6.

Information
InformationSystem Acquisition
Systems

IT1106
Level I - Semester 1
 6. Information System Acquisition
6.1 IS Acquisition Process
6.2 Valuing Information Systems Acquisition
6.2.1 How information systems enable organizational processes
6.2.2 Making a business case for information systems
6.2.3 Productivity paradox of information systems
6.2.4 Investment evaluation (Multi-criteria analysis and Cost-benefit
analysis)
6.2.5 Identifying and implementing innovations
6.3 IS Acquisition Options
6.4 Sourcing Methods
6.4.1 In-Sourcing
6.4.2 Outsourcing and Offshoring
6.4.3 Co-Sourcing
 6.1 IS Acquisition Process

System Acquisition: The process used to obtain the information

system resources needed to provide the services necessary to meet
a specific set of needs.

Fundamental Strategies for System Acquisition: Buy off-the-shelf

software or build a custom application based on the needs which
may be very broad & encompass many users, or very narrow in
scope, affecting just a single user.
 IS Acquisition Process

• Buying off-the-shelf software is less risky & leads to quicker

deployment; however, maintenance & support costs may become
expensive with this approach, & the software may not be an exact
match to the needs & work processes of the organization.

• Building custom software can provide a better match to the current

work processes & provide a potential competitive advantage;
however, software development can be extremely costly, & it can
take months or even years to develop custom software.
Basic Approaches for System Acquisition
A Comparison of the Two Approaches
 Activity
Write down complete answers to the following questions in a
forum.
• Provide two examples of opportunities or problems that are likely to trigger
the need for an information system project.

• Would you expect to see more funds allocated to system development or

to buying existing software and using software service providers? Why?
Discuss.

• Discuss the pros and cons of buying versus building software.

• Distinguish between proprietary software and off-the-shelf software.

 6.2 Valuing Information Systems Acquisition

Information systems can be used in three ways to add value to an

organization:
1. Automating – Doing things faster, cheaper, & more accurately with more
consistency

2. Informating - Doing things better

• Learn about & improve processes
• Support organizational learning

3. Strategizing – Doing things smarter

• Gain or sustain a competitive advantage over rivals
• Turning benefits of automating & informating into strategic advantage
 6.2.1 How Information Systems Enable
Organizational Processes
Five Types of Organizational Strategies
Overall Low Cost Leadership Strategy
• Offer best prices in the industry or product/service category
Focused Low-Cost Strategy
• Offer best prices in the industry or product/service category
Broad Differentiation Strategy
• Offer better products/services than competitors
Focused Differentiation Strategy
• Offer better products/services than competitors
Best Cost Provider Strategy
• Provide products of reasonably good quality at competitive prices
6.2.2 Making A Business Case for Information Systems

• Want systems that match organizational strategy

• Business process management – improved business function
• Identification of IS benefits
• Automating, Informating, and Strategic benefits
• Identification of Costs
• Identification of Productivity Gains
• Productivity Paradox – Unintended consequences
• Web surfing, junk mail, games
• Difficult to measure & quantify
• Effectiveness vs. Efficiency
 6.2.3 Productivity Paradox of Information Systems
• Difficult to measure and quantify
• May measure wrong thing
• Effectiveness vs. Efficiency
• Time Lags
• Benefits do not always occur at the same time as implementation
• Some IT implementations require people to gain experience
• System must be integrated with existing systems
• Redistribution
• IS may redistribute the pieces of the pie rather than grow
• Increases in market share come at the expense of the competitors’
market share
• Mismanagement - Bad business model not overcome by good IS
• IS implementation as temporary fix
• Creation of unanticipated bottlenecks
6.2.4 Investment Evaluation (Multi-criteria Analysis &
Cost-benefit Analysis)

• Cost-Benefit Analysis
• Deciding, Quantitatively, Whether to Go Ahead

• Multi-criteria Analysis
• A complementary approach to cost-benefit analysis (CBA).
 Cost-Benefit Analysis

Cost Benefit Analysis: A systematic approach to quantify the costs & benefits
of a decision or a project.
• A systematic measurement way to calculate the cost to manufacture the product or
produce the service & then compare it with the cost of the benefits to be obtained.

