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22.5 Ryon Pulsipher, manager of Columbia’s property accounting division, has had difficulty
responding to the following departmental requests for information about fixed assets.
1. The controller has requested individual fixed assets schedules to support the general
ledger balance. Although Ryon has furnished the information, it is late. The way the
records are organized makes it difficult to obtain information easily.
2. The maintenance manager wants to verify the existence of a punch press that he
thinks was repaired twice. He has asked Ryon to confirm the asset number and the
location of the press.
3. The insurance department wants data on the cost and book values of assets to include
in its review of current insurance coverage.
4. The tax department has requested data to determine whether Columbia should switch
depreciation methods for tax purposes.
5. The internal auditors have spent significant time in the property accounting division
to confirm the annual depreciation expense.
Ryon’s property account records, kept in an Excel spreadsheet, show the asset acquisition
date, its account number, the dollar amount capitalized, and its estimated useful life for
depreciation purposes. After many frustrations, Ryon realizes his records are inadequate
and that he cannot supply data easily when requested. He discusses his problems with the
controller, Gig Griffith.
RYON: Gig, something has to give. My people are working overtime and can’t keep
up. You worked in property accounting before you became controller. You know I
can’t tell the tax, insurance, and maintenance people everything they need to know
from my records. Internal auditing is living in my area, and that slows down the
work. The requests of these people are reasonable, and we should be able to answer
their questions and provide the needed data. I think we need an automated property
accounting system. I want to talk with the AIS people to see if they can help me.
GIG: I think that’s a great idea. Just be sure you are personally involved in the
design of any system so you get all the info you need. Keep me posted on the
project’s progress. Adapted from the CMA Exam.
a. Identify and justify four major objectives Columbia’s automated property accounting
system should possess to respond to departmental requests for information.
Chapter 1 lists the following seven characteristics of useful information
b. Identify the data that should be included in the database for each asset.
Asset name
Manufacturer
22.6 A credit union is developing a new AIS. The internal auditors suggest planning the systems
development process in accordance with the SDLC concept. The following nine items are
identified as major systems development activities that will have to be completed.
1. System test
2. User specifications
3. Conversion
4. Systems survey
5. Technical specifications
6. Post-implementation planning
7. Implementation planning
8. User procedures and training
9. Programming
Adapted from the CIA Exam.
a. Arrange the nine items in the sequence in which they should logically occur.
2. User Specifications
4. Implementation Planning
6. User Procedures and Training
b. One major activity is converting data files from the old system to the new one. List
three types of file conversion documentation that would be of particular interest to an
22.7 MetLife, an insurance company, spent $11 billion to acquire Travelers Life and Annuity from
Citicorp in one of the largest insurance company acquisitions of all time. The Metlife CIO
estimated it would take three years to integrate the two systems. Because the integration
project was especially critical, he figured he could accomplish the integration in 18 months if
he pulled out all the stops. The MetLife CEO gave him nine months to complete the task. To
pull off the integration in nine months, he had to:
Integrate over 600 IS applications, all with their own infrastructure and business
processes. The new systems had to comply with “One MetLife,” a company policy that all
information systems had to have a common look and feel companywide and be able to
function seamlessly with other MetLife systems.
Work with over 4,000 employees located in 88 offices scattered all over the globe.
Supervise an oversight team and 50 integration teams in seven project management
offices.
Work with hostile, uncooperative Travelers employees for the six months it took to get
regulatory approval and close the deal. The systems had to be integrated three months
after the deal closed.
Identify integration deliverables (144 in total) and manage the process to deliver them.
Negotiate with Citicorp for hundreds of transition services that would not be immediately
converted to MetLife’s systems.
a. What tasks do you think MetLife would have to perform to successfully integrate the
Traveler systems into MetLife’s?
Separate Travelers’ IS operations and assets from Citicorp’s so MetLife could begin the
systems integration process.
Determine what systems had to be integrated before the deadline and which could be
outsourced to Citicorp until they could be integrated into MetLife’s system.
Develop a critical path for the integration process so delays in critical path activities did not
delay the whole process.
b. Search the Internet for articles that describe the integration process. Write a two-page
summary of the problems and successes that MetLife experienced while integrating the
two systems.
22.8 During final testing, just before launching a new payroll system, the project manager at
Reutzel Legal Services found that the purchased payroll system was doing the following:
Writing checks for negative amounts
Printing checks with names and employee numbers that did not match
Making errors; for example, $8 per hour became $800 per hour if a decimal point was not entered
Writing checks for amounts greater than a full year’s salary
Fortunately, payroll was still installed on time, and only 1.5% of the checks had to be
manually reissued every payday until the problem was solved.
Other problems were that no one had made sure the new system was compatible with the
existing payroll database, and there appeared to be no formal transition between the
development of the project and the implementation of the project. The system was never run
in parallel.
