Slide 1:13 Chapter Managing Development and Outsourcing This lecture is based on materials in chapter 8 of Information Systems Management In Practice 5E by McNurlin & Sprague and the summary slides available on their website and from Essentials of Management Information Systems by Laudon and Laudon 5/e and the summary slides available on their website. However, some material herein also represents the perspective of Gregory Rose of Washington State University. Where materials are taken verbatim from the McNurlin & Sprague slides, they represent the views of the book and are copyrighted by the authors and the publisher. Where the sequence or content differ, the content is considered the work of Gregory Rose with all copyrights reserved.


Slide 2:What have we covered so far and what are we covering here? So far, we talked about how systems could be used and how they function We haven’t yet talked about how systems are built and implemented Today’s lecture is how we build and implement systems (including outsourcing these steps) OVERVIEW OF SYSTEMS DEVELOPMENT Essentials of Management Information Systems chapter 13 Managing Development and Outsourcing Overview


Slide 3:Systems Development Activities that go into producing information systems solution Systems Development Lifecycle Traditional methodology for developing information system Partitions systems development process into formal stages that must be completed sequentially ALTERNATIVE SYSTEM-BUILDING APPROACHES Essentials of Management Information Systems chapter 13 Managing Development and Outsourcing Traditional Systems Lifecycle


Slide 4:Systems Development Lifecycle Iterative process Begins with analysis and goes through maintenance Can be broken down into any number of steps depending on methodology We discuss as 6 steps here OVERVIEW OF SYSTEMS DEVELOPMENT Essentials of Management Information Systems chapter 13 Managing Development and Outsourcing


Slide 5:Step 1. Systems analysis Analysis of problems that organization aims to resolve using information systems Begins with feasibility study Determining achievability of solution. We did this in ch3.ppt And with establishing information requirements What are they doing and what should they be doing Analysts look at the now and help think about the future Interviews, focus groups, surveys, document reviews, observation are all methods for this phase OVERVIEW OF SYSTEMS DEVELOPMENT Essentials of Management Information Systems chapter 13 Managing Development and Outsourcing


Slide 6:Step 2. Systems design Details how system will meet information requirements as determined by systems analysis Involves user interface and report design for usability Deals with system configuration and architecture issues for scalability, reuse, and performance Essentials of Management Information Systems chapter 13 Managing Development and Outsourcing Systems Design


Slide 7:Step 3. Programming Process of translating system specifications into program code Many different languages. Breaks down into logic of: linear processes, decisions, repetition, and calls Integration needed at module, application, system, intra and inter-system levels via middleware and calls Step 4. Testing Checks whether the system produces desired results under known conditions Is a serious business and good “test cases” are hard to make and are saved and reused Essentials of Management Information Systems chapter 13 Managing Development and Outsourcing Completing the Systems Development Process


Slide 8:Step 5. Conversion Process of changing from old system to new system Four install choices: Firm-wide rollout vs. “single location installation” rollout Entire application installation vs. “phased installation” “Direct installation” vs. “parallel installation” Insource vs. Outsource (usually transitional) Each has benefits and limitations… Essentials of Management Information Systems chapter 13 Managing Development and Outsourcing Completing the Systems Development Process


Slide 9:Source: Valacich et al., 2001 Four install choices: Firm-wide rollout vs. “single location installation” rollout Entire application installation vs. “phased installation” “Direct installation” vs. “parallel installation” Insource vs. Outsource (usually transitional)


Slide 10:Step 6. Production and maintenance Production is stage after new system is installed and the conversion is complete. Basically, it is the system in use. Maintenance is changes in hardware, software, documentation, or procedures of production system to correct errors Is really just starting the process over again but on a different scale Essentials of Management Information Systems chapter 13 Managing Development and Outsourcing Completing the Systems Development Process


Conducting System Maintenance :Conducting System Maintenance Often included in purchase price of software Corrective maintenance Changes made to a system to repair flaws in its design, coding, or implementation Always important if work around cannot be found but timing of fixes based on severity Usually only for a fee Adaptive maintenance Changes made to a system to evolve its functionality to changing business needs or technologies If real, can be important. May be added as feature in next release if off the shelf software Enhancement maintenance Changes made to a system to add new features or to improve performance Usually kicks off full SDLC evaluation process since adds $ for new needs


Conducting System Maintenance :Conducting System Maintenance


Slide 13:Note: the book does not discuss these things, but you should be aware there is also steps involved in documentation and tech support For more details, take systems analysis with me some fall. Essentials of Management Information Systems chapter 13 Managing Development and Outsourcing Completing the Systems Development Process


Slide 14:Alternatives to traditional SDLC Method Prototyping Buying off the shelf software Customizing off the shelf software End user development ALTERNATIVE SYSTEM-BUILDING APPROACHES Essentials of Management Information Systems chapter 13 Managing Development and Outsourcing Prototyping


Slide 15:Alternatives to traditional SDLC Prototyping Process of building experimental system quickly and inexpensively for demonstration and evaluation “Prototype” Preliminary working version of information system for demonstration and evaluation ALTERNATIVE SYSTEM-BUILDING APPROACHES Essentials of Management Information Systems chapter 13 Managing Development and Outsourcing Prototyping


