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Chapter 16 Alternative Avenues for Systems Acquisitions

Chapter 16 Alternative Avenues for Systems Acquisitions. Learning Objectives.

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Chapter 16 Alternative Avenues for Systems Acquisitions

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  1. Chapter 16Alternative Avenues for Systems Acquisitions Management Information Systems, 4th Edition

  2. Learning Objectives • Explain the differences among the alternatives to professionally tailored system development: outsourcing, purchasing ready-made software, encouraging users to develop their own applications, and contracting with an application service provider • List the business trade-offs inherent in the various methods of acquiring systems Management Information Systems, 4th Edition

  3. Learning Objectives (Cont.) • Explain why the alternatives to tailored development have become so popular • Describe which systems acquisition approach is appropriate for a particular set of circumstances Management Information Systems, 4th Edition

  4. Sources of Information • Outsourcing • Short-term contractual relationship with a service firm to develop a specific application • Long-term contractual relationship with a service firm to take over an organization’s IS functions • Application Service Provider • Allows use of applications via the Internet • In-house use of development tools to create applications Management Information Systems, 4th Edition

  5. Sources of Information (Cont.) Management Information Systems, 4th Edition

  6. Sources of Information (Cont.) Management Information Systems, 4th Edition

  7. Outsourcing • An organization trusts all activities associated with its ISs to another company • Purchasing and maintaining hardware • Developing, purchasing, and maintaining software • Installing and maintaining communications networks • Developing, maintaining, and operating Web sites • Staffing help desks • Running the IS daily operations • Managing customer and supplier relations Management Information Systems, 4th Edition

  8. Outsourcing (Cont.) • Considerations • What are our core business competencies? Of the business we conduct, what specialties should we continue to practice ourselves? • What do we do outside our specialties that could be done better for us by organizations that specialize in that area? • Which of our activities could be improved if we created an alliance with IS organizations? • Which of our activities should we work to improve internally? Management Information Systems, 4th Edition

  9. Outsourcing (Cont.) • Outsourcing means two different things: • A short-term contractual relationship with a service firm to develop a specific application for an organization • A long-term contractual relationship with a service firm to take over all or some of an organization’s IS functions Management Information Systems, 4th Edition

  10. Outsourcing (Cont.) Management Information Systems, 4th Edition

  11. Advantages of Outsourcing • Improved financial planning • Reduced license and maintenance fees • Increased attention to core business • Shorter implementation cycles • Reduction of personnel and fixed costs • Increased access to highly qualified know-how • Ongoing consulting as part of standard support • Increased security Management Information Systems, 4th Edition

  12. Advantages of Outsourcing (Cont.) Management Information Systems, 4th Edition

  13. Risks of Outsourcing • Loss of control • Loss of experienced employees • Risks of losing a competitive advantage • High price Management Information Systems, 4th Edition

  14. Risks of Outsourcing (Cont.) Management Information Systems, 4th Edition

  15. Purchased Applications • The first alternative to consider • Huge variety of ready-made applications • Two classifications of ready-made software: • Inexpensive applications to help in the office • Expensive, large applications that span an entire organization • Human resource management • Financial management Management Information Systems, 4th Edition

  16. The Benefits of Purchased Applications • Immediate system availability • High quality • Low price • Available support Management Information Systems, 4th Edition

  17. Steps in purchasing ready-made software • Identifying the problem • Identifying potential vendors • Soliciting vendor information • Defining system requirements • Requesting vendor proposals • Reviewing proposals and screening vendors Management Information Systems, 4th Edition

  18. Steps in purchasing ready-made software (Cont.) • Visiting sites • Selecting the vendor • Benchmarking • Negotiating a contract • Implementing the new system • Managing post-implementation support Management Information Systems, 4th Edition

  19. Purchased Applications Management Information Systems, 4th Edition

  20. Purchased Applications (Cont.) Management Information Systems, 4th Edition

  21. Purchased Applications (Cont.) Management Information Systems, 4th Edition

  22. Purchased Applications (Cont.) • Benchmarking • Codified comparison of performance measures between systems • Ensures adopted application satisfies the organization's minimum requirements • Learning from Experience Management Information Systems, 4th Edition

  23. Purchased Applications (Cont.) • Purchasing Risks • Loose fit between needs and features • Bankruptcy of the vendor • High turnover of vendor personnel Management Information Systems, 4th Edition

  24. Application Service Providers • An organization that offers the use of software applications through communication lines • Software is not installed on client’s computers • Application, databases, and other files stored at ASP’s location • Option to store files produced at own site Management Information Systems, 4th Edition

  25. Application Service Providers (Cont.) Management Information Systems, 4th Edition

  26. Application Service Providers (Cont.) • The ASP Industry Management Information Systems, 4th Edition

  27. Application Service Providers (Cont.) • Caveat Emptor • Industry has been very unstable • Managers considering ASPs should follow these “commandments” for best results • Check the ASPs history • Check the ASP’s financial strength • Ensure you understand the price scheme • Get a list of the provider’s infrastructure • Craft the service contract carefully Management Information Systems, 4th Edition

  28. Application Service Providers (Cont.) • ASP clients are: • Fast growing companies relying on software for their operations • Small companies without the cash to pay up front, but need office, telecommunications, and basic business operations applications Management Information Systems, 4th Edition

  29. Application Service Providers (Cont.) • ASP clients are: • Medium-sized companies that need expensive software, such as enterprise applications, for their operations, but cannot afford the immediate payment of large sums • Organizational units located where it is difficult to obtain desired software or personnel to install and maintain the software Management Information Systems, 4th Edition

  30. User Application Development • Factors Encouraging User Application Development • The programming backlog and chargeback system • The widespread use of PCs • The emergence of 4GLs and Visual Programming Languages • Increasing popularity of prototyping • Increasing popularity of client/server architecture and intranets Management Information Systems, 4th Edition

  31. User Application Development (Cont.) Management Information Systems, 4th Edition

  32. User Application Development (Cont.) Management Information Systems, 4th Edition

  33. User Application Development (Cont.) • Managing User-developed Applications • Managing the reaction of IS professionals • Providing support • Compatibility • Managing access Management Information Systems, 4th Edition

  34. User Application Development (Cont.) • Advantages of user application development • Shortened lead times • Good fit to needs • Compliance with culture • Efficient utilization of resources • Acquisition of skills • Free IS staff time Management Information Systems, 4th Edition

  35. User Application Development (Cont.) • Risks of user application development • Poorly developed applications • Islands of information • Duplication • Security problems • Poor documentation Management Information Systems, 4th Edition

  36. Ethical and Societal IssuesComputer Use Policies for Employees • End-user computing encourages increased productivity, but business computers are often used for unproductive personal activities • Most state statutes do not address unauthorized use of computers • Employers should provide clear guidelines stating acceptable and unacceptable use of company computers Management Information Systems, 4th Edition

  37. Summary • There are several options available for systems acquisition: • Outsourcing • Ready-made software • User-developed applications • ASP • There are trade-offs for each option • Each set of circumstances will dictate the appropriate approach Management Information Systems, 4th Edition

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