CHAPTER 13: Acquiring Information Systems and

Applications
Chapter Outline

13.1 Planning for and Justifying IT Applications

13.2 Strategies for Acquiring IT Applications
13.3 The Traditional Systems Development Life Cycle
13.4 Alternative Methods and Tools for Systems Development
13.5 Vendor and Software Selection

Learning Objectives

1. Define an IT strategic plan, identify the three objectives it must meet, and describe the four
common approaches to cost-benefit analysis.
2. Discuss the four business decisions that companies must make when they acquire new
applications.
3. Identify the six processes involved in the systems development life cycle, and explain the
primary tasks and importance of each process.
4. Describe four alternative development methods and four tools that augment development
methods, and identify at least one advantage and one disadvantage of each method and tool.
5. Analyze the process of vendor and software selection.

Teaching Tools and Tips

This chapter discusses the process whereby an organization develops a new information system.
I would suggest spending time discussing the opportunities and pitfalls of systems development.
Among the key points is to ensure that students gain an appreciation for the human relations side
of the process. Remind students that people are an extremely important component of any
information system. Once a development project is underway, many people from different
disciplines are involved in the effort. Emphasize that project management and communications
skills are extremely important for this process to be successful.

It is important that students understand that when companies are planning new information
systems, sometimes the concerned parties hit a stone wall regarding development and
implementation processes. Managers from different areas may have different (and often hidden)
agendas for the new system. Some times these hidden agendas may not become apparent until it
is too late.

Spend some time describing how companies struggle to bring order to the system development
life cycle (SDLC) process. In some cases companies actually allow their users to develop their
own applications. Explain that these islands of information and private databases maintained by
users must be integrated into a well-designed, enterprisewide information strategy. This is
Chapter 13: Acquiring Information Systems and Applications (4th edition) Page 2

especially true in cases where IS failed to determine the applications that users should and should
not develop, as well as the tools they should and should not use.

Companies usually embark on a systematic development of information systems when they find
out they are losing competitive advantage because they have an inefficient business process or no
IS at all. In such cases, top management frequently initiates an impetus for change and throws
their unwavering support behind the effort. Consequently, the project gets off to a great start.
Unfortunately, this same sense of urgency causes project managers to take inappropriate
shortcuts. It is imperative for top management to inform their employees that the project plan is
the blueprint for successful development.

A successful approach to systems development is to rely on modular methodology and to

exercise sound technical judgment. The key to successful project completion, however, is human
relations and communications techniques. Therefore, it is prudent to mix the study of information
systems development with sociological and psychological topics!

Review Questions

Section 13.1 Before you go on

1. What are some problems associated with assessing the costs of IT?

One problem is the allocation of fixed costs among different IT projects. Another difficulty
is that system costs continue after the system is installed. It is important to calculate the
Total Cost of Ownership a formula for calculating the cost of acquiring, operating, and
controlling an IT system.

2. What difficulties accompany the intangible benefits from IT?

By definition, intangible benefits are very difficult to place an accurate monetary value on. It
is important not to ignore these benefits, however, because they are real and are valuable to
the organization. Therefore, they must be approximated. Overestimating the value of
intangible benefits will cause organizations to initiate projects that do not produce the
expected benefits. Conversely, underestimating their value can result in valuable projects
being rejected.

3. Describe the NPV, ROI, breakeven analysis, and business case approaches.

The NPV method compares the present value of a projects cash inflows with the present
value of its cash outflows, discounted at the organizations cost of capital. An NPV that is $0
or greater suggests the project is acceptable. The ROI method computes a rate of return that
is generated by the project based on the projects net income divided by the average assets
invested in the project. Breakeven analysis provides an estimated date when the money spent
Chapter 13: Acquiring Information Systems and Applications (4th edition) Page 3

on the systems development process is recouped from the benefits earned in the business it is
used in.

A business case is a written document that is used by managers to garner funding for one or
more specific applications or projects. Its major emphasis is the justification for a specific
required investment. The business case helps to clarify how the organization can best use its
resources to accomplish the IT strategy.

