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Chapter 13: Choices in Systems
Acquisition
Management Information Systems, FifthEdition
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Management Information Systems, Fifth Edition 2
Objectives
Explain the differences among the alternatives totailored system development: outsourcing,licensing ready-made software, contracting with
an application service provider, and encouragingusers to develop their own applications
List the business trade-offs in the variousmethods of acquiring systems
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Objectives (continued)
Describe which systems acquisition approach isappropriate for a particular set of circumstances
Discuss organizational policies on employeecomputer use
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Options and Priorities
Four alternatives to in-house development
Outsourcing
Licensing
Using ASP Allow users to develop
Deciding factor usually cost
License low cost and immediately available Best choice
ASP immediately available and small startup fee
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Options and Priorities (continued)
Third best option is allowing users to develop
Outsource if non-IT employees cannot developIS
Many factors in addition to cost and quality
Alternatives not fully comparable
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Options and Priorities (continued)
Figure 13.1: Alternatives to in-house development of ISs
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Outsourcing
Outsourcing has two meanings:
Commission development of application to otherorganization
Hire services of other company to manageservices
May not encompass development
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Outsourcing Custom-DesignedApplications
Custom-designed: developed specifically fororganization
More expensive
Several advantages
Good fit to need
Good fit to culture
Dedicated maintenance
Smooth interface
Specialized security
Potential for strategic advantage
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Outsourcing Custom-DesignedApplications (continued)
Figure 13.2: Advantages and disadvantages of custom-designed applications
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Outsourcing Custom-DesignedApplications (continued)
Tailored development requires organization tofund all costs
IS personnel constantly in use
Production schedules may be delayed
Less likely to be compatible with otherorganizations
Offshoring: outsourcing to India, China,Philippines, etc.
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Outsourcing IT Services
Many businesses turn to IT companies for long-term services
Purchasing and maintaining hardware
Developing Maintaining and operating Web sites
Staffing help desks
Running IT daily operations
Managing customer and supplier relations Business process outsourcing: outsourcing
routine processes
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Outsourcing IT Services (continued)
Some companies realize IT is not primary focus
Pace of development in IT requires high level ofexpertise
Growing portion of IS budget allocated foroutsourced services
Popular IT service providers IBM
EDS
Accenture Unisys
AT&T
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Outsourcing IT Services (continued)
Figure 13.3: Typical outsourced IT services
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Outsourcing IT Services (continued)
Outsourcing companies known as vendors
Typically long-term contractual relationship
7-10 years
Clients often bound by obsolete contracts
Can renegotiate
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Advantages of Outsourcing IT Services
Several advantages of outsourcing
Improved financial planning
Know exact cost of IS functions
Reduced license and maintenance fees
IS professionals pay discounted prices for tools
Increased attention to core business
Executives dont have to manage
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Advantages of Outsourcing IT Services(continued)
Figure 13.4: Expected benefits from IT outsourcing
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Advantages of Outsourcing IT Services(continued)
Advantages of outsourcing
Shorter implementation cycles
IT vendors 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 Sometimes outsourcing does not save client
money
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Risks of Outsourcing IT Services
Disadvantages of outsourcing
Loss of control
High risk in quickly changing industry
Loss of experienced employees
Transfer employees to vendor
Risks of losing a competitive advantage
May disclose trade secrets
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Risks of Outsourcing IT Services(continued)
Figure 13.5: Risks of outsourcing are higher at higher levels of decision making
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Risks of Outsourcing IT Services(continued)
Disadvantages of outsourcing
High price
Outsourcing may cost more than in-house
development Important to clearly define contract terms
Service-level agreement: most importantelement of agreement
List of services vendor will meet
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Licensing Applications
Purchased software usually licensed
Large selection of high-quality packagedsoftware
Two groups
Inexpensive office helpers
Large applications supporting whole organization
May cost millions
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Software Licensing Benefits
Licensing benefits Immediate system availability
High quality
Low price Available support
Beta version: software to be tested bycompanies
Up to 1 year of free service
Installation specialists needed
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Software Licensing Risks
Software licensing has risks Loose fit between needs and features
Comply with company needs
Difficulty in modifications
Bankruptcy of vendor
Maybe left without support and maintenance
High turnover of vendor personnel
Turnover among IS professionals is high
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Steps in Licensing Ready-MadeSoftware
Selecting software involves large moneyinvestment
Project management team responsibilities
Identify problem or opportunity Define functional requirements
Identifying potential vendors
Trade shows
Soliciting vendor information Request for information (RFI): request
informal information about product
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Steps in Licensing Ready-MadeSoftware (continued)
Figure 13.6: Steps in licensing software
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Steps in Licensing Ready-MadeSoftware (continued)
Responsibilities of selecting vendor
Defining system requirements
Requesting vendor proposals
Request for proposal (RFP): specifies systemrequirements
Reviewing proposals and screening vendors
Visiting sites
Selecting the vendor
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Steps in Licensing Ready-MadeSoftware (continued)
Responsibilities while selecting vendor
Benchmarking
Benchmarking: quantify performance
Negotiating a contract
Implementing new system
Managing post-implementation support
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Steps in Licensing Ready-MadeSoftware (continued)
Figure 13.7: How IT managers rank the importance of product purchase factors
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Software As a Service
Application service provider(ASP):organization that offers software on Web
Software as a service (SaaS): applications
through Web No software installed
Files may be stored on local storage device
ASP may rent software
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Software As a Service (continued)
Renting software has benefits and risks
No need to maintain
No large startup fee
Storage hardware unnecessary
Software available sooner
Good option for small companies
Software on demand approach Lack of control may be issue
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Software As a Service (continued)
Figure 13.8: Benefits and risks of ASP services
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Caveat Emptor
ASP may be disappointing
Scope of services
Reliability
Manager guidelines
Check ASP history
Check ASP financial strength
Ensure you understand price scheme Get list of providers infrastructure
Craft service contract carefully
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Caveat Emptor
Uptime: proportion of time ASP systems up
No ASP has 100 percent uptime
99.999 percent uptime recommended
Less than 5 minutes a year
Storage service provider (SSP): rents storagespace
Store files remotely
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User Application Development
User application development:nonprogrammer users write own applications
Simple and limited in scope
Develop small applications for immediate needs
Maintained by end users
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User Application Development(continued)
Figure 13.9: Guidelines for end-user development of applications
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Managing User-Developed Applications
Challenges of user-developed applications
Managing reaction of IT professionals
Providing support
Compatibility
Managing access
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Managing User-Developed Applications(continued)
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Advantages and Risks
Advantages of user development
Shortened lead times
Good fit to needs
Compliance with culture
Efficient utilization of resources
Acquisition of skills
Freeing up IS staff time
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Advantages and Risks (continued)
Disadvantages of user-developed applications
Poorly developed applications
Islands of information
Duplication
Security problems
Poor documentation
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Summary
Several alternatives to having applicationsdeveloped in-house
Outsourcing can mean commissioning
development or assigning services to vendor Outsourcing custom-designed applications gives
good fit
Outsourcing IT services benefits are great
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Summary (continued)
Outsourcing IT services has potential risks suchas loss of control
Licensing software advantages are immediately
available and low priced Disadvantage of licensing software is loose fit to
organization
ASP is popular method of obtaining software Client pays monthly fees for ASP
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Summary (continued)
User application development advantages areshort lead time and good fit
User application development disadvantage is
poor quality Over half of Americas office workers have rich
computer resources
Policies established to prevent computer abuse