Chapter 13 Choices in Systems Acquisition Flashcards
1
Q
Alternatives to in-house development
A
- Outsourcing
- Licensing
- Using software as a service (SaaS)
- Having users develop the system
2
Q
When licensing is not available
A
- Application service provider (ASP) is the next best choice
- System is immediately available for a small start-up fee
- Third best choice is to allow users to develop their system
- Last choice is to outsource if non-IT employees cannot develop IS
3
Q
Options and Priorities
A
- The deciding factor is usually cost when the desired application is available from multiple sources
- Licensing is preferred due to low cost and immediate availability
- Many factors must be considered in addition to cost and quality
- Alternatives are not fully comparable, and often cannot be simply prioritized
4
Q
Outsourcing meanings in the IT arena
A
- To commission the development of an application to another organization
- To hire the services of another company to manage all or parts of the services usually rendered by an IT unit in the organization
- May not include development of new applications
5
Q
Outsourcing Custom-Designed Applications
ADVANTAGES
A
- Good fit to need
- Good fit to culture
- Dedicated maintenance
- Smooth interface
- Specialized security
- Potential for strategic advantage
6
Q
Outsourcing Custom-Designed Applications
(Custom-designed (tailored) software)
ADVANTAGES
A
- High cost
- The organization must fund all development costs
- Staff may be diverted from other projects
- Software is less likely to be compatible with other organizations’ systems
7
Q
Outsourcing Custom-Designed Applications
(Custom-designed (tailored) software)
DISADVANTAGES
A
- High cost
- The organization must fund all development costs
- Staff may be diverted from other projects
- Software is less likely to be compatible with other organizations’ systems
8
Q
Outsourcing Custom-Designed Applications
A
- Must deal with an inherent conflict when outsourcing software development:
- Client wants a firm contract and set of requirements
- Specific requirements may mean that no deviation is allowed if changes are needed later as development progresses
- Changes may involve hefty additional charges
- Offshoring: outsourcing to other countries such as Costa Rica, Indonesia, Columbia, etc.
9
Q
Offshoring
A
outsourcing to other countries such as Costa Rica, Indonesia,
10
Q
Outsourcing IT Services
A
- Many businesses turn to IT companies for long-term services for:
- Purchasing and maintaining hardware
- Developing, licensing, and maintaining software
- Installing communications networks
- Maintaining and operating websites
- Staffing help desks
- Running IT daily operations
- Business process outsourcing: outsourcing routine processes, such as order entry or HR
- Some companies realize IT is not their core competency
- IT should not be a focus of their efforts
- Pace of development in IT requires a high level of expertise
- A growing portion of IS budgets are being allocated for outsourced services
- IT outsourcing contracts are typically long-term contractual relationships, usually for seven to 10 years
- Clients sometimes find themselves bound by obsolete contracts, and must renegotiate
11
Q
Business process outsourcing:
A
outsourcing routine processes, such as order entry or HR
12
Q
Popular IT service providers
A
IBM Fujitsu Accenture Computer Sciences Corp. (CSC) Northrop Grumman Hitachi, Capgemini Perot Systems NEC Hewlett-Packard
13
Q
Outsourcing companies are known as ?
A
VENDORS
14
Q
Tips for businesses to ensure receiving solid offshore IT services
A
- Conduct a process design review
- Reevaluate the possibility of near-shore alternatives
- Review the firm’s infrastructure
- Revisit the price if the IT service provider is moving onsite roles overseas
15
Q
Advantages of Outsourcing IT Services
A
- Improved financial planning
- Client knows the exact cost of IS functions
- Reduced license and maintenance fees
- IS professional firms pay discounted prices for tools and can pass on the savings to their clients
- Increased attention to core business
- Executives can concentrate on their company’s core business
- Shorter implementation cycles
- IT vendors can 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
16
Q
Risks of Outsourcing IT Services
A
- Loss of control
- High risk in a quickly changing industry
- Loss of experienced employees
- Usually involves transferring employees to vendor
- Risks of losing a competitive advantage
- May disclose trade secrets
- High price
- Can be more expensive than keeping the tasks in-house
- Important to clearly define contract terms
- The client must develop the service level and metrics list, not the vendor
- Service-level agreement
- The most important element of an outsourcing agreement
- Lists all services expected of the vendor
- Defines the metrics to be used to measure vendor performance
17
Q
most important element of an outsourcing agreement
A
Service-level agreement
- Lists all services expected of the vendor
- Defines the metrics to be used to measure vendor performance
18
Q
Considering Outsourcing IT Services
A
- Research
- Review outsourcing contracts from other business organizations
- Contractual requirements and scope of services
- Scope is the single most important facet of executing a project or contract
- Commitment and engagement in change
- Ensure the service provider can document its ability to complete the services
- Monitoring and conflict resolution
- Monitor and track the progress with measureable performance measures for both parties
- Achieve timely resolutions
- Both parties must “come to the table”
- Refrain from outsourcing the world
- The more expensive the contract or the more services that are being provided, the greater the risk of contract failure
-
19
Q
Considering Outsourcing IT Services
SHORT VERSION
A
- Research
- Contractual requirements and scope of services
- Commitment and engagement in charge
- monitoring and conflict resolution
- refrain from outsourcing world
20
Q
Licensing Applications
A
- Purchasing software usually means purchasing a license to use the software
- There is a large selection of high-quality packaged software available
- Groups of ready-made software
- Relatively inexpensive software that helps in the workplace, such as office suites
- Large, costly applications that support entire organizational functions, such as HR or financial management
21
Q
Software Licensing Benefits
A
Licensing benefits
- Immediate system availability
- High quality
- Low price (license fee)
- Available support