Section 13.2 Before you go on

1. Describe the four fundamental business decisions that organizations must make when
acquiring information systems.

1. How much computer code does the company want to write?

A company can choose to use a totally pre-written application (to write no computer
code); to customize a pre-written application (to write some computer code); or to
custom-write an entire application (write all new computer code).
2. How will the company pay for the application?
For pre-written and customized pre-written applications, the payment options are to buy
or to lease. For complete custom applications, the company may use internal funding.
3. Where will the application run?
The company may choose to run the application on the companys own platform or on
someone elses platform (e.g., Software-as-a-Service vendor or an application service
provider).
4. Where will the application originate?
Pre-written applications can be open source or proprietary software (i.e., from a software
vendor). These applications may be further customized in-house or outsourced.
Completely customized applications can be either written in-house or outsourced.

2. Discuss each of the seven development methods in this section with

regard to the four business decisions that organizations must make.

Development Methods Amount Funding/ Operating Program

Of Code Payment Platform Source Code
Written Owner
Purchase a pre-written None Buy or Companys Open-source
application Lease platform or
Proprietary
Customize a pre-written Some Buy or Companys Open-source
application Lease platform or
Proprietary
Lease the applications None Lease Companys or Open-source
Vendors or
platform Proprietary
Application service None Lease Vendors Open-source
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providers and software- platform or

as-a-service vendors Proprietary
Use open-source Some Internal Companys Open-source
software funding platform
Outsourcing None Internal Companys Outsource
funding platform
Custom development Most Internal Companys In-house or
funding platform outsource

Section 13.3 Before you go on

1. Describe the feasibility study.

The feasibility study involves defining the business problem or new opportunity,
investigating options available for the best solution, making a recommendation and
estimating the probability of success.

2. What is the difference between systems analysis and systems design?

Systems analysis is the detailed study and documentation of the as is situation and the
requirements for the new system. Systems design is the development of a technical
specification that details the system inputs, outputs and interfaces as well as the hardware,
software, databases, telecommunications, personnel and procedures needed to provide a
solution for the requirements developed in the analysis stage. Systems design also provides a
blueprint for integrating these various components.

3. Describe structured programming.

Structured programming techniques are used to establish a uniform approach to

programming that successive iterations of staff can understand. Each module has only
one function.
Each module has only one entrance and one exit.
GO TO statements are not allowed.

4. What are the four conversion methods?

Parallel - running old and new systems concurrently for a period of time.

Direct moving the new system into production at the same time the old system is being
made inaccessible.

Pilot introducing the new system in one part of the organization, determining that it is
stable, and then rolling it out to other areas.
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Phased introducing select components of the new system in stages. When the organization
determines that these components are stable, it rolls out other components.

Section 13.4 Before you go on

1. Describe the tools that augment the traditional SDLC.

Prototyping involves building a model of the system based on user feedback. It is an

iterative approach that helps users visualize what the new system will look like.

Joint application development (JAD) involves a meeting attended by all of the end users
meeting and the IS project team to develop requirements and reach a consensus. It can save a
lot of time, but it is intense, and it will work well only if all departments are represented.

CASE tools are specialized tools that automate many of the tasks in the SDLC. Long-term
maintenance on systems developed with CASE tools can be less expensive; however, initial
development can cost more.

Rapid application development is a systems development method that can combine JAD,
prototyping, and ICASE tools to rapidly produce a high-quality system. In the first RAD
stage, developers use JAD sessions to collect system requirements. This strategy ensures that
users are intensively involved early on. The development process in RAD is iterative, similar
to prototyping. That is, requirements, designs, and the system itself are developed and then
undergo a series, or sequence, of improvements. RAD uses ICASE tools to quickly structure
requirements and develop prototypes. As the prototypes are developed and refined, users
review them in additional JAD sessions. RAD produces the functional components of a final
system, rather than prototypes.

2. Describe the alternate methods that can be used for systems development, other than the
SDLC.

The two methods are end-user development and object-oriented development.

End-user development is very popular today because of the availability and familiarity with
small databases such as Access and spreadsheet applications.
As long as these databases are relatively small and the users document what they have done,
end-user development can work well. If not, the IS department is usually called on to rewrite
and rework.

Object-oriented development is based on a different view of computer systems. OO systems are

based on the aspects of the real world that must be modeled to perform a task. Consequently,
these systems can be used to perform related tasks that involve the same real-world entities.

