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CHAPTER 21
AIS DEVELOPMENT STRATEGIES
Instructor’s Manual
Learning Objectives:
1. Describe how organizations purchase application software, vendor
services, and hardware.
3. Explain how end users develop, use, and control computer-based
information systems.
5. Explain the principles and challenges of business process
reengineering.
7. Explain what computer-aided software engineering is and how it is
used in systems development.
Questions to be addressed in this chapter include:
1. Can Ann buy the software she needs? If so, how should she buy
hardware and software and select a vendor?
2. How do companies develop software in-house? Is this the best
approach for SM?
Introduction
Traditionally, companies have experienced the following difficulties in
developing an AIS:
1. Demands for development resources are so numerous that AIS
projects can be backlogged for several years.
2. A newly designed AIS does not always meet user needs.
Purchasing Software
A Deloitte & Touche survey found that most chief information officers
expect to replace their current systems with commercially available
packages rather than use custom-developed software. Consider the
following examples:
1. Hard Rock Café International wanted to get its customers to
visit its cafes and Web site more often. It purchased customer
2. WellPoint Health Networks installed PeopleSoft’s payroll,
3. Pacific Gas & Electric had to respond to the deregulation of
California’s power industry. Rather than try and update its
37-year-old customer information system, it spent three years
and invested $204 million in canned software. This project was
Learning Objective One
Describe how organizations purchase application
software, vendor services, and hardware.
The Internet has given companies a new way to acquire software.
Application service providers (ASPs) host Web-based software on their
computers and deliver the software to their clients over the Internet.
Purchasing Software and the SDLIC
Companies that buy rather than develop AIS software still follow the
SDLC process as follows:
1. Systems analysis
3. Physical design
5. Operation and maintenance
Selecting a Vendor
Decisions to make or purchase software can be made independently of the
decision to acquire hardware, service, maintenance, and other AIS
resources.
Acquiring Hardware and Software
Once AIS requirements have been defined, an organization is ready to
purchase software and hardware.
1. Saves time. The same information is provided to all vendors,
eliminating repetitive interviews and questions.
3. Reduces errors. The chances of overlooking important factors are
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4. Avoids potential for disagreement. Both parties possess the same
expectations, and pertinent information is captured in writing.
When an RFP is solicited based on exact hardware and software
specifications, the total costs are usually lower and less time is
required for vendor preparation and company evaluation.
Evaluating Proposals and Selecting a System
Proposals that are missing important information, fail to meet minimum
requirements, or are ambiguous should be eliminated.
Proposals that pass this preliminary screening should be carefully
compared with the proposed AIS requirements to determine:
1. If they meet all mandatory requirements
Table 21-1 presents criteria that can be used to evaluate hardware,
software, and vendors.
One way to compare system performance is to use a benchmark problem—a
data-processing task with input, processing, and output jobs typical of
those the new AIS will be required to perform.
Once the best AIS has been identified, the software should be
thoroughly test-driven.
The lessons that Geophysical Systems Corporation (GSC) learned from its
vendor selection process highlight the importance of a thorough vendor
evaluation (see FOCUS 21-1 on page 711).
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Despite the availability of good software packages, many organizations
meet their information needs by writing their own software.
Multiple Choice 1
Which of the following statements is false?
a. Canned software is sold on the open market to a broad range of
users with similar requirements.
Multiple Choice 2
One way to compare system performance is to use __________.
a. requirements costing
b. point scoring
Development by In-House IS Departments
Developing custom software is difficult and error-prone and it consumes
a great deal of time and resources.
The U.S. Government Accountability Office (GAO) reported that 31
percent of the information system projects of the federal government,
costing $12 billion (19 percent of its annual IT budget), are either
poorly planned or not living up to their intended objectives.
1. Carefully select a developer. The outside developer should have
2. Sign a contract. The contract should place responsibility for
3. Plan and monitor each step. All aspects of the project should be
4. Maintain effective communication. The relationship between the
5. Control all costs. Cost should be tightly controlled and cash
outflows minimized until the project has been completed and
accepted.
Arthur D. Little and other information systems consultants tell clients
to develop custom software only if it provides a significant
competitive advantage.
If a software application will not provide a competitive advantage,
Little advises its clients to buy software from an outside supplier.