Although the programming manager lost his job, the payroll problems helped raise awareness
of the company’s growing dependence on IT. Lacking a major problem, there was a
perception that the information system did not affect operations.
a. What does “the system was never run in parallel” mean?
b. If the company had run the system in parallel, what should have occurred?
What other testing methodologies could have been used by the firm?
c. What other types of problems are evident from reading the case?
There does not appear to be proper management or leadership of the system development,
implementation, or testing processes involved in this system. For example
22.9 A new program at Jones and Carter Corporation (JCC) was supposed to track customer
calls. Unfortunately, the program took 20 minutes to load on a PC, and it crashed frequently.
The project did not have a traditional reporting structure, and it appeared that no one was
actually in charge. The lead project manager quit halfway through the project, the in-house
programmers were reassigned to other projects or let go, and two layers of management
loosely supervised the systems analyst.
Management hired consultants to fix the application, but after three months and $200,000, the
project was discontinued. JCC did not check the references of the consulting firm it hired to
create the new system. The consultants, who were located two states away, made many
programming errors. Although the systems analyst caught some of the consultant’s mistakes,
they grew increasingly distant and difficult to work with. They would not even furnish the
source code to the project managers, most likely because they were afraid of revealing their
incompetence.
a. Identify potential causes for the system implementation failure.
•Leadership and managerial oversight is clearly lacking at Jones and Carter Corp (JCC).
When the project was managed internally, the following problems existed:
b. What steps should JCC have taken to successfully design and implement the call
tracking system?
Start and end the process with a clearly designated manager over the project and with
In summary, JCC should have followed the systems development processes explained in
chapters 20-22.
SUGGESTED ANSWERS TO THE CASES
22.1 Citizen’s Gas Company (CGC) provides natural gas service to 200,000 customers. The
customer base is divided into the following three revenue classes:
Residential customer gas usage is highly correlated with the weather. Commercial customer
usage is partially weather dependent. Industrial customer usage is governed almost entirely
by business factors.
The company buys natural gas from 10 pipeline companies in the amounts specified in
contracts that run for 5 to 15 years. For some contracts, the supply is in equal monthly
increments; for other contracts, the supply varies according to the heating season. Supply
over the contract amounts is not available, and some contracts contain take-or-pay clauses.
That is, the company must pay for the gas volume specified in the contract, regardless of the
amount used.
To match customer demand with supply, gas is pumped into a storage field when supply
exceeds customer demand. Gas is withdrawn when demand exceeds supply. There are no
restrictions on the gas storage field except that the field must be full at the beginning of each
gas year (September 1). Consequently, when the contractual supply for the remain- der of the
gas year is less than that required to satisfy projected demand and fill the storage field, CGC
curtails service to industrial customers (except for heating quantities). The curtailments must
be carefully controlled to prevent either an oversupply at year-end or a curtailing of
commercial or residential customers so the storage field can be filled at year-end.
In recent years, CGC’s planning efforts have not been able to control the supply during the
gas year or provide the information needed to establish long-term contracts. Customer
demand has been projected only as a function of the total number of customers. Commercial
and industrial customers’ demand for gas has been curtailed. This has resulted in lost sales
and caused an excess of supply at the end of the gas year.
To correct the problems, CGC has hired a director of corporate planning. She is presented
with a conceptual design for an information system that will help analyze gas supply and
demand. The system will provide a monthly gas plan for the next five years, with particular
emphasis on the first year. The plan will provide detailed reports that assist in the decision-
making process. The system will use actual data during the year to project demand for the
year. The president has indicated that she will base her decisions on the effect alternative
plans have on operating income. Adapted from the CMA Exam.
1. Discuss the criteria to consider in specifying the structure and features of CGC’s new
system.
Need for market information The factors that affect the demand and supply for gas must
be isolated, their relative importance determined, and their effect quantified.
Class Customers Sales in Cubic Feet Revenues
Residential 160,000 80 billion $160 million
Commercial 38,000 15 billion $ 25 million
Industrial 2,000 50 billion $ 65 million
Totals 145 billion $250 million
2. Identify the data that should be incorporated into CGC’s new system to provide adequate
planning capability. Explain why each data item it is important and the level of detail
needed for the data to be useful.
Number of customers The customer count should be projected by month, unless customer
growth is regular, in which case a base customer count can be used in conjunction with a
commercial heating, and industrial heating. The heating factors need not vary by month
unless it is determined that a seasonal relationship exists or that trends such as
conservation are likely.
Customer unit demand The average monthly consumption for each commercial and
industrial non-heating customer must be provided, either as a constant or as varying over
class.
Storage field capacity The capacity of the gas storage field is required in order to
determine if gas remains in storage that can be withdrawn to supplement pipeline supply.
Priority system A priority system needs to be established in case the company needs to
curtail service to its customers due to an inadequate supply of gas.
The first six factors are necessary in order to determine the demand for gas. The next two
