Ch 11:

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Ch 11:

  1. 1. CHAPTER 11 M ETHODOLOGIES FOR P URCHASED S OFTWARE P ACKAGES
  2. 2. T HE M AKE-OR- B UY D ECISION Page 406 <ul><li>Decision should be made jointly by business managers and IS professionals </li></ul><ul><li>Advantages of purchasing: </li></ul><ul><ul><li>Cost savings </li></ul></ul><ul><ul><li>Faster speed of implementation </li></ul></ul><ul><li>Disadvantages of purchasing: </li></ul><ul><ul><li>Seldom exactly fits a company’s needs </li></ul></ul><ul><ul><li>Often forces trade-offs </li></ul></ul>
  3. 3. P URCHASING M ETHODOLOGY Page 407 The Purchasing Steps Figure 11.1 The Purchasing Process
  4. 4. P URCHASING M ETHODOLOGY Page 407 Initiating the Purchasing Process Figure 11.2 Comparison of Costs and Building vs Purchasing a System
  5. 5. P URCHASING M ETHODOLOGY Page 408 Establish Criteria for Selection Figure 11.3 Key Criteria for Software Selection
  6. 6. P URCHASING M ETHODOLOGY Page 409 Develop and Distribute the 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 would meet the company’s needs
  7. 7. Page 409 Develop and Distribute the RFP Figure 11.4 Sample RFP Table of Contents
  8. 8. P URCHASING M ETHODOLOGY Page 410-411 <ul><li>Evaluation steps: </li></ul><ul><ul><li>Review vendors’ responses from RFPs </li></ul></ul><ul><ul><li>Request demonstrations of leading packages </li></ul></ul><ul><ul><li>Request references from users of software packages in other companies </li></ul></ul><ul><ul><li>Assess how well package capabilities satisfy company’s needs </li></ul></ul><ul><ul><li>Understand extent of any additional development efforts or costs to tailor software </li></ul></ul><ul><ul><li>Make decision </li></ul></ul>Evaluate Vendor Responses to RFP and Choose Package
  9. 9. P URCHASING M ETHODOLOGY Page 411 Evaluate Vendor Responses to RFP and Choose Package Figure 11.6 Matching Company Needs with Capabilities of the Package
  10. 10. P URCHASING M ETHODOLOGY Page 413 <ul><li>If no software package modifications required: </li></ul><ul><ul><li>Skip system design and building steps </li></ul></ul><ul><ul><li>Move directly to system testing </li></ul></ul><ul><ul><li>Develop any necessary process changes </li></ul></ul><ul><li>If software package is modified: </li></ul><ul><ul><li>Consider contracting with vendor or a third party for changes versus modifying in-house </li></ul></ul><ul><ul><li>Determine if changes are required to other existing company systems </li></ul></ul>Construction Phase
  11. 11. P URCHASING M ETHODOLOGY Page 413-414 Implementation Phase
  12. 12. P URCHASING M ETHODOLOGY Page 414-415 <ul><ul><li>Business managers and users </li></ul></ul><ul><ul><li>IS professionals </li></ul></ul><ul><ul><li>Project manager – usually a business manager </li></ul></ul><ul><ul><li>Software vendor personnel </li></ul></ul><ul><ul><li>Sometimes includes a third-party implementation partner </li></ul></ul><ul><ul><li>Purchasing specialists </li></ul></ul><ul><ul><li>Attorneys </li></ul></ul>Project Team for Purchasing Packages
  13. 13. P URCHASING M ETHODOLOGY Page 416 Purchasing Advantages and Disadvantages Figure 11.7 Advantages and Disadvantages of Purchasing Packaged Software
  14. 14. S PECIAL C ASE: E NTERPRISE S YSTEM P ACKAGES Page 417 <ul><li>Enterprise Resource Planning (ERP) system packages: </li></ul><ul><ul><li>Companies purchase to achieve business benefits and IT platform benefits </li></ul></ul><ul><ul><li>Enables access to integrated data for better decision making </li></ul></ul><ul><ul><li>Often require heavy reliance on third-party consultants </li></ul></ul><ul><ul><li>Implementation efforts usually complex, and sometimes not successful </li></ul></ul>
  15. 15. S PECIAL C ASE: E NTERPRISE S YSTEM P ACKAGES Page 417 <ul><li>Factors that need to be managed well for ERP implementation to be successful: </li></ul><ul><ul><li>Top management is engaged in the project, not just involved </li></ul></ul><ul><ul><li>Project leaders are veterans, and team members are decision makers </li></ul></ul><ul><ul><li>Third parties fill gaps in expertise and transfer their knowledge </li></ul></ul><ul><ul><li>Change management goes hand-in-hand with project planning </li></ul></ul><ul><ul><li>A satisfying mindset prevails </li></ul></ul>Brown and Vessey, 2003
  16. 16. N EW P URCHASING O PTION: A PPLICATION S ERVICE P ROVIDERS (ASPs) Page 418 <ul><li>New trend beginning 2000s </li></ul><ul><li>Purchasing option: purchaser elects to use a “hosted” application rather than to purchase the software application and host it on its own equipment </li></ul><ul><li>ASP is an ongoing service provider </li></ul><ul><li>Company pays third party (ASP) for delivering the software functionality over the Internet to company employees and sometimes business partners </li></ul>
  17. 17. N EW P URCHASING O PTION: A PPLICATION S ERVICE P ROVIDERS (ASPs) Page 418-419 <ul><li>Some advantages: </li></ul><ul><ul><li>Cost savings and faster speed of implementation </li></ul></ul><ul><ul><li>Usually involves monthly fees rather than large infrastructure investment </li></ul></ul><ul><li>Disadvantages: </li></ul><ul><ul><li>Dependence on an external vendor for both software and ongoing operations </li></ul></ul><ul><ul><li>Good assessment of required service levels even more critical </li></ul></ul>
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