Chapter 13 Flashcards
organizations must analyze the need for applications and then _________
justify each purchase in terms of costs and benefits.
need for information systems is usually related to __________ and __________
organizational planning and to the analysis of its performance vis-à-vis its competitors
What must the cost-benefit justification consider?
he wisdom of investing in a specific IT application versus spending the funds on alternative projects
def. application portfolio
The set of recommended applications resulting from the planning and justification process in application development
What does the planning process for new IT applications begin with?
an analysis of the organizational strategic plan
what does the organization’s strategic plan do?
identifies the firm’s overall mission, the goals that follow from that mission, and the broad steps required to reach these goals
what does the strategic planning process do?
modifies the organization’s objectives and resources to match its changing markets and opportunities
What provides the inputs in developing the IT strategic plan?
organizational strategic plan and the existing IT architecture
what does the IT architecture do? What does it encompass?
- delineates the way an organization should utilize its information resources to accomplish its mission
- encompasses both the technical and the managerial aspects of information resources
what does the technical aspects of IT structure include?
hardware and operating systems, networking, data management systems, and applications software.
what do the managerial aspects of IT architecture do?
specify:
- how the IT department will be managed,
- how the functional area managers will be involved,
- how IT decisions will be made.
def. IT strategic plan
A set of long-range goals that describe the IT infrastructure and major IT initiatives needed to achieve the goals of the organization
What three objectives must the IT strategic plan meet?
- It must be aligned with the organization’s strategic plan.
- -critical because org’s ISs must support the organization’s strategies - It must provide for an IT architecture that seamlessly networks users, applications, and databases.
- It must efficiently allocate IS development resources among competing projects so that the projects can be completed on time and within budget and still have the required functionality.
why is the existing architecture a necessary input into the IT strategic plan?
acts as a constraint on future development efforts
-not an absolute constraint
what is a critical component in developing and implementing the IT strategic plan?
IT steering committee
def. IT steering committee
committee, composed of a group of managers and staff representing various organizational units, set up to establish IT priorities and to ensure that the MIS function is meeting the needs of the enterprise.
why is th IT steering committee important to you?
because it ensures that you get the information systems and applications that you need to do your job
what happens after a company has agreed on an IT strategic plan?
develops IS operational plan
def. IS operational plan
A clear set of projects that the IS department and the functional area managers will execute in support of the IT strategic plan.
Describe the elements of a typical IS operational plan? (6)
- Mission: The mission of the IS function (derived from the IT strategy).
- IS environment: A summary of the information needs of the individual functional areas and of the organization as a whole.
- Objectives of the IS function: The best current estimate of the goals of the IS function.
- Constraints on the IS function: Technological, financial, personnel, and other resource limitations on the IS function.
- The application portfolio: A prioritized inventory of present applications and a detailed plan of projects to be developed or continued during the current year.
- Resource allocation and project management: A listing of who is going to do what, how, and when.
What is the first step in the acquisition process? Why?
Developing an IT plan
-Because all companies have limited resources, they must justify investing resources in some areas, including IT, rather than in others
What does justifying IT investment involve?
calculating the costs, assessing the benefits (values), and comparing the two
ie. Cost-benefit analysis
Wha is one of the major challenges companies face regarding IT and costs?
allocate fixed costs among different IT projects
def. fixed costs
costs that remain the same regardless of any change in the company’s activity level.
what are some IT fixed costs?
infrastructure costs and the costs associated with IT services and IT management
what is another complication regarding IT and costs? Why is it critical?
the costs of a system do not end when the system is installed. Rather, costs for maintaining, debugging, and improving the system can accumulate over many years
-a critical point because organizations sometimes fail to anticipate these costs when they make the investment.
T or F: evaluating the benefits of IT projects is more complex than calculating their costs
true
Why are benefits more difficult to evaluate than costs?
- Benefits may be more difficult to quantify, especially because many of them are intangible
- organizations use IT for multiple purposes further complicates benefit analysis.
- to obtain a return from an IT investment, the company must implement the technology successfully, many aren’t
- the proposed system may be “cutting edge.” In these cases, there may be no precedent for identifying the types of financial payback the company can expect
What do some companies do to test their tech?
may actually implement the technology at one or more locations to verify that the technology functions effectively and is accepted by consumers
T or F: there is a uniform strategy to conduct cost-benefit analyses
False
What are the four common approaches to conducting a cost-benefit analysis?
(1) net present value, (2) return on investment, (3) break-even analysis, and (4) the business case approach.
Describe the net present value method
- use the net present value (NPV) method to convert future values of benefits to their present-value equivalent by “discounting” them at the organization’s cost of funds.
- They can then compare the present value of the future benefits with the cost required to achieve those benefits to determine whether the benefits exceed the costs.
describe the return on investment (ROI) method
- measures management’s effectiveness in generating profits with its available assets.
- ROI is calculated by dividing the net income generated by a project by the average assets invested in the project.
- ROI is a percentage, and the higher the percentage return, the better.
describe break-even analysis
the point at which the cumulative dollar value of the benefits from a project equals the investment made in the project.
describe business case approach
- system developers write a business case to justify funding one or more specific applications or projects.
- IS professionals will be a major source of input when business cases are developed because these cases describe what you do, how you do it, and how a new system could better support you.
What are the fundamental decisions a company has to make when deciding how to pursue an IT investment? (4)
- How much computer code does the company want to write?
- How will the company pay for the application?
- Where will the application run?
- Where will the application originate?
Describe the decision “How much computer code does the company want to write? “
A company can choose to use a totally prewritten application (write no computer code), to customize a prewritten application (write some computer code), or to custom-write an entire application (write all new computer code).