Basically, Cost Benefit Analysis calculates;

• Profit to be gained from the alternative
• Costs to be spent to build up the alternative
• Time Value of costs, incomes, and profits
 Cost-Benefit Analysis
Performing a Cost Benefit Analysis:

Step One: Brainstorm Costs and Benefits

Step Two: Assign a Monetary Value to

the Costs

Step Three: Assign a Monetary Value to

the Benefits

Step Four: Compare Costs and Benefits

 Cost-Benefit Analysis

Scenarios Utilizing Cost Benefit Analysis

Cost Benefit Analysis offers unique and valuable insight when:

• Developing benchmarks for comparing projects

• Deciding whether to pursue a proposed project
• Evaluating new hires
• Weighing investment opportunities
• Measuring social benefits
• Appraising the desirability of suggested policies
• Assessing change initiatives
• Quantifying effects on stakeholders and participants
 Multi-Criteria Analysis

Multi-Criteria Analysis: A two-stage decision procedure.

• Stage 01: identifies a set of goals or objectives and then seeks

to identify the trade-offs between those objectives for different
policies or for different ways of achieving a given policy.

• Stage 02: seeks to identify the “best” policy by attaching weights

(scores) to the various objectives.
 Multi-Criteria Analysis

Weighted Multi-criteria Analysis: Method used for deciding between

alternative IS investments or alternatives of the same system.
 6.2.5 Identifying and Implementing Innovations
Successful Innovation is Difficult
• Innovation is often fleeting
• Advantages gained are often short lived
• Innovation is often risky
• Superior products may not win race
• Innovation choices are often difficult
• Cannot foresee the future

The Innovator’s Dilemma

• New technologies, products, or services that eventually surpass dominant technologies
• Undermine effective management practices
• Solution– Disruptive growth engine - Helps organizations respond to disruptive
innovations more effectively
Start early 3. Build a team of expert innovators
Educate organization 4. Executive leadership
 Organizational Requirements for Innovation

• Process requirements
• The organization has to be willing to do whatever it takes to implement the
change.
• Resource requirements
• The need to have the human capital necessary for successful deployment
of the system
• Risk tolerance requirements
• The organizational members must have appropriate tolerance of risk and
uncertainty.
 E-Business Innovation Cycle
• The key to success is the extent of IS use in timely and innovative ways.
 E-Business Innovation Cycle
• Choosing Enabling/Emerging Technologies
• Group/ process devoted to looking for emerging IT
• Matching Technologies to Opportunities
• Most promising new technology matched with current economic
opportunities
• Executing Business Innovation for Growth
• Stage at which the change is actually implemented
• Assessing Value
• Assess value created for customers and internal operations
 Activity
Write down complete answers to the following questions.

• Discuss the advantages and limitations of Cost Benefit Analysis.

• Distinguish between Cost Benefit Analysis and Multi-Criteria Analysis.

• An example of modern disruptive innovation is the Internet. Briefly explain

why internet has become a disruptive innovation and how does it affect for
a successful innovation.
 6.3 IS Acquisition Options

System Acquisition: The process used to obtain the information system

resources needed to provide the services necessary to meet a specific set of
needs.

System Development: The process of defining, designing, testing, and

implementing a software application or program in building an information
systems to meet end-users’ needs.

Buy off-the-shelf software: Buying existing software developed by a

software manufacturer enables an organization to test drive and evaluate it
before making a major commitment to purchase it and install it.
 System Development Processes

Waterfall System
Development Process
A sequential, multistage
system development
process in which work on
the next stage cannot begin
until the results of the
current stage is reviewed
and approved or modified
as necessary.
 Waterfall System Development
• The development process moves from one phase to the next. At
the end of each phase, a review is conducted to ensure that all
tasks & deliverables associated with that phase were produced and
to ensure that the project is on track and worth completing. As a
result, the waterfall approach allows for a high degree of
management control.

