Ch. 21: AIS Development Strategies
21–18
21.5 Nielsen Marketing Research (NMR), with operations in 29 countries, produces and
disseminates marketing information. Nielsen has been the primary supplier of decision
support information for more than 70 years. NMR’s most recognizable product is the Nielsen
television ratings. Nielsen is one of the largest users of computer capacity in the UnitedStates.
Its information system consistently ranks above average in efficiency for its industry. NMR
hired IBM to evaluate outsourcing its information processing. NMR wanted to know whether
outsourcing would allow it to concentrate on giving its customers value-added services and
insights, increase its flexibility, promote rapid growth, and provide it with more real-time
information.
What are the benefits and risks of outsourcing for NMR?
THE BENEFITS OF OUTSOURCING:
• IT is changing so rapidly that companies spend a lot of their information system money on
new technology. Outsourcing is a way to alleviate this cash drain. NMR could use the cash
savings to provide a better product to its customers.
• Outsourcing may make it easier for Nielsen to concentrate on the things it does best (its “core
competencies”) and leave the data processing business to computer companies who are more
qualified. Companies who adopt outsourcing for this reason believe that their information
systems are essential, but not that it is essential for them to operate the systems.
Accounting Information Systems
21–19
AMONG THE RISKS OF OUTSOURCING ARE THE FOLLOWING:
• A major risk is entering an inflexible agreement that does not provide the company an “out”
for future unanticipated circumstances.
• Another risk is losing too much control over your information system by outsourcing. NMR
will want to make sure that it works closely with the outsourcer to oversee the development
and operation of the information system.
Do the benefits outweigh the risks? Explain your answer.
Without knowing the results of the evaluation that NMR commissioned, there is no “right” answer
Ch. 21: AIS Development Strategies
21.6 A large organization had 18 months to replace its old customer information system with a
new one that could differentiate among customer levels and provide appropriate products
and services on demand. The new system, which cost $1 million and was installed by the IS
staff on time, did not work properly. Complex transactions were error-prone, some
transactions were canceled and others were put on hold, and the system could not
differentiate among customers. The system was finally shut down, and transactions were
processed manually. New IS management was hired to build a new system and mend the
strained relationship between operations and IS.
a. What could IS management have done differently to make this project successful?
• Negotiated more time to complete the project.
b. What in-house development issues are demonstrated in this case?
• Custom software development is difficult, time consuming, and error prone.
c. How could the in-house issues have been addressed to prevent the system’s failure?
• It should have been made clear to management that in-house development is difficult,
time consuming, and error prone. This could have been facilitated by citing examples of
Accounting Information Systems
Ch. 21: AIS Development Strategies
21–22
21.7 Meredith Corporation publishes books and magazines, owns and operates television stations,
and has a real estate marketing and franchising service. Meredith has 11 different systems
that do not communicate with each other. Management wants an executive information
system that provides them with the correct and timely information they need to make good
business decisions. Meredith has decided to use prototyping to develop the system.
a. Identify three questions you would ask Meredith personnel to determine systems
requirements. What information are you attempting to elicit from each question?
• What is Meredith’s background and what are its goals and objectives? It is difficult to
help a company without knowing where it is coming from and where it hopes to go.
b. Explain how prototyping works. What would the system developer do during the
iterative process step? Why would you want the fewest iterations possible?
1. At Meredith, the prototype process would begin by interviewing personnel in order to
identify system requirements for the prototype. The focus should be on what output
2. After identifying system requirements, an initial prototype would be developed that meets
turn it over to the users.
3. The users experiment with the prototype and determine what is good and what is bad
about it. Their feedback is used to modify the prototype. Within reason, there should be
4. When the prototype is completed, it is either made operational or used as the
specifications for developing a more functional system.
Accounting Information Systems
Prototyping tools are efficient, easy to use, and can create files, screens, reports, and program
code much faster and with much less effort than conventional programming languages.
c. Would you want the prototype to be operational or nonoperational? Why? If it were
an operational prototype, what would have to happen? If it were a nonoperational
prototype, how would the prototype be used?
The answer to these questions will vary depending on the student’s view of the situation.