There is no single right answer to the build-or-buy decision. Different
companies come to different conclusions.
Multiple Choice 3
After end users define their requirements,
a. they develop detailed program specifications
b. analysts work with them to determine the format of paper and
screen outputs
End-User-Developed Software
End-user computing (EUC) is the hands-on development, use, and control
of computer-based information systems by users.
With the advent of inexpensive PCs and a wide variety of powerful and
inexpensive software, users began developing their own systems to
create and store data, access, and download company data, and share
data and computer resources in networks.
Appropriate End-User Development and Use
End-user development (EUD) occurs when information users, such as
managers, accountants, and internal auditors develop their own
applications using computer specialists as advisors.
The following are examples of appropriate end-user developments:
2. Performing “what-if,” sensitivity, or statistical analysis
Benefits of End-User Computing
One reason end-user computing has increased so significantly is that it
offers the following advantages:
1. User creation, control, and implementation
3. Timeliness
Risks of End-User Computing
There are some significant drawbacks to end-user computing and to
eliminating analyst/programmer involvement in the development process.
1. Logic and development errors. End users have little experience in
2. Inadequately tested applications. Users are not as likely to
rigorously test their applications, either because they do not
recognize the need to do so or because of the difficulty or time
involved.
3. Inefficient systems. Most end users are not programmers and have
not been trained in systems development.
5. System incompatibilities. Some companies add end-user equipment
without considering the technological implications.
For example, Aetna Life & Casualty spent more than $1 billion a
year on IT in an attempt to gain a competitive advantage.
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6. Duplication of systems and data and wasted resources. If end
7. Increase costs. A single PC purchase is inexpensive, but buying
PCs for hundreds or thousands of workers is costly.
Updating the hardware and software every few years is also
expensive.
Managing and Controlling End-User Computing
Organizations use several different approaches to manage and control
end-user computing.
A help desk can encourage, support, coordinate, and control end-user
activities.
Duties of the help desk include the following:
1. Providing hotline assistance to help resolve problems
3. Training end-users how to use specific hardware and software
and providing corresponding technical maintenance and support.
5. Assisting with application development
6. Developing and implementing standards for:
▪ Hardware and software purchases to ensure compatibility
8. Controlling corporate data so:
▪ Authorized end users can access and share it
Multiple Choice 4
If the end-user computing trend continues, it will represent _____ to
_____ of all information processing by the end of this decade.
a. 60 percent; 80 percent
b. 85 percent; 95 percent
c. 75 percent; 95 percent
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d. 65 percent; 85 percent
Multiple Choice 5
Aetna Life & Casualty spent more than __________ which resulted in
purchasing __________ PCs and __________ minicomputers.
a. $1 billion; 50,000; 2,000
Outsourcing the System
Outsourcing is hiring an outside company to handle all or part of an
organization’s data processing activities.
In a mainframe outsourcing agreement, the outsourcers buy their
client’s computers and hire all or most of the client’s employees.
The Growth in Outsourcing Applications
Outsourcing was initially used for standardized applications.
However, Eastman Kodak outsourced its data processing operation and
sold its mainframes to IBM. It also outsourced its telecommunications
and its PC operations.
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its computing, telecommunications, and software management in 19
countries.
Outsourcing business processes is the fastest-growing information
technology trend, with outsourcing services valued at more than $1
trillion.
The Benefits of Outsourcing
There are a number of significant advantages to outsourcing:
1. A business solution. Outsourcing is a viable strategic and
2. Asset utilization. Organizations with millions of dollars tied
3. Access to greater expertise and more advanced technology. Many
4. Lower costs. Many companies outsource because skilled overseas
5. Improved development time. Experienced industry specialists
6. Elimination of peaks-and-valleys usage. Many companies have
7. Facilitation of downsizing. Companies that downsize are often
left with an unnecessarily large AIS function.
Risks of Outsourcing
Although many outsourcing agreements are great success stories, studies
show that anywhere from 25 percent to 50 percent of outsourcing
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agreements either fail or do not live up to significant agreement
objectives.
In one survey, 17 percent of outsourcing agreements were labeled as
disasters.