• However, a major problem with the approach is that users do not

interact with the solution until the integration and testing phase.
This can lead to a mismatch between system capabilities, users’
expectations, organizational needs.
 System Investigation

The initial phase in the development of a new or modified business

information system whose purpose is to gain a clear understanding
of the specifics of the problem to solve or the opportunity to address.
 System Investigation

The steps of the investigation phase:

1. Review system investigation request
2. Identify and recruit team leader and team members
3. Develop budget and schedule for investigation
4. Perform investigation
5. Perform preliminary feasibility analysis
6. Prepare draft of investigation report
7. Review results of investigation with steering team.
 System Analysis

The overall emphasis of the system analysis is on gathering data on

the existing system, determining the requirements for the new
system, considering alternatives within identified constraints, and
investigating the feasibility of alternative solutions.

• The primary outcome of system analysis is a prioritized list of

system requirements and a recommendation of how to proceed
with the project.
 System Analysis

The steps in the system analysis phase:

1. Identify and recruit team leader and team members
2. Develop budget and schedule for system analysis activities
3. Study existing system
4. Develop prioritized set of requirements
5. Identify and evaluate alternative solutions
6. Perform feasibility analysis
7. Prepare draft of system analysis report
8. Review results of system analysis with steering team
 System Design

System design creates a complete set of technical specifications that

can be used to construct the information system.

• The primary result of the design phase is a technical design that

details;
• system outputs, inputs, controls, and user interfaces;
• specifies hardware, software, databases, telecommunications,
personnel, and procedures;
• shows how these components are interrelated.
 System Design

The steps in the system design phase:

1. Identify and recruit team leader and team members.
2. Develop schedule and budget for system design activities.
3. Design user interface.
4. Design system security and controls.
5. Design disaster recovery plan.
6. Design database.
7. Perform feasibility analysis.
8. Prepare draft of system design report.
9. Review results of system design with steering team.
 System Development

The system development phase follows the completion of the system

design phase when the project steering team approves of
proceeding with the project. System development converts the
system design into an operational system by coding and testing
software programs, creating and loading data into databases, and
performing initial program testing.
 System Development

The steps in the system development phase:

1. Code software components
2. Create and load data
3. Perform unit testing
 Integration and Testing

Several types of testing must be conducted before a new or modified

information system is ready to be put into production.

These tests are outlined in the testing phases:

1. Integration testing
2. System testing
3. Volume testing
4. User acceptance testing
Tests Conducted on an Information System
 Implementation

The steps in the system development phase:

1. User preparation
2. Site preparation
3. Installation
4. Cutover
 Implementation

• User preparation: The process of readying managers, decision

makers, employees, other users, and stakeholders to accept and
use the new system.
• Site preparation: Preparation of the location of a new system.
• Installation: The process of physically placing the computer
equipment on the site and making it operational.
• Cutover: The process of switching from an old information system
to a replacement system.
 System Operation and Maintenance

The steps in the system operation and maintenance phase:

1. Operation
2. Maintenance
3. Disposal
 System Operation and Maintenance

• System operation: Involves the use of a new or modified system

under all kinds of operating conditions.
• System maintenance: A stage of system development that involves
changing and enhancing the system to make it more useful in
achieving user and organizational goals.
• System disposal: A stage of system development that involves
those activities that ensure the orderly dissolution of the system,
including disposing of all equipment in an environmentally friendly
manner, closing out contracts, and safely migrating information
from the system to another system or archiving it in accordance
with applicable records management policies.
Advantages & Disadvantages of Waterfall
System Development Process
 Activity
Write down complete answers to the following questions.

• Identify and state the purpose of each of the six phases of the waterfall system
development process.

