Development Strategies

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Development Strategies

• Dr. Yan Xiong
• College of Business
• CSU Sacramento
• 10/12/03

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Agenda

• Software Packages
• In-house Development
• Outsourcing
• Business Process Reengineering (BPR)
• Prototyping

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Purchase Software

• Canned software written by
  computer manufacturers or software
  development companies
• Sold on open market to broad range of users with
  similar requirements
• Turnkey systems combination of software and
  hardware sold as a package

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Purchasing Software

• Companies that buy rather than
  develop AIS software still go
  through systems development life cycle (SDLC)
• Implementation phase is reduced
• less coding
• less testing
• This is most costly

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Purchasing Software

• Companies that buy rather than
  develop AIS software still go
  through systems development life cycle (SDLC)
• Implementation phase is reduced
• less coding
• less testing
• This is most costly SDLC phase

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Systems Acquisition Process
Investigate software packages
Develop software internally
No
No
Yes
Yes
Send RFP for software and hardware
Send RFP for hardware, if necessary
Select best combination
Evaluate proposal
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Alternative Screening Matrix

• Use for screening,
  not selection
• Beware of implying too much accuracy

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Alternative Screening Matrix

• Example
• Vendor A score 4.35
• Vendor B score 4.25
• Vendor C score 3.25
• Vendor C out Vendors A and B too
  close to call

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Alternative Screening Matrix

M Evaluation Criteria
N Alternatives

Alternatives to be Compared
Evaluation Criteria
Crit. Weight
. . . .
A1
A2
An
C1
Wc1
C2
Wc2
. . .
. . .
Cm
Wcm
. . . .
1.00
Total
T1
T2
Tn
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Determining Weights

• Rank factors in importance with
  most important receiving highest
  number
• Total the ranks
• Divide each factor weight by the total
• Make individual weight adjustments if necessary

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Weighting Example
CRITERIA RANK CALCULATION WEIGHT
Cost 4 4/15 .27
Scalability 2 2/15 .13
Ease of Use 5 5/15 .33
Service 3 3/15 .20
Upgrades 1 1/15 .07
TOTAL 1.00
TOTAL 15
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Agenda

• Software Packages
• In-house Development
• Outsourcing
• Business Process Reengineering (BPR)
• Prototyping

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In-house Development

• In the past, most organizations
  had information system
  departments develop custom software,
  because canned software fitting specific
  needs not available
• Developing custom software difficult and
  error-prone
• Also consumes a great deal of time and resources

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In-house Development

• Custom software usually developed
  and written in house
• Alternatively, can engage
  outside company to develop package or
  assemble it from their inventory of program
  modules (objects)
• called outsourcing
• When contracting with outside organization, must
  maintain control over the development process

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In-house Development

• Outsourcing management
• carefully select developer
• Vendor Screening Matrix
• sign contract
• plan and monitor each step
• maintain effective communication
• control all costs

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Agenda

• Software Packages
• In-house Development
• Outsourcing
• Business Process Reengineering (BPR)
• Prototyping

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Outsourcing

• Hiring outside company to handle all
  or part of an organizations IT activities
• In mainframe outsourcing agreement, outsourcers
  buy clients computers and hire all or most of
  clients employees
• Electronic Data Services (EDS)

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Outsourcing

• In client/server (PC)
  outsourcing agreement,
  firm contracts for
• particular service
• segment of its business
• particular function
• PC support

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Outsourcing Types

• Professional services
  (consulting)
• Services (training / data entry)
• Temporary employees
• contract programmers
• Transactions (credit reports)
• Systems integrators

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Outsourcing
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Outsourcing
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When to Outsource

• Activity not strategic
• Save at least 15
• Need technology specialists
• Increase financial flexibility
• capital to operating expenses
• Free personnel for development
• Acquire new technologies quicker

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Outsource Failures

• DT Study, 1997
• Vendor expertise and sophistication
• Improved delivery quality
• Cost reduction
• Increased focus on core
  competencies
• Transition to new technologies

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Raleys

• Prefer to acquire talented,
  retail-oriented staff
• Augments IT projects with consultants,
  contractors
• Outsource professional services such as training
  and data entry

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Agenda

• Software Packages
• In-house Development
• Outsourcing
• Business Process Reengineering (BPR)
• Prototyping

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Reengineering

• Hammer / Champy
• . . . fundamental rethinking
• and radical redesign of
  business processes
• to achieve dramatic improvements
  . . .

