MANAGING
INFORMATION
TECHNOLOGY
FIFTH EDITION
CHAPTER 11
METHODOLOGIES
FOR PURCHASED
SOFTWARE PACKAGES
E. Wainright Martin  Carol V. Brown  Daniel W. DeHayes
Jeffrey A. Hoffer  William C. Perkins
THE MAKE-OR-BUY DECISION
 Decision should be made jointly by business
managers and IS professionals
 Advantages of purchasing:
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Cost savings
Faster speed of implementation
 Disadvantages of purchasing:
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Seldom exactly fits a company’s needs
Often forces trade-offs
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The Purchasing Steps
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Figure 11.1 The Purchasing Process
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Initiating the Purchasing Process
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Figure 11.2 Comparison of Costs and
Building vs. Purchasing a System
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Establish Criteria for Selection
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Figure 11.3 Key Criteria for
Software Package Selection
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Develop and Distribute the RFP
Request for proposal (RFP) – a formal document sent to
potential vendors inviting them to submit a proposal
describing their software package and how it would meet
the company’s needs
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Develop and Distribute the RFP
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Figure 11.4 Sample RFP Table of Contents
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Evaluate Vendor Responses to RFP and Choose Package
 Evaluation steps:
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Review vendors’ responses from RFPs
Request demonstrations of leading packages
Request references from users of software
packages in other companies
Assess how well package capabilities satisfy
company’s needs
Understand extent of any additional development
efforts or costs to tailor software
Make decision
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Evaluate Vendor Responses to RFP and Choose Package
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Figure 11.6 Matching Company Needs
with Capabilities of the Package
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Construction Phase
 If no software package modifications required:
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Skip system design and building steps
Move directly to system testing
Develop any necessary process changes
 If software package is modified:
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Consider contracting with vendor or a third party for
changes versus modifying in-house
Determine if changes are required to other existing
company systems
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Project Team for Purchasing Packages
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Business managers and users
IS professionals
Project manager – usually a business manager
Software vendor personnel
Sometimes includes a third-party implementation
partner
Purchasing specialists
Attorneys
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PURCHASING METHODOLOGY
Purchasing Advantages and Disadvantages
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Figure 11.7 Advantages and Disadvantages
of Purchasing Packaged Software
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SPECIAL CASE: ENTERPRISE
SYSTEM PACKAGES
 Enterprise Resource Planning (ERP)
system packages:
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Companies purchase to achieve business
benefits and IT platform benefits
Enables access to integrated data for
better decision making
Often require heavy reliance on third-party
consultants
Implementation efforts usually complex,
and sometimes not successful
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SPECIAL CASE: ENTERPRISE
SYSTEM PACKAGES

Factors that need to be managed well for ERP
implementation to be successful:
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Top management is engaged in the project, not just
involved
Project leaders are veterans, and team members are
decision makers
Third parties fill gaps in expertise and transfer their
knowledge
Change management goes hand-in-hand with project
planning
A satisfying mindset prevails
Brown and Vessey, 2003
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NEW PURCHASING OPTION:
APPLICATION SERVICE
PROVIDERS (ASPs)

New trend beginning 2000s

Purchasing option: purchaser elects to use a
“hosted” application rather than to purchase the
software application and host it on its own
equipment

ASP is an ongoing service provider

Company pays third party (ASP) for delivering the
software functionality over the Internet to company
employees and sometimes business partners
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NEW PURCHASING OPTION:
APPLICATION SERVICE
PROVIDERS (ASPs)

Some advantages:
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Cost savings and faster speed of implementation
Usually involves monthly fees rather than large
infrastructure investment
Disadvantages:
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Dependence on an external vendor for both software and
ongoing operations
Good assessment of required service levels even more
critical
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