• What is the purpose of studying the existing system during the analysis phase?

• Once a project has successfully made it through the system investigation phase,
should it ever be cancelled? Why or why not? Discuss.

• The waterfall approach allows for a high degree of management control, but it does
not allow for user interaction with the system until the integration and testing phase,
when the system is nearly complete. True or False? Explain your answer.
 Agile Development
Agile development: An iterative system development process that
develops the system in "sprint“ increments lasting from two weeks to two
months.

• Scrum: An agile development framework that emphasizes a team

based approach in order to keep the development effort focused and
moving quickly.
• Scrum master: The person who coordinates all the scrum activities of a
team.
• EXtreme Programming (XP): A form of agile software development that
promotes incremental development of a system using short
development cycles to improve productivity and to accommodate new
customer requirements.
The Scrum Agile Software Development Process
Advantages and Disadvantages of Agile
Development
Comparison of Approaches to System Development
 Activity
Write down complete answers to the following questions.
• As part of the team’s initial project kickoff meeting, you have been asked to
briefly summarize the differences between the waterfall and agile software
development process. What would be your answer?

• There is likely to be some confusion over the role of project manager,

scrum master, and product owner.
• What is the difference between the roles and responsibilities of a scrum
master, project manager and product owner?

• Which agile development framework uses a team-based approach in order

to keep the development effort focused and moving quickly. Explain your
answer.
 Buying Off-the-Shelf Software

• Buying existing software developed by a software manufacturer

enables an organization to test drive and evaluate it before making
a major commitment to purchase it and install it.
• The effort required to modify the software package, as well as
existing software, must be taken into account as a major factor in
selecting the final vendor and software.
• Once purchased, the existing software can be installed with
minimal disruption, so that user requirements can be quickly met &
the organization can obtain the benefits from the system.
 Software Package Implementation Process

Software package implementation eliminates several of the phases of

the waterfall approach.
 Investigation & System Analysis

• One question that must be answered during System Analysis

phase is :
• Which approach is the best solution for the system?
(buying off-the-shelf software or build a custom application)
The decision is often called ‘make-or-buy’ decision.
 Package Evaluation Phase
Purchasing an off-the-shelf software requires that, an
organization to go through several steps to ensure it purchases
the software that best meets its needs. These steps are a part of
the Package Evaluation phase which comes after the System
Analysis phase.

1. Identify potential solutions.

2. Select top contenders.
3. Research top contenders.
4. Perform final evaluation of leading solutions.
5. Make selection.
6. Finalize contract.
 Integration and Testing
Testing must be conducted before the software package is ready to
be put into the workspace, if the software package has been
modified to meet the needs of the organization or the software
package must integrate with the existing information systems.

1. Integration testing
2. System testing
3. Volume testing
4. User Acceptance testing
 Implementation
Key Implementation Tasks:
• Use data-flow diagrams to map current business processes and requirements
to the software, and identify any gaps that must be filled by changing current
processes or by modifying the software.
• Install the software and configure all of its capabilities and options to meet the
project requirements.
• Customize any aspects of the solution needed for the organization.
• Integrate existing software with the new software.
• Train end users.
• Test the software to ensure that it meets all processes and requirements.
• Convert historical data from the old software so that it can be used by the new
software.
• Roll out the new software to users in a live work environment.
• Provide for ongoing end-user support and training.
 6.4 Sourcing Methods

An increasingly popular approach to manage the IS and IT functions

of an organization is to adopt a sourcing method.

• In-Sourcing
• Outsourcing and Offshoring
• Co-Sourcing
 6.4.1 In-Sourcing
In-sourcing: the organization performs an activity internally, thereby
using internal resources and governance. i.e. the activity is governed
and performed by internal resources.