Section 13.5 Before you go on

1. List the major steps of selection of a vendor and a software package.

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a. Identify potential vendors

b. Determine the evaluation criteria
c. Evaluate vendors and packages
d. Select a vendor and a package
e. Negotiate a contract
f. Establish a service-level agreement

2. Describe a request for proposal (RFP).

A request for proposal (RFP) is a document that a company sends to potential vendors
inviting them to submit a proposal that describes their software package and explains how it
would meet the companys needs.

3. Explain why SLAs play an important role in systems development.

Service-level agreements are formal contracts that specify the division of work and
responsibilities between vendors and the company. These divisions are based on a set of
agreed-upon milestones, quality checks, and what-if situations all of which need to be
specified in the SLA. They describe how quality checks will be made and what is to be done
in case disputes and quality standards are specified

ITs About Business Questions

ITs About Business 13.1

Anniston Orthopaedics and Greenway Medical Technologies

1. Would acquiring a new information system for a small organization be a longer or shorter
process than acquiring one for a large organization? Why or why not? Support your answer.

It some ways it may take longer due to the possible lack of understanding of the process, the
systems, and the expectations of the acquiring organization. However, these factors can also
speed up the process under some circumstances.

2. What is the purpose of the contract between the two parties?

When acquiring a new information system, both parties (purchasing organization and
service provider) normally sign a contract outlining the project scope and other aspects of
the project. A typical contract for a system development project includes but is not
limited to the final system functionalities, stakeholders and their responsibilities with
proper contact information, reporting/communication channel for the project progress,
system costs, service charges, training and consulting fees, payment terms and
procedures, contract and system effective dates, conflict of interest, change orders
procedures, implementation procedures and timeline, stakeholder penalty for violating
the contract terms, project termination, insurance, and warranty.
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In this case, the contract will specify the responsibilities of both Anniston and Greenway.
If the two parties cannot agree on terms, then Anniston must resume its search for a new
IS vendor.

ITs About Business 13.2

A Disastrous Development Project

1. Debate the lawsuit from the point of view of Deloitte and SAP.

Deloitte filed a counterclaim over Marin countys failure to pay more than $550,000 in fees
and interest. In its counterclaim, Deloitte maintained that it had fulfilled all of its obligations
under the contract, as evidenced by the fact that all of Deloittes work was approved by the
county officials who were responsible for the project.

2. Debate the lawsuit from the point of view of Marin County.

The complaint alleged that Deloitte used the countys SAP project as a training ground to
provide young consultants with public sector SAP experience, at the countys expense.
Further, the complaint charged that Deloitte (1) intentionally failed to disclose its lack of SAP
and public sector skills; (2) withheld information about critical project risks; (3) falsely
represented to the county that the SAP system was ready to go live as originally planned;
(4) conducted inadequate testing; and (5) concealed the fact that it had failed to perform
necessary testing, thereby insuring that system defects would remain hidden prior to the go-
live date. The county further maintained that, despite the consulting fees it had paid to
Deloitte, the system continued to experience crippling problems.

ITs About Business 13.3

The State of Virginias Outsourcing Contract Proves Costly

1. What are some reasons why Virginias IT problems can be considered the result of poor state
oversight of Northrop Grumman? What are some reasons, if any, why the state might not be
overseeing Northrop effectively?

The IT problems at the State of Virginia could stem from the states or, in this case, the
VITA taskforces poor agreement (i.e., contract) and inadequate oversight of the
contractor. The project contract did not cover such items as backup or a disaster recovery
plan. There is no penalty for Northrop Grumman if the project milestone is delayed or
fails. Furthermore, the project scope is so large that a relatively small, 16-member VITA
committee simply cannot oversee the entire $2.4 billion, 10-year project development for
the state.
2. What are some reasons why Virginias IT problems can be considered the result of poor
execution by Northrop Grumman? What are some reasons, if any, why Northrop might be
executing this project poorly?

Northrop Grumman did not have any prior experience.

There was not a disaster recovery plan in effect in the event of a system outage.
Chapter 13: Acquiring Information Systems and Applications (4th edition) Page 8

The states critical databases were backed up properly.

Discussion Questions

1. Discuss the advantages of a lease option over a buy option.

Leasing has the advantages of lower upfront costs and more flexibility to change and adapt
the applications used over time as needs change.

2. Why is it important for all business managers to understand the issues of IT resource
acquisition?

Because information systems are so critical to competitive advantage, a systems timely and
careful development is a very high priority. Systems acquisition and development is a team
effort that should involve the entire organization.