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BPR

• Reduces company to essential
  processes
• Focuses on why they are done
  rather than on the details of how they
  are done
• Completely reshapes organizational work practices
  and information flows to take advantage of
  technological advancements

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Business Process

• set of tasks that directly support the
  achievement of business
  objectives by providing a product or service
  for a customer who is outside
  the organization or in a different organizational
  unit
• 
  American Management Systems

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Core Processes

• 4 or 5 in any organization
• Can be broken down into
  sub-processes
• Critical to organizations success
• Focus redesign on these processes

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Financial Core Processes

• Product New loan, savings
  Development checking plan
• Sales and New accounts,
  Marketing acquisitions
• Order Deposits, loans,
  Fulfillment withdrawals
• Customer Financial planning,
  Service inquiries

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Pharmaceuticals Core Processes

• Product R D testing
  Development
• Sales and Market segmenta-
  Marketing tion, contracts
• Order Contract manage-
  Fulfillment ment, shipping
• Customer Claims analysis
  Service

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BPR Examples

• From Martin, Analysis and
  Design of Business Information Systems,
  (Prentice Hall, 1995)
• All focused on Data Flow Diagrams (DFDs)

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Outsourcing
A. GM Process Flows Before
B. Outsourcing Delivery to Contrail
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Customer Focus
Before
After
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Buffering
3.6 ShipProduct
Order
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Parallel Processing
Before
3.1
3.2
Order
Order
Customer
Verify Order
Credit Check
After
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Geographic Balancing
Building A
Building B
Before
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Geographic Balancing
Building A
Building B
After
1
3
2
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BPR Challenges

• Tradition
• Resistance
• e.g., seniority
• Time requirements
• Lack of management support
• Risk
• most crucial processes
• on-going organization

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BPR Challenges

• Controls
• often sacrificed for sake
  of efficiency
• e.g., eliminating verification process
• Accountants must ensure that
  what is gained by BPR is not lost
  through fraud, errors, etc.

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Controls Example

• BPR expert recommends that you
  consolidate two sequential processes
• reduce personnel
• reduce handoffs (errors)
• increase job satisfaction
• But you will lose separation of duties

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Controls Example

• Calculate BPR consolidation savings
• Calculate probable fraud costs
• Likelihood of threat (risk) times
  exposure
• Compare

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State of California Guidelines
Consolidate,Transfer Internally
Improve,Leverage
Redesign(Reengineer)
Outsource
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Agenda

• Software Packages
• In-house Development
• Outsourcing
• Business Process Reengineering (BPR)
• Prototyping

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Prototyping

• Approach to systems development in
  which simplified working model
  of system developed
• Prototype (first draft)
  quickly and inexpensively built
• Provided to users for testing
  and training

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Why Prototyping

• When youre working with new
  system ideas with your users, you
  dont want to go through the cost of
  developing a gigantic system which might take
  years youll build a mock-up of it, which might
  take weeks.
• Brian Kilcourse, CIO
• Longs Drug Stores

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Why Prototyping

• Experience at ATT, TRW,
  and IBM
• 30 of system requirements will change
  BEFORE initial system
  delivery
• Production error correction model

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Error Correction
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Prototype Life Cycle
Analyze problem
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Prototype Types

• Iterative Make series
  of changes until prototype becomes the
  final system
• e.g., writing a poem
• Throw-away Once user approves, then abandon for
  construction purposes
• e.g., architects drawing of new house

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SDLC Stage
A
D
Iterative
Throwaway
Iterative
Prototype Models
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Prototyping
Advantages of Prototyping Better definition of
user needs Higher user involvement
and satisfaction Faster development time
Fewer errors
More opportunity for changes
Less costly Better user/analyst
communication
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Prototyping
Disadvantages of Prototyping Significant
user time Bypass
Analysis Phase Incomplete systems development
Inadequately tested and documented
systems
Negative behavioral reactions Unending
development
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Topics Covered

• Software Packages
• In-house Development
• Outsourcing
• Business Process Reengineering (BPR)
• Prototyping