Some of the points the student should bring up are:
Operational Prototype. Because Meredith needs the system so quickly, an operational
prototype would be advantageous. To make the prototype operational, the developer must
d. Suppose the company decides the prototype system is not practical, abandons it, and
takes some other approach to solving its information problem. Does that mean
prototyping is not a valid systems development approach? Explain your answer.
Just because the prototype system is not used does not mean prototyping is not a useful
Ch. 21: AIS Development Strategies
21–24
21.8 Norcom, a division of a large manufacturer, needed a new distribution and customer service
system. The project was estimated to take 18 months and cost $5 million. The project team
consisted of 20 business and IT staff members. After two years, the CIO was fired, and the
company hired a CIO with expertise in saving troubled projects. The new CIO said three
grave errors were committed.
1. IT picked the wrong software using a very naïve request for proposal process.
2. IT did not formulate a project plan.
3. No one “owned” the project. The IT staff assumed the users owned the project, the users
believed the IT staff owned it, and management believed the vendor owned it.
a. List the primary components of an RFP.
• Detailed system specifications, with a clear distinction between mandatory and desired
requirements.
b. Identify possible components or deficiencies in Norcom’s RFP that could have led the
new CIO to claim that it was naïve or insufficient.
• The RFP lacked the software specifications needed to prepare a good RFP response.
c. Identify possible approaches Norcom could have used to evaluate RFP responses.
• Norcom could have requested help with the RFP process and the necessary documents
from someone with extensive RFP experience, such as a systems consultant.
Accounting Information Systems
21.9 Quickfix is rapidly losing business, and management wants to redesign its computer repair
processes and procedures to decrease costs and increase customer service. Currently, a
customer needing help calls one of five regional service centers. A customer service
representative records the relevant customer information, finds the closest qualified
technician, and calls the technician’s cell phone to see whether the repair fits into his or her
There are several problems with this process that have led to a significant drop in business:
(1) it is time-consuming; (2) it is inconvenient for a customer to have a computer removed, a
new one installed, and then the old one reinstalled; and (3) service representatives do not have
immediate access to information about items being repaired. Quickfix decides to use BPM
principles to redesign its business processes.
a. Identify the repair processes that occur and decide which should be redesigned.
1. Customer calls Quickfix requesting service.
b. Describe how the repair process can be redesigned to solve the three problems
identified.
Design a new information system with the following features.
• A single, centralized database that stores all the data about customers, technicians, and
the items being serviced.
Ch. 21: AIS Development Strategies
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• The system uses the customer’s address to search the list of authorized technicians
maintained in the company’s database. The system produces a list of the four closest
technicians and their schedule for the next week. The system lists the technicians in
order of priority, based on location and availability. The customer service representative
selects one of the technicians to perform the repair service and the system sends them an
electronic notification and an electronic copy of the customer order.
• If the technician is unable to perform the work on a timely basis, he responds
electronically and another technician is scheduled.
• Each morning the technicians logon to the Customer Service Center and retrieve their
schedule for the day. Their schedule is organized and prepared by the computer at the
Customer Service Center to minimize travel time. As each repair job is completed, the
technicians enter the data on the customer order and send it into the Customer Service
Center over the VPN.
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for repair, the representative can tell the customer when it is scheduled for repair and
when it will be returned.
In a world with no costs, Quickfix would do all of the above. However, we live in a world
where we must always weigh costs versus benefits and only implement the things the above
items that make financial sense.
c. What benefits can be achieved by redesigning the repair process?
• Increased customer service and satisfaction because most computers are repaired
immediately at the customer’s business. This should also save money because the
amount of time it takes to repair computers is reduced
Ch. 21: AIS Development Strategies
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21.10 Conduct a search (using written materials, the Internet, electronic databases, etc.) for
successful and failed implementations of information systems. Per your professor’s
instructions, prepare an oral or written summary of a successful and a failed
implementation. Include in your summary the approach used to acquire or develop the
system (purchase software, develop it, modify it, outsource it).
