Chapter 13 - Choices in Systems Acquistion

7/31/2019 Chapter 13 - Choices in Systems Acquistion

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Chapter 13: Choices in Systems

Acquisition

Management Information Systems, FifthEdition


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Management Information Systems, Fifth Edition 2

Objectives

Explain the differences among the alternatives totailored system development: outsourcing,licensing ready-made software, contracting with

an application service provider, and encouragingusers to develop their own applications

List the business trade-offs in the variousmethods of acquiring systems


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Objectives (continued)

Describe which systems acquisition approach isappropriate for a particular set of circumstances

Discuss organizational policies on employeecomputer use


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Options and Priorities

Four alternatives to in-house development

Outsourcing

Licensing

Using ASP Allow users to develop

Deciding factor usually cost

License low cost and immediately available Best choice

ASP immediately available and small startup fee


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Options and Priorities (continued)

Third best option is allowing users to develop

Outsource if non-IT employees cannot developIS

Many factors in addition to cost and quality

Alternatives not fully comparable


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Options and Priorities (continued)

Figure 13.1: Alternatives to in-house development of ISs


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Outsourcing

Outsourcing has two meanings:

Commission development of application to otherorganization

Hire services of other company to manageservices

May not encompass development



Outsourcing Custom-DesignedApplications

Custom-designed: developed specifically fororganization

More expensive

Several advantages

Good fit to need

Good fit to culture

Dedicated maintenance

Smooth interface

Specialized security

Potential for strategic advantage



Outsourcing Custom-DesignedApplications (continued)

Figure 13.2: Advantages and disadvantages of custom-designed applications



Outsourcing Custom-DesignedApplications (continued)

Tailored development requires organization tofund all costs

IS personnel constantly in use

Production schedules may be delayed

Less likely to be compatible with otherorganizations

Offshoring: outsourcing to India, China,Philippines, etc.


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Outsourcing IT Services

Many businesses turn to IT companies for long-term services

Purchasing and maintaining hardware

Developing Maintaining and operating Web sites

Staffing help desks

Running IT daily operations

Managing customer and supplier relations Business process outsourcing: outsourcing

routine processes


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Outsourcing IT Services (continued)

Some companies realize IT is not primary focus

Pace of development in IT requires high level ofexpertise

Growing portion of IS budget allocated foroutsourced services

Popular IT service providers IBM

EDS

Accenture Unisys

AT&T


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Figure 13.3: Typical outsourced IT services


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Outsourcing companies known as vendors

Typically long-term contractual relationship

7-10 years

Clients often bound by obsolete contracts

Can renegotiate


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Advantages of Outsourcing IT Services

Several advantages of outsourcing

Improved financial planning

Know exact cost of IS functions

Reduced license and maintenance fees

IS professionals pay discounted prices for tools

Increased attention to core business

Executives dont have to manage


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Advantages of Outsourcing IT Services(continued)

Figure 13.4: Expected benefits from IT outsourcing


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Advantages of Outsourcing IT Services(continued)

Advantages of outsourcing

Shorter implementation cycles

IT vendors complete new applications faster

Reduction of personnel and fixed costs

Increased access to highly qualified know-how

Availability of ongoing consulting as part of

standard support Sometimes outsourcing does not save client

money


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Risks of Outsourcing IT Services

Disadvantages of outsourcing

Loss of control

High risk in quickly changing industry

Loss of experienced employees

Transfer employees to vendor

Risks of losing a competitive advantage

May disclose trade secrets


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Risks of Outsourcing IT Services(continued)

Figure 13.5: Risks of outsourcing are higher at higher levels of decision making


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Risks of Outsourcing IT Services(continued)

Disadvantages of outsourcing

High price

Outsourcing may cost more than in-house

development Important to clearly define contract terms

Service-level agreement: most importantelement of agreement

List of services vendor will meet


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Licensing Applications

Purchased software usually licensed

Large selection of high-quality packagedsoftware

Two groups

Inexpensive office helpers

Large applications supporting whole organization

May cost millions


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Software Licensing Benefits

Licensing benefits Immediate system availability

High quality

Low price Available support

Beta version: software to be tested bycompanies

Up to 1 year of free service

Installation specialists needed


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Software Licensing Risks

Software licensing has risks Loose fit between needs and features

Comply with company needs

Difficulty in modifications

Bankruptcy of vendor

Maybe left without support and maintenance

High turnover of vendor personnel

Turnover among IS professionals is high


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Steps in Licensing Ready-MadeSoftware

Selecting software involves large moneyinvestment

Project management team responsibilities

Identify problem or opportunity Define functional requirements

Identifying potential vendors

Trade shows

Soliciting vendor information Request for information (RFI): request

informal information about product


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Steps in Licensing Ready-MadeSoftware (continued)

Figure 13.6: Steps in licensing software


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Responsibilities of selecting vendor

Defining system requirements

Requesting vendor proposals

Request for proposal (RFP): specifies systemrequirements

Reviewing proposals and screening vendors

Visiting sites

Selecting the vendor


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Responsibilities while selecting vendor

Benchmarking

Benchmarking: quantify performance

Negotiating a contract

Implementing new system

Managing post-implementation support


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Figure 13.7: How IT managers rank the importance of product purchase factors


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Software As a Service

Application service provider(ASP):organization that offers software on Web

Software as a service (SaaS): applications

through Web No software installed

Files may be stored on local storage device

ASP may rent software


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Software As a Service (continued)

Renting software has benefits and risks

No need to maintain

No large startup fee

Storage hardware unnecessary

Software available sooner

Good option for small companies

Software on demand approach Lack of control may be issue


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Software As a Service (continued)

Figure 13.8: Benefits and risks of ASP services


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Caveat Emptor

ASP may be disappointing

Scope of services

Reliability

Manager guidelines

Check ASP history

Check ASP financial strength

Ensure you understand price scheme Get list of providers infrastructure

Craft service contract carefully


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Caveat Emptor

Uptime: proportion of time ASP systems up

No ASP has 100 percent uptime

99.999 percent uptime recommended

Less than 5 minutes a year

Storage service provider (SSP): rents storagespace

Store files remotely


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User Application Development

User application development:nonprogrammer users write own applications

Simple and limited in scope

Develop small applications for immediate needs

Maintained by end users


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User Application Development(continued)

Figure 13.9: Guidelines for end-user development of applications


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Managing User-Developed Applications

Challenges of user-developed applications

Managing reaction of IT professionals

Providing support

Compatibility

Managing access


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Managing User-Developed Applications(continued)


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Advantages and Risks

Advantages of user development

Shortened lead times

Good fit to needs

Compliance with culture

Efficient utilization of resources

Acquisition of skills

Freeing up IS staff time


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Advantages and Risks (continued)

Disadvantages of user-developed applications

Poorly developed applications

Islands of information

Duplication

Security problems

Poor documentation


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Summary

Several alternatives to having applicationsdeveloped in-house

Outsourcing can mean commissioning

development or assigning services to vendor Outsourcing custom-designed applications gives

good fit

Outsourcing IT services benefits are great


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Summary (continued)

Outsourcing IT services has potential risks suchas loss of control

Licensing software advantages are immediately

available and low priced Disadvantage of licensing software is loose fit to

organization

ASP is popular method of obtaining software Client pays monthly fees for ASP


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Summary (continued)

User application development advantages areshort lead time and good fit

User application development disadvantage is

poor quality Over half of Americas office workers have rich

computer resources

Policies established to prevent computer abuse

Chapter 13 - Choices in Systems Acquistion

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