Slide 16:Advantage Useful in designing information system’s end-user interface Often faster Disadvantage Rapid prototyping can gloss over essential steps in systems development My take on this: Basically you lose the rigor of explicit knowledge gathering and replace with tacit “looks good but don’t know why” ALTERNATIVE SYSTEM-BUILDING APPROACHES Essentials of Management Information Systems chapter 13 Managing Development and Outsourcing Advantages and Disadvantages of Prototyping


Slide 17:Buying off the shelf software Set of prewritten, precoded application software programs commercially available for sale or lease Not innovation and you fit your firm to the software Customization “Tailor an off the rack suit” Great if you are a close fit Ends up more trouble than worth if you aren’t a close fit… ALTERNATIVE SYSTEM-BUILDING APPROACHES Essentials of Management Information Systems chapter 13 Managing Development and Outsourcing Application Software Packages


Slide 18:ALTERNATIVE SYSTEM-BUILDING APPROACHES Essentials of Management Information Systems chapter 13 Managing Development and Outsourcing The Effects of Customizing a Software Package on Total Implementation Costs


Slide 19:Another alternative: end-user development Development by end users with little or no formal assistance from technical specialists Allows users to specify their own business needs Doesn’t require IT staff so is more rapid response to user needs Can only really be done for a single or few people’s needs Generally not well designed, easily maintained, or efficient software Creates islands of software in firm. Difficult to manage what is going on from above. Creates redundancies. ALTERNATIVE SYSTEM-BUILDING APPROACHES Essentials of Management Information Systems chapter 13 Managing Development and Outsourcing End-User Development


Slide 20:Now that we know how systems are built, we need to discuss who should build and implement them in a firm Any stage of the SDLC can be managed internally or outsourced Practice of contracting computer center operations, telecommunications networks, or applications development to external vendors Essentials of Management Information Systems chapter 13 Managing Development and Outsourcing In House or Outsource?


Outsourcing Risk/Reward :Risks/Rewards of outsourcing: IS Management loses an increasing amount of control Vendors take more risk Vendors’ margins improve Choosing the right vendor becomes more important Organizations lose learning and often intellectual property from innovation (would have been bad for Amazon) Organizations lose management control (cannot demand immediate help, etc.), quality control, and loyalty Outsourcing Risk/Reward


Outsourcing Risk/Reward :Discuss case questions 3-5 from Enerline case Why did Hozjan turn to working with an ASP? Was this a good decision? Identify the issues that were involved in this decision. What were the potential benefits of working with an ASP? The potential problems? Was FutureLink a good choice of ASP for Enerline? Should Enerline continue working with FutureLink? Describe the implications of the changes in FutureLink’s business plan for Enerline. If Enerline decides to sever ties with FutureLink, should it switch to another ASP or build its own IT infrastructure? What management, organization, and technology issues should be addressed in answering this question? Outsourcing Risk/Reward


Outsourcing Information Systems Functions :Outsourcing Information Systems Functions (Continued from last week…) Outsourcing means turning over a firm’s computer operations, network operations, or other IT function to a vendor for a specified time. Outsourcing starts with a “Request for Proposal” (RFP) Detailed list of questions submitted to vendors of software or other services Determines how well vendor’s product or services can meet organization’s specific requirements


One Alternative to Outsourcing :Application service providers (ASPs) Software services for rent in remote location (e.g., no temps working in house) Primarily with an Internet interface Can pay by the transaction Can integrate company externally and someone else provides and maintains hardware and software (discussed this within the case homework) One Alternative to Outsourcing


Outsourcing Information Systems Functions: Two Driving Forces :Focus on core businesses: Global competition in 1970s-2008 have forced efficiencies Shareholder value: Companies “priced” based on shareholder value, and focus on short term profits. Management must stress value, they must consider outsourcing in all their non-strategic functions. Outsourcing Information Systems Functions: Two Driving Forces


Outsourcing Alternatives :IT outsourcing Single outsourcer Big bang (common pre-1990) Sell IT assets to outsourcer Move personnel to outsourcer Get fixed costs off books and change to variable costs Outsourcers took loss for 2 years and then got economy of scale to keep costs down Many problems with transition and culture shock of ex-employees being treated like “temps” Outsourcing Alternatives


Outsourcing Alternatives :Transitional outsourcing (common early 1990s) Single outsourcer Stopgap outsourcing for a one-shot specific need Example 1- Y2K Example 2- Need to transition to new tech frame Two strategies: Outsource maintenance of legacy systems to focus on building new systems in new frame (C/S or Internet) Or outsource development of new frame while maintaining legacy and then transition with turnkey system Outsourcing Alternatives


Outsourcing Alternatives :Best-of-breed outsourcing (common throughout 1990s) Multiple outsourcers Choose each outsourcer based on their expertise Alternatively, could be “collaborative outsourcing” General contractor and subcontractor system Outsourcing Alternatives


Outsourcing Alternatives :Shared services Insourcing within organization Across large organization, create centralized service unit that deals with services of all sorts (like a spin off company that has its own management and autonomy and in some cases is legal corporate entity) Specialties within types of service (like IT or mailroom or legal) have autonomous subunits within service unit Insource group can subsequently outsource Outsourcing Alternatives


Outsourcing Alternatives :Business process outsourcing (late 1990s) Buying radical innovation in processes via IT Is risky and sometimes risks and rewards are shared in joint ventureship Outsourcing Alternatives


Slide 31:Managing Development and Outsourcing