Accounting Information Systems
SUGGESTED ANSWERS TO THE CASES
21-1 Steve Cowan owns Professional Salon Concepts (PSC), a hair salon products distribution
company. After working for his father, a barber and beauty salon products distributor, he
started his own business selling Paul Mitchell products. Business was poor until Steve
conducted a free seminar demonstrating how to successfully use his products. He left with a
After buying a computer and installing a $3,000 accounting package, Steve thought
everything was going great until Terri Klimko, a consultant from a PSC supplier, stopped by.
Terri asked the following questions to find out how well he knew his business:
• Do you know exactly how much you ship each month and to whom?
• Do you know how much each customer bought, by supplier?
• Can you rank your customer sales?
• Can you break your sales down by product?
• Do you know how the profit per client breaks down into product lines?
• Do you know how revenues per salesperson vary over the days of the week?
Steve asked Terri to help the salons become more profitable. She developed a template to help
salon owners determine how much each hairstylist brings in per client, how many clients
receive extra services, and which clients buy hair products. The Cowans soon became more
like partners to their customers than trainers. If a salon had employee problems, the Cowans
would help settle it. If a salon needed help with a grand opening, they lent a hand. The more
PSC products the salons bought, the more time the Cowans gave.
Ch. 21: AIS Development Strategies
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Three days prior to conversion, Steve met a distributor who described how his system met his
detailed accounting and customer reporting needs as well as his inventory management and
order fulfillment needs. Steve was so impressed that they stopped the conversion, went to
North Dakota to check out the distributor’s system, and flew to Minneapolis to visit DSM, the
software developer.
Their economic feasibility analysis showed $234,000 in yearly savings:
$144,000 Most PSC orders consist of several boxes, 95% of which are sent COD. The old
PSC system had no way to prepare orders for multiple-box shipments; a five-
box order required five sales invoices and five COD tickets. The new system
allowed PSC to generate one sales order and ship one box COD and the other
four by regular delivery. Not having to ship every box COD would save $144,000
a year.
After estimated annual maintenance costs of $10,000, there was an annual return on
investment of $224,000. Because the system would pay for itself in less than a year, Steve
bought it and wrote off his $20,000 investment in the other system.
When DSM installed the software, Steve found out that the promised features were not
available and that there was no immediate plan to add them. Although Steve and Mike were
Accounting Information Systems
months were not nearly enough for the training and testing. They should have used twice as
much time to identify and eliminate glitches.
The next day, order entry and shipping proceeded more smoothly, but Steve could not
retrieve data to monitor sales. That did not make him feel too kindly about his $200,000
system or DSM. It took Steve weeks to figure out how to get data to monitor sales. When he
did, he was horrified that sales had dropped 15%. They had focused so hard on getting the
system up and running that they took their eyes off the customers. To make matters worse,
Steve could not get information on sales by customer, salesperson, or product, nor could he
figure out why or where sales were falling. Things quickly improved after “Hell Week.”
Orders were entered just as quickly, and warehouse operations improved thanks to the
integrated add-in program. The new system provided pickers with the most efficient path to
Ch. 21: AIS Development Strategies
21–32
1. Do you agree that PSC did a good job selecting, installing, and implementing the new
system? If so, why? Or do you feel PSC could have done a better job? If so, what did it
do wrong, and what should it have done differently?
PSC could have done a better job by doing the following:
• Steve knows Terri is outstanding and he could have used her to manage better the
computerization process.
2. How could PSC have avoided the missing features problem?
• Steve should have prepared a specification document that defined all the features he
wanted in the new system and had each vendor bid to those specifications. The
3. How could PSC have avoided conversion and reporting problems?
• PSC should have developed and documented a plan for testing the system. The plan
should include tests for all the features specified as well as the various real operation
Accounting Information Systems
4. Evaluate Steve’s economic feasibility analysis. Do you agree with his numbers and his
conclusions?
• Not all accountants’ fees can be saved. Even if the system prepares the statements, PSC
will probably still need tax help as well as an independent audit or review of the
statements.
5. How could PSC‘s customers use the new multi-box shipping approach to defraud PSC?
• Customers could order a very large shipment, refuse the one COD package, and keep the
rest of the products and not pay for them.
6. How would you rate the service PSC received from DSM? What did it do well and what
did it do poorly?
The developer gets a bad grade for:
• Their salespeople selling features that they had no intention of providing.