3. Why is it important for everyone in business organizations to have a basic understanding of

the systems development process?

End users possess the business knowledge the IS staff needs to develop all of the components
of the systems design. For this reason, user input is critical to the acquisition and/or design
of a successful IS.

4. Should prototyping be used on every systems development project? Why or why not?

The SDLC provides the basic structure of the development process. Prototyping can be used
within that structure to experiment with new technology or clarify requirements. It should
not replace the traditional SDLC for highly complex systems.

5. Discuss the various types of feasibility studies. Why are they all needed?

Technical, economic, behavioral, and organizational feasibilities are different facets of the
analysis.

Technical determines if the current hardware and software platform is appropriate as well
as whether the system should be developed in house or purchased from a vendor.

Economic determines if the project has an acceptable financial risk and whether the
organization can afford it.

Behavioral determines if the corporate culture is open to the change.

Organizational determines whether the organization has any external issues that would
preclude the project from being successful and whether the project meshes with the
companys strategic plan.
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6. Discuss the issue of assessing intangible benefits and the proposed solutions.

Intangible benefits are often very hard to quantify. IS staff responsible for the cost benefit
analysis should collaborate with users of the system to place a value on the benefit, even if
their analysis is less than scientific. Very often, it is the quantifying of the intangible benefit
that will make the biggest impact on the decision to move ahead with a new system.

7. Discuss the reasons why end-user-developed information systems can be of poor quality.
What can be done to improve this situation?

Putting development tools in the hands of end-users can result in some very innovative work.
One of the biggest problems, however, is that in many cases the end users do not know the
most efficient way to design a system. Therefore, when working with a small amount of
data, it may seem like everything is okay, but as soon as they try to function in a full-blown
production environment, the application grinds to a halt or stops completely.

One way that this problem can be avoided is through education. If, for example, the users
know how to design a relational database, then, they have a better chance of developing an
efficient application. Another way would be to have the applications run through a quality
assurance process with IS to ensure that they are not only developing software that can be
used, but also documenting their work.

Problem-Solving Activities

Students will research as directed and prepare a thoughtful report on their findings.

1. Access www.ecommerce-guide.com. Find the product review area. Read reviews of three
software payment solutions. Assess the payment solutions as possible components.

Students will visit the Web sites and look for reviews on three software payment solutions of
their choice. Note that some product information was submitted by the company
representatives and may not provide the true review of the product.

2. Use an Internet search engine to obtain information on CASE and ICASE tools. Select
several vendors and compare and contrast their offerings.

A list of CASE tool vendors can be found at this Web site

http://www.unl.csi.cuny.edu/faqs/software-enginering/vendor.html. Students may choose a
few vendors and compare and contrast their features.

3. Access www.ning.com, www.coghead.com, www.teglo.com, and www.dabbledb.com.

Observe how each site provides components for you to use to build applications. Build a
small application at each site.
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Ning is an educational network site that helps people integrate social media into education.
Students will visit www.ning.com and learn how to use it to build an application. There are
resources available in many different formats (e.g., printed information, blog, interactive
demo, etc.) to help users get started. Note that dabbledb.com no longer provides support for
its users.

Web Activities

Results of the various on-line activities should be organized into report format and submitted
after research activities are completed.

1. Enter www.ibm.com/software. Find its WebSphere product. Read recent customers success
stories. What makes this software so popular?

Students will develop and submit or present a report on their findings.

2. Enter the Web sites of the GartnerGroup (www.gartnergroup.com), the Yankee Group
(www.yankeegroup.com) and CIO (www.cio.com). Search for recent material about ASPs
and outsourcing, and prepare a report on your findings.

Students will develop and submit or present a report on their findings.

3. StoreFront (www.storefront.net) is a vendor of e-business software. At its site, the company

provides demonstrations illustrating the types of storefronts that it can create for shoppers.
The site also provides demonstrations of how the companys software is used to create a
store.

a. Run the StoreFront demonstration to see how this is done.

Students may need to register with the Web site in order to view the demo.

b. What features does StoreFront provide?

Features of the StoreFront e-commerce software include various software tools
for store building, product management, order processing, marketing and
promotions, shopper features, and store management.

c. Does StoreFront support smaller or larger stores?