Describe the decision “How will the company pay for the application?”
Once the company has decided how much computer code to write, it must decide how to pay for it. With prewritten applications or customized prewritten applications, companies can buy them or lease them. With totally custom applications, companies use internal funding.
describe the decision “Where will the application run?”
The next decision is whether to run the application on the company’s platform or on someone else’s platform. In other words, the company can employ either a software-as-a-service vendor or an application service provider.
describe the decision “where will the application originate?”
Prewritten applications can be open-source software or they can come from a vendor. The company may choose to customize prewritten open-source applications or prewritten proprietary applications from vendors. Further, it may customize applications in-house, or it can outsource the customization. Finally, it can write totally custom applications in-house, or it can outsource this process.
What is a good rule of thumb regarding acquisition methods?
an organization should consider all feasible acquisition methods in light of its business requirements
Advantages of Buying Software (purchasing a prewritten application)
- Many different types of off-the-shelf software are available.
- The company can try out the software before purchasing it.
- The company can save much time by buying rather than building.
- The company can know what it is getting before it invests in the product.
- Purchased software may eliminate the need to hire personnel specifically dedicated to a project.
Disadvantages of purchasing a prewritten application?
- Software may not exactly meet the company’s needs.
- Software may be difficult or impossible to modify, or it may require huge business process changes to implement.
- The company will not have control over software improvements and new versions.
- Purchased software can be difficult to integrate with existing systems.
- Vendors may discontinue a product or go out of business.
- Software is controlled by another company with its own priorities and business considerations.
- The purchasing company lacks intimate knowledge about how and why the software functions as it does.
When is customizing a prewritten application especially attractive?
if the software vendor allows the company to modify the application to meet its needs
when is customization not attractive?
- in cases where customization is the only method of providing the necessary flexibility to address the company’s needs
- not the best strategy when the software is either very expensive or likely to become obsolete in a short time
what is a challenge for customization?
customizing a prewritten application can be extremely difficult, particularly for large, complex applications.
What can the lease option do compared to customizing and buying
can save a company both time and money
what is a challenge with leased applications?
may not exactly fit the company’s application requirement
What does vendor software that can be leased generally include?
the features that are most commonly needed by organizations in a given industry
What rule do interested companies apply when they evaluate vendor software?
80/20 rule
if the software meets 80 percent of the company’s needs, then the company should seriously consider modifying its business processes so that it can utilize the remaining 20 percent
**Many times this is a better long-term solution than modifying the vendor software. Otherwise, the company will have to customize the software every time the vendor releases an updated version.
Who is leasing attractive to?
small and medium-sized enterprises that cannot afford major investments in IT software.
- large companies who want to test potential IT solutions before committing to major investments
- a company that does not employ sufficient IT personnel with the appropriate skills for developing custom IT applications may choose to lease software instead of developing it in-house
- companies who want to establish a quicker presence in the market
What three ways can leasing be executed?
- to lease the application from a software developer, install it, and run it on the company’s platform.
- –The vendor can assist with the installation and frequently will offer to contract for the support and maintenance of the system. Many conventional applications are leased this way. - leasing an application and running it on the vendor’s platform, using an application service provider to accomplish this
- leasing an application and running it on the vendor’s platform., using a software-as-a-service vendor to accomplish this
def. application service provider
An agent or vendor that assembles the software needed by enterprises and packages them with outsourced development, operations, maintenance, and other services
how does the customer access applications with an application service provider
through the internet
ASP host both a/an ___________ and a/an _________ for each customer
an application and a database for each customer.
def. Software-as-a-service
A method of delivering software in which a vendor hosts the applications and provides them as a service to customers over a network, typically the Internet
What does SaaS eliminate the need for? What does this do?
eliminates the need for customers to install and run the application on their own computers
-save the expense (money, time, IT staff) of buying, operating, and maintaining the software
with SaaS, the vendor hosts what? (2 big things)
- an application that multiple customers can use
- a database that is partitioned for each customer to protect the privacy and security of each customer’s data
For prewritten applications companies can use, companies can use _____________
can use open-source software or obtain the software from a vendor
For customized prewritten applications, they can __________
customize open-source software or customize vendor software
for totally custom applications, they can ___________
write the software in-house or they can outsource the process
With open source software organizations obtain a licence to do what?
to implement an open-source software product and either use it as is, customize it, or develop applications with it.
Unless the company is one of the few that want to tinker their source code, open-source applications are ______________
basically, the same as a proprietary application except for licensing, payment, and support.
open-source software is really an __________ rather than a conceptually different development option
alternative source of applications
def. outsourcing
The use of outside contractors or external organizations to acquire IT services
What are some reasons companies use outsourcing?
- they might want to experiment with new IT technologies without making a substantial upfront investment
- to obtain access to outside experts
what is a disdavantage of outsourcing?
companies frequently must place their valuable corporate data under the control of the outsourcing vendor
What are some main general characteristics that companies can offer?
offer a range of outsourcing services for developing, operating, and maintaining IT applications
What can offshoring do? (positive)
save money
What are is a risk of offshoring?
- If a company is offshoring application development, then the major risk is poor communication between users and developers
what does continuous application development do?
automates and improves the process of software delivery
T or F: a software development project is viewed as having a defined product, with development stopped when the product is implemented
False
a software development project is viewed as constantly changing in response to changing business conditions and in response to user acceptance.
def. continuous application development
The process of steadily adding new computer code to a software project when the new computer code is ready
- Each development team member submits new code when it is finished.
- Automated testing is performed on the code to ensure that it functions within the software project requirements.
What does continuous code submission provide?
developers with immediate feedback from users and status updates for the software on which they are working