There are many reasons why outsourcing projects fail, including:
2. Lukewarm executive and company buy-in
Companies that outsource often experience one or more of the following
drawbacks:
1. Inflexibility. Many outsourcing contracts are for 10 years and
contracts are difficult or costly to break.
2. Loss of control. A company that outsources runs the risk of
3. Reduced competitive advantage. Companies can lose a
4. Locked-in system. It is expensive and difficult to reverse
6. Poor service. Some companies complain of receiving poor
service from their outsourcing company.
7. Increased risk. Outsourcing business processes can expose a
company to significant risks, including operations, financial,
technology, strategy, market position, human capital
(personnel), legal, regulatory, and reputation impairment
risks.
Multiple Choice 6
Xerox outsourced it data processing in a contact with _____.
a. IBM
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Multiple Choice 7
In a survey, _____ of outsourcing agreements were labeled as disasters.
a. 15 percent
b. 17 percent
Business Process Reengineering
Business process reengineering (BPR) is the analysis and redesign of
business processes and information systems to achieve significant
performance improvements.
Business process management (BPM) software has been developed to help
organizations automate many BPR tasks.
Michael Hammer set forth several principles that help organizations
successfully reengineer business processes:
1. Organize around outcomes, not tasks. In a reengineered system,
2. Require those who use the output to perform the process. It is
3. Require those who produce information to process it. Ford
Motor used to have 500 people matching 14 data items on
purchase orders, receiving reports and vendor invoices before
4. Centralize and disperse data. To achieve economies of scale
and eliminate redundant resources, companies centralize
operations.
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5. Integrate parallel activities. Chrysler had separate
departments that worked on designing engines, transmissions,
frames, and so on.
6. Empower workers, use built-in controls, and flatten the
organizational chart. Most organizations have a layer of
employees, who do the work and several layers that record,
manage, audit, or control processes. In a reengineered system,
the people who do the work have decision-making
responsibility.
7. Capture data once, at its source. Previously, functional areas
Challenges Faced by Reengineering Efforts
To successfully complete the BPR process, a company must face and
overcome the following obstacles:
2. Resistance
4. Lack of management support
6. Retraining
7. Controls
Multiple Choice 8
When _____ reengineered its business processes and information systems,
it reduced its accounts payable staff by _____ percent.
a. Ford; 60
b. Chrysler; 75
Prototyping
Prototyping is an approach to systems design in which a simplified
working model of a system is developed.
A prototype, or first draft, is quickly and inexpensively built and
provided to users for testing.
Steps in Developing a Prototype
As shown in Figure 19-1 on page 722, four steps are involved in
developing a prototype:
The first step is to identify basic system requirements.
When to Use Prototyping
In most cases, prototyping supports rather than replaces the SDLC.
Prototyping is appropriate when 1) there is a high level of uncertainty
about the AIS, 2) it is unclear what questions to ask, 3) the final AIS
Advantages of Prototyping
Prototyping has the following advantages:
1. Better definition of user needs
2. Higher user involvement and satisfaction
3. Faster development time
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Mutual Life Insurance developed the prototype of an executive
information system is only one month, as described in FOCUS 21-2.
Disadvantages of Prototyping
Prototyping has the following disadvantages:
2. Less efficient use of system resources
4. Inadequately tested and documented systems
6. Never-ending development
Multiple Choice 9
The second step in developing a prototype is:
a. to develop an initial prototype
b. develop an initial prototype into a fully functional system
c. specify basic needs
Computer-Aided Software Engineering
The developers of software for others have failed to create software to
simplify their own work.
CASE tools are used to plan, analyze, design, program, and maintain an
information system.
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CASE tools do not replace skilled designers. Instead, they are a host
of well integrated tools that give developers effective support for all
phases of the SDLC.
Advantages and Disadvantages of CASE Technology
CASE tools provide the following important advantages:
1. Improved productivity. Sony reported that CASE tools increased
productivity by more than 600 percent.
3. Cost savings. Savings of 80 percent to 90 percent are
possible.
4. Improved control procedures. CASE tools encourage the
5. Simplified documentation.
Some of the more serious problems with CASE technology include the
following:
1. Incompatibility. Some CASE tools do not interact effectively
with other systems.
Multiple Choice 10
CASE tools provide the following important advantage(s):
a. timeliness
b. cost savings
c. improved development time
d. All of the above