The software provides services for smaller stores with additional add-on modules
for larger stores.

d. What other products does StoreFront offer for creating online stores? What types
of stores do these products support?
In addition to software solutions, StoreFront offers services that help customers
build e-commerce stores including design, custom development, marketing, setup
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and implementation, training, hosting, payment processing, and support. Click

the View Client Gallery link to see examples of client applications.

Team Assignments

1. Assessing the functionality of an application is part of the planning process (Step 1) Select
three to five Web sites that cater to the same type of buyer (for instance several Web sites that
offer CDs or computer hardware), and divide the sites among the teams. Each team will
assess the functionality of its assigned Web site by preparing an analysis of the different sorts
of functions provided by the sites. In addition, the team should compare the strong and weak
points of each site from the buyers perspective.

Students will follow the directions for the group project. Note that students will have
to search the Internet to locate information, and some Web sites might require them to
register and provide contact information.

2. Divide into groups, with each group visiting a local company (include your university). At
each firm, study the systems acquisition process. Find out the methodology or
methodologies used by each organization and the type of application each methodology
applies. Prepare a report and present it to the class.

Students will research and develop report on their findings.

3. As a group, design an information system for a startup business of your choice. Describe
your chosen IT resource acquisition strategy, and justify your choices of hardware, software,
telecommunications support, and other aspects of a proposed system.

Students will follow the directions for the group project. The project outcome may
include a written report (e.g., a project proposal), a class presentation, or both. To
help students prepare for the presentation, set up a scenario where the city has some
funding to help a local startup business. Each project team is working for a local
company. Stage the presentation as though the groups are presenting the selected
companys information system to the citys Board of Commerce as a part of the city
grant/funding application process.

Closing Case

The City of Lincoln, Nebraska: Developing Systems for the Taxpayers

The Business Problem

The City of Lincoln and the County of Lancaster, Nebraska, have a history of innovative systems
development projects. In 2001, the municipality deployed Palm handheld computers to its animal
control officers in an effort to streamline the processes involved in managing the areas growing
Chapter 13: Acquiring Information Systems and Applications (4th edition) Page 12

pet population. The initial deployment was very successful and provided the animal control
officers with real-time access to a wealth of useful field information, including contact
information for pet owners, vaccination data, bite and attack history, previous
dispatch history, citations written, and impoundment data.

As a growing city/county government, Lincoln/Lancaster was concerned about providing the

highest level of governmental services possible given its specific budgetary constraints. In 2008,
the City and County wanted to again effectively use technology, this time involving the city
police, county sheriffs, and firefighters.

The IT Solution
The Lincoln/Lancaster governments IT staff undertook an enterprise-wide systems development
project that would enable the governmental staff and citizens to utilize smartphones to access a
variety of governmental services. The initial project was the development of a smartphone-
enabled system for parking services. Follow-up projects subsequently expanded into the
sanitation and weed control departments.

In addition, the city/county government developed a multi-use web portal to serve two purposes.
First, the portal facilitates employee access to email and calendaring systems. Second, the portal
provides citizens with realtime access to animal tag lookup, fire runs, property tax information, a
geographical information system (GIS) for navigating the areas streets, 29 traffic cameras, and a
lookup service for government employee phone numbers.

The system also enables smartphone subscribers to receive real-time alerts from the National
Weather Service, the Department of Homeland Security, and Amber Alerts (missing persons)
from the State of Nebraska. For the first time, the local police, fire, sheriff, public health
officials, and emergency coordinators can send needed information within seconds to desktops or
smartphones.

The Results
Citizens responses to the systems developed by the Lincoln/Lancaster government and deployed
via smartphones have been very positive. In a recent ranking published by the Center for Digital
Government, Lincoln/Lancaster was ranked the second most technologically progressive
municipal/county government in the United States.

Questions

1. Is this use of information technology an appropriate use of tax-payer dollars? Why or why
not?

The technology based projects have enabled the city to provide better service to the tax
payers and also made the city employees more efficient in their job. These benefits can be
quantified in financial terms and show that the tax payers are benefiting from these projects.
So, these projects are appropriate use of tax payer dollars.
Chapter 13: Acquiring Information Systems and Applications (4th edition) Page 13

2. Can you think of any other possible uses for this type of technology in local or state
government?

There are many potential projects. Involving the citizens in the governance process and
means of interacting with the city are useful projects that can be based on technology.