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Hall, Accounting Information Systems, 8e

©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Accounting Information Systems, 8eJames A. Hall

Chapter 13Managing the Systems

Development Life Cycle

Hall, Accounting Information Systems, 8e©2013 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Objectives for Chapter 13• Be able to identify the key stages in the SDLC.• Recognize how a firm’s business strategy will shape

its information system.• Understand the relationship between strategic

systems planning and legacy systems.• Understand what transpires during systems

analysis.• Understand the TELOS model for assessing project

feasibility.• Be familiar with cost-benefit analysis issues related

to information systems projects.• Understand the role of accountants in the SDLC.

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The Systems Development Life Cycle (SDLC)

A logical sequence of activities used to: identify new systems needs develop new systems to support those needs

A model for reducing risk through planning, execution, control, and documentation

The SDLC model may be shown in five stages. We’ll look at the first two in this chapter and the

remaining three in chapter 14.

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System Development Life Cycle

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Figure 13-1


Overview of Phases 1 and 2

Phase 1 - Systems Strategy understand the strategic needs of the organization examine the organization’s mission statement analyze competitive pressures on the firm examine current and anticipated market conditions consider the information systems’ implications

pertaining to legacy systems consider concerns registered through user

feedback produce a strategic plan for meeting these various

and complex needs produce a timetable for implementation

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Overview of Phases 1 and 2

Phase 2 - Project Initiation assess systems proposals for consistency with the

strategic systems plan evaluate feasibility and cost-benefit characteristics

of proposals consider alternative conceptual designs select a design to enter the construct phase of the

SDLC examine whether the proposal will require in-house

development, a commercial package, or both

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Systems Development Participants

Systems Professionals: analyze problems in current systems and formulate solutions systems analysts systems designers programmers

End Users: primary users of the system addressing their needs is critical to success

Stakeholders: individuals who have an interest in the system but are not end users

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Systems Steering Committee

Usually includes the CEO, CFO, CIO, senior management from user areas and computer services, and internal auditors

Typical responsibilities: provide guidance resolve conflicts review projects and assigning priorities budget and allocate funds review the status of projects determine whether projects should be continued

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Phase 1Systems Strategy


Assessing Strategic Information Needs

Strategic systems planning involves the allocation of resources at the macro level. usually a time frame of three to five years

Key inputs in developing a sound systems strategy include: strategic business needs of the organization situations involving legacy systems end user feedback

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Strategic Business Needs

Vision and mission systems strategy requires an understanding of top

management’s vision, which has shaped the organization’s business strategy

Industry and competency analysis industry analysis: the driving forces that affect the

industry and their organization’s performance, such as important trends, significant risks, and potential opportunities

competency analysis: a complete picture of the organization’s effectiveness as seen via four strategic filters: resources, infrastructure, products/services, and customers

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Legacy Systems Use legacy components to help develop an

architecture description.


End User Feedback

Identifying user needs is fundamental to everything else

During phase 1, pertains to substantial perceived problems rather than minor systems modifications

Has five key phases at this point in the SDLC: recognize problems define problems specify systems objectives determine feasibility and contributions of projects

• may entail prioritizing individual projects preparing a formal project proposal

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End User Feedback: Recognizing the Problem

The need for a new, improved information system is manifested through various symptoms. Symptoms may seem vague and innocuous or go

unrecognized initially.

The point at which the problem is recognized is often a function of management’s philosophy. reactive management - responds to problems only

when they reach a crisis state proactive management - alert to subtle signs of

problems and aggressively looks for ways to improve

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End User Feedback: Defining the Problem

Managers and end users should… avoid leaping to a single definition of a problem keep an open mind and gather facts before deciding learn to intelligently interact with systems

professionals

An interactive process between managers/end users and systems professionals is necessary to arrive at an accurate problem definition. The next three stages of the end user feedback

process involve this interactive process.

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End User Feedback:Specifying System Objectives

The strategic objectives of the firm and the operational objectives of the information systems must be compatible.

At this point, the objectives only need to be defined in general terms.


End User Feedback:Preliminary Project Feasibility-TELOS

Technical feasibility - is the technology necessary available?

Economic feasibility - are the funds available and appropriate for the system?

Legal feasibility - does the system fall within legal boundaries?

Operational feasibility - can procedural changes be made to make the system work?

Schedule feasibility - can the project be completed by an acceptable time period?

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End User Feedback:Preparing a Formal Project Proposal

A systems project proposal provides management with a basis for deciding whether or not to proceed with the project.

It summarizes the findings of the study and makes a general recommendation.

It outlines the linkage between the objectives of the proposed system and the business objectives of the firm.

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Strategic Systems Plan After collecting input, the steering committee

and systems professionals evaluate the pros and cons of each proposal.

Assessing each potential project’s: benefits costs strategic impact

Development will proceed on proposals with the greatest potential for supporting the organization’s business objectives at the lowest cost.

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Relationship Between Priority, Cost, and Strategic Impact

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Figure 13-3


Create an Action Plan:the Balanced Scorecard

The next step is to translate strategy into action

Many companies have found the balanced scorecard (BSC) a useful tool for this step.