- Beta version: a prerelease version of software to be tested by companies who want to use it
- After-the-sale support often includes a period of up to one year of free service
- Large applications require installation specialists
22
Q
Beta version
A
a prerelease version of software to be tested by companies who want to use it
23
Q
Software Licensing Risks
A
- Loose fit between needs and features
- Must determine if the software will comply with company needs and organizational culture
- Difficulties in undertaking custom modifications
- Dissolution of the vendor
- May be left without support and maintenance
- High turnover of vendor personnel
- Turnover among IS professionals is high
- May result in lowered support expertise from vendor
- Custom modifications vs. vendor updates
- Any new updates may require tedious “weaving” into the current system with the local modifications
24
Q
Custom modifications vs. vendor updates
A
Any new updates may require tedious “weaving” into the current system with the local modifications
25
Steps in Licensing Ready-Made Software
- Selecting software involves a large money investment and a long-term commitment
26
Request for information (RFI)
request for informal information about a vendor’s product
27
Steps in Licensing Ready-Made Software
Project management team responsibilities
- Identify problem or opportunity
- Define functional requirements
- Identify potential vendors
- Solicit vendor information
- Request for information (RFI): request for informal information about a vendor’s product
- Define system requirements
- Request vendor proposals
- Request for proposal (RFP): a document that specifies all requirements and solicits a proposal
- Review proposals and screen vendors
- Visit sites where the application is in use
- Select a vendor
- Benchmark the application by comparing actual performance against specific quantifiable criteria
- Negotiate a contract
- Should define performance expectations and penalties for failure to meet expectations
- Implement the new system
- Manage post-implementation support
28
Application service provider (ASP)
an organization that offers software through a network (the Internet or private network)
- may rent the software they offer
29
Software as a service (SaaS)
applications available through a network
- No software is installed on a client’s computers
- Files may be stored on local storage device
30
Software as a Service
Benefits of renting software
- No need to learn how to maintain the software
- No large start-up fee
- Storage hardware is unnecessary
- Software is usually available sooner
- A good option for small companies
- Considered a “software on demand” approach
- low financial risk
- no need to purchase or maintain hardware for installation
31
Software as a Service
Risks of renting software
- Lack of control may be an issue, as the client’s data is managed by the vendor
- Vendor is unlikely to make many customized changes to the software
- Response time is impacted by traffic levels
- May be security risks through a public network
- Many clients used leased lines instead of the Internet to limit security risks
32
Possible areas of disappointment with ASP
- Scope of services provided
| - Level of reliability
33
Manager guidelines when selecting an ASP
- Research the ASP’s history: get references
- Validate the ASP’s financial strength
- Ensure you understand the price scheme
- Get a list of the provider’s infrastructure
- Craft the service contract carefully
- Uptime
34
Uptime
proportion of time that the ASP’s systems and communications links are up
- No ASP has 100% uptime
- 99.9 percent uptime = up to 500 minutes/year of downtime
- 99.999 percent uptime = less than 5 minutes/year of downtime
- Recommended for critical applications
35
Categories of typical ASP services users
- Rapidly growing companies that rely on software for deployment of their operations
- Small companies without cash to pay up-front costs for software
- Medium-sized companies that need expensive software
- Organizational units at remote locations
36
Storage service provider (SSP)
rents storage space for remote storage of client files
37
User Application Development
nonprogrammer users write their own business applications
38
User Application Development
Characteristics of user-developed software
- Simple and limited in scope
- Small applications developed for immediate or brief needs
- Maintained by end users
39
End Users should develope if....
- have necessary skills
- application is small
- application needed immediately
- can be maintained by users
- can be used briefly & discarded
40
End Users should not develope if...
- application is large
- application interfaces with other systems
- application is vital for the organizations survival
- application will survive the user-developer tenure
41
Challenges of user-developed applications
- Managing the reaction of IT professionals
- Providing support
- Compatibility
- Managing access
42
Advantages of user development of applications
- Shortened lead times
- Good fit to needs
- Compliance with culture
- Efficient utilization of resources
- Acquisition of skills
- Freeing up IS staff time
43
Disadvantages of user-developed applications
- Poorly developed applications
- Islands of information
- Duplication
- Security problems
- Poor or no documentation
44
Summary
- Several alternatives to having applications developed in-house include outsourcing, licensing ready-made software, using software as a service, and allowing users to develop their own software
- Outsourcing can mean commissioning development or assigning services to vendor
- Outsourcing custom-designed applications might afford the organization a good fit of software to need
- Outsourcing IT services offers possible benefits, such as reduced cost and shortened time implementing new technologies
- Outsourcing IT services has potential risks, such as loss of control, loss of experienced employees, and loss of competitive advantage
- Licensing software advantages include software being immediately available and low-priced
- Disadvantage of licensing software is often a loose fit to the organization’s needs
- Software as a service, from an ASP, is a popular method of obtaining software for a monthly fee
- User application development has advantages, e.g., short lead time, good fit, and freeing IT staff
- User application development disadvantages include poor quality, islands of information, security problems, and poor documentation
- Policies must be established to prevent computer abuse by employees
- Employees should not use their computers for anything but work
