MANAGEMENT INFORMATION SYSTEMS CHAPTER 10 METHODOLOGIES FOR PURCHASED SOFTWARE PACKAGES Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-1 THE MAKE-OR-BUY DECISION - In large companies today, application software is typically both custom developed and purchased - In small businesses, software is typically purchased Why? Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-2 THE MAKE-OR-BUY DECISION Advantages and Disadvantages of Purchasing Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-3 PURCHASING METHODOLOGY Initiating the Purchasing process • Development of a high-level cost estimate - with business manager and IS analyst input Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-4 PURCHASING METHODOLOGY The Purchasing Steps • Steps for purchasing application packages fit into the three SDLC phases (referred to as the modified SDLC approach) Fig 10.1 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-5 PURCHASING METHODOLOGY The Purchasing Steps, continued • In comparison to an SDLC methodology, the Definition phase has additional steps, and the Construction phase is greatly reduced • In special circumstances, if the package is new, the purchaser may play a major role as an Alpha or Beta site for the vendor: - Alpha site: plays a role in determining the final functionality and user interface design for the new package - Beta site: plays a role in user acceptance testing α β Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-6 PURCHASING METHODOLOGY Definition Phase • Two traditional SDLC steps: • Five additional steps: Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-7 DEFINITION PHASE Feasibility Analysis • Determine whether the proposed system is economically, technically, and operationally feasible • In addition, the feasibility of purchasing rather than building the system is considered - Preliminary investigation of available packaged systems - Detailed cost-benefit analysis for budgeting and monitoring purposes Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-8 DEFINITION PHASE Requirements Definition • As when creating custom software, Requirements Definition is a critical step in the purchase methodology • But rather than create detailed requirements for in-house custom development, this step focuses on defining functional requirements needed to develop a Request for Proposal (RFP) Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-9 DEFINITION PHASE Create Short List of Suitable Packages • Eliminate all but a few promising candidate packages • Evaluate: - Available features of a package - Compatibility with current hardware and software - Vendor track record Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-10 CONSTRUCTION PHASE • System Design and Building: - Typically the vendor does not provide the source code for the package, so the company typically contracts with the vendor (or a certified third party firm) for modifying the package • Changes may also be required for other existing company systems that interface with the package System Testing: - User acceptance testing of configured package (and/or modified package) - IS specialist or vendor testing on organization’s equipment Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-18 IMPLEMENTATION PHASE • Same three steps as for Implementation phase for custom development: Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-19 IMPLEMENTATION PHASE Installation • • Installation planning, training, data cleanup, and conversion Success dependent on: - Quality of vendor support - Package size and complexity • Special attention needs to be given to training, especially if there are significant changes in the way employees their work • Change management is a set of activities designed to help overcome resistance by business users to the new system Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-20 IMPLEMENTATION PHASE Operations • • • Operations is the same, whether the package was built or bought Initial success highly dependent on good communication with the vendor Long-term success also dependent on how well the system has been integrated into the company’s ongoing operations Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-21 IMPLEMENTATION PHASE Maintenance • • Most common = vendor handles package maintenance, as specified in the contract Advantage: • Can lead to significant cost avoidance over the life of the system Disadvantages: - Purchasing company totally dependent on vendor for future system changes - May not get specific changes that the company wants Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-22 PURCHASING METHODOLOGY Project Team • • • • • • Project manager: usually is an IS manager, but may be a business manager (or both) IS analysts and IS specialists who will operate the system Representatives of key business managers and users Software vendor personnel Sometimes a third-party implementation partner (other than vendor) For contracting: purchasing specialists and attorneys Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-23 ENTERPRISE SYSTEM PACKAGES • Enterprise Resource Planning (ERP) systems are software packages designed to integrate all departmental and functional systems into a single integrated system • Packages are more complex to implement because they can impact an entire enterprise • Companies purchase to achieve business benefits and IT platform benefits, such as: - Enables access to integrated data for better decision making - Takes advantage of client/server platform Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-24 ENTERPRISE SYSTEM PACKAGES Source: Brown and Vessey, MIS Quarterly Executive, 2003 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-25 OPEN SOURCE SOFTWARE Open Source Software • • • Free to acquire, so lower upfront costs Ability to access and modify the source code Third parties also provide fee-based products: - Advanced features for the product - Maintenance and training - Documentation and manuals Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-26 OPEN SOURCE SOFTWARE • Open Source Software Licensing • • There are many different licenses for open source software All allow for the modification and redistribution of source code, but some have conditions or restrictions • It is important for managers to be aware of the specific terms of a license so that they are not violated Open Source Licenses Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-27 OPEN SOURCE SOFTWARE • Advantages - Large pool of volunteer testers and developers - Ability to modify source code - Not dependent on a single vendor - Acquisition cost is the same for one copy or thousands - May use the software for any purpose - May be easier to interface open source packages with each other Open Source in the Enterprise Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall Open Source Applications 10-28 OPEN SOURCE SOFTWARE • Disadvantages - No complete documentation without paying for it - May not be viable for software that is not common to many organizations - Different adopters may duplicate efforts in development - Must be careful in choosing a licensing agreement that fits the company’s needs Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-29 APPLICATION SERVICE PROVIDERS (ASPs) Application Service Providers (ASPs) • Purchaser elects to use a “hosted” application rather than to purchase the software application and operate it in-house • Company pays ASP vendor for delivering the software functionality over the Internet to company employees (and sometimes business partners) • ASP vendor = an ongoing service provider Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-30 APPLICATION SERVICE PROVIDERS (ASPs) • ASP Advantages - Cost savings and faster speed of implementation • Usually involves monthly fees rather than large infrastructure investment ASP Disadvantages - Dependence on an external vendor for both software and ongoing operations - Contract based on initial estimates of required service levels Customization by ASPs by 2004 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-31 APPLICATION SERVICE PROVIDERS (ASPs) • Service Level Agreement (SLA) specifies performance expectations for the ASP, including: - System uptime - Recovery time - Wait time on calls to the help desk - Notifications about software upgrades - Other factors important to the customer • This agreement should be a key part of the ASP contract Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-32 [...]... specialists and attorneys Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-23 ENTERPRISE SYSTEM PACKAGES • Enterprise Resource Planning (ERP) systems are software packages designed to integrate all departmental and functional systems into a single integrated system • Packages are more complex to implement because they can impact an entire enterprise • Companies purchase to achieve business... the source code for the package, so the company typically contracts with the vendor (or a certified third party firm) for modifying the package • Changes may also be required for other existing company systems that interface with the package System Testing: - User acceptance testing of configured package (and/or modified package) - IS specialist or vendor testing on organization’s equipment Copyright... RFP • Request for Proposal (RFP): A formal document sent to potential vendors inviting them to submit a proposal describing their software package and how it meets the company’s needs • Gives vendors information about: - System’s objectives and requirements - Environment in which the system will be used - General criteria used to evaluate proposals - Conditions for submitting proposals Copyright ©... to integrated data for better decision making - Takes advantage of client/server platform Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-24 ENTERPRISE SYSTEM PACKAGES Source: Brown and Vessey, MIS Quarterly Executive, 2003 Copyright © 2011 Pearson Education, Inc publishing as Prentice Hall 10-25 OPEN SOURCE SOFTWARE Open Source Software • • • Free to acquire, so lower upfront