantage of outsourcing, an
organization is able to acquire best-practices
process expertise.
– This facilitates the design, building, training, and
deployment of business processes or functions.
11-77
OUTSOURCING PROJECTS
• Industry changes.
– High levels of reorganization across industries have
increased demand for outsourcing to better focus on
core competencies.
– The significant increase in M&A activity created a
sudden need to integrate multiple core and noncore
business functions into one business, while the
deregulation of the utilities and telecom industries
created a need to ensure compliance with government
rules and regulations.
– Companies in either situation turned to outsourcing so
they could better focus on industry changes at hand.
11-78
OUTSOURCING PROJECTS
• The Internet.
– The pervasive nature of the Internet as an effective
sales channel has allowed clients to become more
comfortable with outsourcing. Barriers to entry, such
as lack of capital, are dramatically reduced in the
world of e-business due to the Internet. New
competitors enter the market daily.
• Globalization.
– As markets open worldwide, competition heats up.
Companies may engage outsourcing service
providers to deliver international services
11-79
OUTSOURCING PROJECTS
• Best Buy is the number one U.S. specialty retailer
for consumer electronics, personal computers,
entertainment software, and appliances
– Best Buy outsourced its enterprise systems to
Accenture
– The results of this outsourcing arrangement included a
20 percent increase in revenue which translated into a
$25 million profit
• According to PricewaterhouseCoopers
“Businesses that outsource are growing faster,
larger, and more profitable than those that do not”
11-80
OUTSOURCING PROJECTS
• Most organizations outsource their noncore
business functions, such as payroll and IT
11-81
Outsourcing Benefits
 Increased quality and efficiency of a process, service,
or function.
 Reduced operating expenses.
 Resources focused on core profit-generating
competencies.
 Reduced exposure to risks involved with large capital
investments.
 Access to outsourcing service provider’s economies
of scale.
 Access to outsourcing services provider’s expertise
and best-in-class practices.
11-82
Outsourcing Benefits
 Access to advanced technologies.
 Increased flexibility with the ability to respond quickly
to changing market demands.
 No costly outlay of capital funds.
 Reduced head count and associated overhead
expense.
 Reduced frustration and expense related to hiring
and retaining employees in an exceptionally tight job
market.
 Reduced time to market for products or service
11-83
Outsourcing Challenges
– Contract length
1. Difficulties in getting out of a contract
2. Problems in foreseeing future needs
3. Problems in reforming an internal IT department after the
contract is finished
– Competitive edge – Effective and innovative use of IT
can be lost when using an outsourcing service provider
– Confidentiality – Confidential information might be
breached by an outsourcing service provider, especially
one that provides services to competitors
– Scope definition – Scope creep is a common problem
with outsourcing agreements
11-84
Business Requirements Analysis
• You have been hired to build an employee payroll system for a
new coffee shop. Review the following business requirements
and highlight any potential issues
– 1. All employees must have a unique employee ID.
– 2. The system must track employee hours worked based on employee’s last
name.
– 3. Employees must be scheduled to work a minimum of eight hours per day.
– 4. Employee payroll is calculated by multiplying the employee’s hours
worked by $7.25.
– 5. Managers must be scheduled to work morning shifts.
– 6. Employees cannot be scheduled to work more than eight hours per day.
– 7. Servers cannot be scheduled to work morning, afternoon, or evening
shifts.
– 8. The system must allow managers to change and delete employees from
the system.