Source: Björn Johansson, Mirella Muhic, “Examining Sourcing Strategies in Information Systems Development in the Financial Sector”-
semanticscholar.org(https://pdfs.semanticscholar.org/e1fa/0950cf47126a6ba6057983bfca18419a28f9.pdf)
 6.4.2 Outsourcing

Outsourcing: A long-term business arrangement in which a company

contracts for services with an outside organization that has expertise
in providing a specific function.

Source: Björn Johansson, Mirella Muhic, “Examining Sourcing Strategies in Information Systems Development in the Financial Sector”-
semanticscholar.org(https://pdfs.semanticscholar.org/e1fa/0950cf47126a6ba6057983bfca18419a28f9.pdf)
 Outsourcing

Main reasons behind a decision to outsourcing:

• Save Money—Achieve Greater Return on Investment (ROI)
• Focus on Core Competencies
• Achieve Flexible Staffing Levels
• Gain Access to Global Resources
• Decrease Time to Market
 6.4.3 Offshoring

Offshore outsourcing: An outsourcing arrangement in which the

organization providing the service is located in a country different
from the firm obtaining the services.

• Offshoring can be defined as a relocation of an organization’s

business processes to a lower-cost location, usually overseas.
(Offshoring can be considered in the context of either production
offshoring or services offshoring.)
 6.4.4 Co-Sourcing

Co-sourcing combines the advantages of outsourcing and insourcing

as it provides access to external expertise without having to
completely give up internal control over processes. (Gross, 2006)

• Co-sourcing is advisable for processes that an organization does

not want to completely allocate to an external provider. It reviews
the main characteristics, benefits and pitfalls of the type of
co-outsourcing, along with some case evidence showing how some
organizations had approached it.
Source: https://www.kbmanage.com/concept/co-sourcing
 Activity – Discuss in a Forum

• What benefits might your organization gain from outsourcing basic

functions? Identify at least three major organizational challenges
associated with transitioning those functions to an outsourcing firm.
Discuss and explain your answer with an example.

• What is outsourcing? How is it different from offshoring?

• Identify and distinguish the difference between in-sourcing vs. outsourcing

and on-shoring vs. offshoring.
 Match
Organizations can obtain software using one of two
basic approaches: buy or build.
• a. Custom
1. _______ software is less risky and leads to
quicker deployment; however, maintenance and • b. analysis
support costs may become expensive.
• c. Off-the-shelf
2. _________ software can provide a better match
to the current work processes of the organization
and may provide a potential competitive advantage;
however, software development can be extremely
costly, and it can take months or even years to
complete.
 Match

3. The overall emphasis of the • a. Custom

________ phase is on gathering • b. analysis
data on the existing system,
• c. Off-the-shelf
determining the requirements of the
new system, considering
alternatives within identified
constraints, and investigating the
feasibility of alternative solutions.
 Match

4. A preliminary evaluation of software packages • a. Request for information

and vendors begins during the __________ phase • b. gain a clear understanding of the
when the two or three strongest contenders are specifics of the problem to solve or the
identified. opportunity to address

5. The primary tool for assessing the software • c. system analysis

marketplace to determine whether existing • d. system construction
packages can meet the organization’s needs is the
_________.
 Match

• a. Request for information

6. The __________ phase converts
the system design into an • b. gain a clear understanding of the
operational system by coding and specifics of the problem to solve or the
testing software programs, creating opportunity to address
and loading data into databases, • c. system analysis
and performing initial program
testing. • d. system construction

7. The purpose of the system

investigation phase is to ________.
 Quiz
Agile development is an iterative system development process that develops a system in “sprint” increments
lasting from two weeks to two months.

1. In the scrum framework, the _________ is a person who represents the project stakeholders and is responsible
for communicating and aligning project priorities between stakeholders and the development team.

• a. project manager

• b. scrum master

• c. product owner

• d. project sponsor

• e. developer

2. ________ is the practice of blending the tasks performed by the development and IT operations groups to
enable faster and more reliable software releases.

• a. Scrum

• b. Extreme programming

• c. JAD

• d. DevOps