Chapter 4 – Development Strategies Flashcards
Outsourcing (*)
• Transfer of information systems development, operation or maintenance
- To an outside firm that provides these services for a fee, on a temporary or long-term basis
• Can refer to:
- Relatively minor programing tasks
- Rental of software from a service provider
- Outsourcing of a basic business process (business process outsourcing (BPO))
- Handling of a company’s entire IT function
The Growth of Outsourcing
• Service Provider:
- A firm that offers outsourcing solutions
• Application service providers (ASP) – Offline
- A firm that:
~ Delivers software application, or access to an application by charging a usage or subscription fee
- Database & accounting packages
• Internet business services (IBS) – Online - Managed hosting - Provides: ~ Powerful Web-based support for transactions ~ Offer: \+ Online data center support \+ Mainframe computing power \+ Universal access via the Internet
Outsourcing Fees
• Fixed Fee Model:
- Set fee based on:
~ Specific level of service
~ User support
• Subscription model:
- Variable fee based on:
~ Number of users or workstations that have access to the application
• Usage model / transaction model:
- Charges a variable fee based on:
~ Volume of transactions or operations performed by the application
Outsourcing Issues and Concerns
• Mission-critical IT systems: - Outsourced only if the result is: ~ Cost-attractive (worth the $) ~ Reliable (effective/useful) ~ Business solution that fits the company’s long-term business strategy • Can: - Affect day-to-day company operations - Raise some concerns • A company must review issues relating to: - Insurance - Potential liability - Licensing - Information ownership - Warranties - Disaster recovery
Offshore Outsourcing (*)
• Global outsourcing
• Sending IT work overseas at an increasing rate (by many firms)
• Main reason:
- Lower bottom-line costs (same as domestic outsourcing)
• However:
- Involves some unique risks and concerns
In-house Software Development Options (*)
• A company can choose to develop its own systems or purchase, customize, and implement a software package.
• Most important consideration:
- Total cost of ownership (TCO)
• Make or buy Decision
Make or buy Decision
• Developing vs purchasing software:
- Make or buy decision - Build or buy decision
• In-house software:
- The company’s IT department makes, build and develops a software
• Software package:
- Obtained from a vendor or application service provider
• Software vendors:
- Companies that develop software for sale
• Value-added reseller (VAR) – Adding extra features
- Firms that enhances a commercial package by adding customer features and configuring it for a particular industry
• Horizontal application – Many types - Can used by: ~ Many different types of organizations - Example: ~ Accounting package
• Vertical application – Specific types - Handle information requirements ~ For a specific type of business - Examples: ~ Hospitals ~ Banks
• Customizing a Software Package
- Purchase a basic package
~ Vendors will customize to suit your needs
- Negotiate directly with the software vendors
~ To make enhancements (to meet your needs) by paying for the changes
- Make your own modifications
~ If permissible under the terms of the software license
• Creating User Application
- User application - User interface - Information center (IC) / Help desk - Screen generators - Report generators - Read-only properties
Reasons for in-house development(make)
• Satisfy: - Unique business requirements - Unique security requirements • Minimize changes in: - Business procedures - Policies • Meet constraints of: - Existing systems - Existing technology • Develop: - Internal resources - Capabilities
Reasons for purchasing a software package(buy – in general software)
• Lower costs • Requires: - Less time to implement - Less technical development staff • Proven: - Reliability - Performance benchmarks • Future upgrades: - Provided by the vendor • Obtain input - From other companies
Role of the System Analyst
• Company must decide whether to:
- Use an outsourcing option - Develop software in-house - Acquire a software package - Develop user applications - Select some combinations of these solutions
• The decision will affect the remaining SDLC phases
- As well as system analyst’s involvement
• System analysts:
- Work as an evaluation and selection team
~ When selecting hardware and software
• A team approach:
- Ensures that critical factors are not overlook - A sound choice is made
• Evaluation and selection team’s primary objective:
- Eliminate system alternatives that will not meet requirements - Rank the system alternatives that are feasible - Present the viable alternatives to management for a final decision
Analyzing Cost and Benefits (*)
• End of the systems analysis phase:
- Must apply financial analysis tools and techniques
~ Evaluate development strategies
~ Decide how the project will move forward
• Accurate forecast of TCO
- Critical / Important
• Financial Analysis Tools
- Payback Analysis
~ Process of determining how long it takes an information system to pay for itself
- Return on Investment (ROI)
~ Percentage rate that measures profitability
~ ROI = (total benefits - total cost) / total costs
~ Net Present Value (NPV)
• Cost-Benefit Analysis Checklist
Cost-Benefit Analysis Checklist
• Identify all: - Costs ~ Indicate when will be incurred - Benefits ~ Indicate benefits realized • For each alternatives • Consider: - Future growth - Need for scalability • Include: - Support costs for: ~ Hardware ~ Software • Analyze: - Various software licensing options including: ~ Fixed fee and formulas based on the number of users or transactions
The Software Acquisition Process (*)
- Step 1: Evaluate the Information System Requirements
- Step 2: Identify Potential Vendors or Outsourcing Options
- Step 3: Evaluate the Alternatives
- Step 4: Perform Cost-Benefit Analysis
- Step 5: Prepare a Recommendation
- Step 6: Implement the Solution
Step 1: Evaluate the Information System Requirements
• Identify: - Key features • Consider: - Network - Web-related issues • Estimate: - Volume - Future growth • Specify: - Hardware - Software - Personnel constraints • Prepare a request for proposal or quotation - Request for proposal (RFP) - Evaluation model - Request for quotation (RFQ)
Step 2: Identify Potential Vendors or Outsourcing Options
• The Internet: - Primary marketplace • Another approach: - Work with a consulting firm • Another valuable resource: - Internet bulletin board system ~ That contains thousands of forums called new newsgroup