The BSC recommends viewing an organization using four perspectives: learning and growth internal business process customer financial

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The Balanced Scorecard

Primary objective: capture information on orthogonal dimensions that are important to every organization

financial: how do we look to our shareholders?

customer: how do we look to our customers?

internal business process: what must we excel at?

learning and growth: can we continue to improve?

Second objective: prevent the proliferation of reports and information. Concentrate only on critical success factors to which everyone in the organization will pay attention.

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Balanced Scorecard for Online Banking

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Figure 13-4




Phase 2Project Initiation


Project Initiation

The second phase in SDLC involves: understanding users’ needs and problems proposing multiple alternative solutions assessing alternatives in terms of feasibility

and cost-benefit characteristics selecting the best option and proceeding to

the construct phase examining whether the selected option will

require in-house development, a commercial package, or both

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Systems Analysis

A business problem must be fully understood before a solution can be formulated. A defective analysis will lead to a defective

solution. System analysis is a two-step process

survey of current systems analysis of users’ needs

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Survey of Current Systems

Advantages: identifies aspects of the old system which should

be retained in the new system aids in planning the implementation of the new

system may allow conclusive determination of the cause

of the reported problems Disadvantages:

the current physical tar pit can stifle new ideas

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The Survey Step

Fact-gathering techniques include observing, participating, interviewing, and reviewing documents.

Facts must be gathered regarding: data sources and data stores users processes data flows controls, especially audit trails transaction volumes error rates resource costs bottlenecks and redundant operations

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The Analysis Step

Systems analysis is an intellectual process that is commingled with fact gathering.

A formal systems analysis report, prepared and presented to the steering committee, contains: reasons for system analysis scope of study problem identified with current system statement of user requirements resource implications recommendations

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The Conceptualization Phase

Purpose: produce alternative conceptual solutions that satisfy the requirements identified during systems analysis

How much detail? enough to highlight the differences

between critical features of competing systems rather than their similarities

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Alternative Conceptual Designs for a Purchasing System

31Figure 13-6


Systems Evaluation and Selection

A critical juncture in the SDLC a formal mechanism for selecting the

one system from the set of alternative conceptual designs that will go forward for construction

an optimization process that seeks to identify the best system

a structured decision-making process that reduces uncertainty and risk

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The Role of Accountants

Accountants ensure that the following are considered during evaluation and selection: only escapable (relevant) costs are used in

calculations of cost savings benefits reasonable interest rates are used in measuring

present values of cash flows one-time and recurring costs are completely and

accurately reported realistic useful lives are used in comparing

competing projects intangible benefits are assigned reasonable

financial values33


Detailed Feasibility Study

Similar to the preliminary project feasibility analysis (TELOS), but now more detailed and oriented to deciding on a specific system design. Examine: technical feasibility economic feasibility legal feasibility operational feasibility schedule feasibility

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Cost-Benefit Analysis: Identify Costs

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Cost-Benefit Analysis: Identify Benefits—Tangible

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Cost-Benefit Analysis: Identify Benefits—Intangible

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Comparing Costs and Benefits

Two methods commonly used for evaluating the costs and benefits of information systems: Net Present Value Method: deduct the present value

of costs from the present value of benefits over the life of the project.• The optimal choice is the project with the greatest net

present value. Payback Method: do break-even analysis of total

costs (one-time costs plus present value of recurring costs) and total benefits (present value of benefits). After the break-even point, the system earns future profits. • The optimal choice is the project with the greatest

future profits.38


How Should We Get the System?

Once the optimal system is selected, decide how to acquire it: develop the system in-house: best for systems

that need to meet unique and proprietary business needs

purchase commercial software: best for systems that are expected to support “best industry practices”

a mix of the first two approaches: make in-house modifications, to varying degrees, of a commercial system to meet the organization’s unique needs

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Announcing the New System Project…

can be the most delicate aspect of the SDLC. End user support is critical to success. All end users need to be made to understand

the objectives of the new system. End users and managers who view the new

system as a potential benefit to their jobs, rather than a threat, are more likely to cooperate with the project.

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Why are Accountants Involved with SDLC?

The creation of an information system consumes significant resources and has financial resource implications.

The quality of accounting information systems and their output rests directly on the SDLC activities that produce them.

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How are Accountants Involved with SDLC?

As end users who must provide a clear picture of their problems and needs

As members of the development team As auditors who must ensure that the

system is designed with appropriate internal controls and computer audit techniques.

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The Accountant’s Role in Systems Strategy

Auditors should routinely review the organization’s systems strategy.

Careful systems planning is a cost-effective way to reduce the risk of creating unneeded, unwanted, inefficient, and ineffective systems.

Both internal and external auditors have vested interests in this outcome.


The Accountant’s Role in Conceptual Design

Accountants should be responsible for the conceptual system… and the systems professionals for the physical

system. If important accounting considerations are

not conceptualized at this point, they may be overlooked, exposing the organization to potential financial loss.

The auditability of a system depends in part on its design characteristics.

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The Accountant’s Role in Systems Selection

Economic feasibility is a primary concern to accountants. Accountants should ensure that: use only escapable costs in calculations of cost-

savings benefits use reasonable interest rates in measuring present

values of cash flows one-time v. recurring costs are accurately reported use realistic useful lives in comparing competing

projects intangible benefits are assigned reasonable financial

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