Development Strategies Dr. Yan Xiong College of Business CSU Sacramento 10/12/03
Agenda <ul><li>Software Packages </li></ul><ul><li>In-house Development </li></ul><ul><li>Outsourcing </li></ul><ul><li>Bu...
Purchase Software <ul><li>Canned software:   written  by computer manufacturers  or software development  companies </li><...
Purchasing Software <ul><li>Companies that buy rather  than develop AIS software  still go through systems development lif...
Purchasing Software <ul><li>Companies that buy rather  than develop AIS software  still go through systems development lif...
Systems Acquisition Process Develop software internally Send RFP for hardware, if necessary Evaluate proposal No Yes Inves...
Alternative Screening Matrix <ul><li>Use for screening,  not selection </li></ul><ul><li>Beware of implying too much accur...
Alternative Screening Matrix <ul><li>Example: </li></ul><ul><ul><li>Vendor A score 4.35 </li></ul></ul><ul><ul><li>Vendor ...
Alternative Screening Matrix Evaluation Criteria Crit. Weight Alternatives to be Compared A1 A2 An .  .  .  . 1.00 Total T...
Determining Weights <ul><li>Rank factors in importance  with most important  receiving highest number </li></ul><ul><li>To...
Weighting Example TOTAL  15 TOTAL  1.00 .07 1/15 1 Upgrades .20 3/15 3 Service .33 5/15 5 Ease of Use .13 2/15 2 Scalabili...
Agenda <ul><li>Software Packages </li></ul><ul><li>In-house Development </li></ul><ul><li>Outsourcing </li></ul><ul><li>Bu...
In-house Development <ul><li>In the past, most  organizations had  information system  departments develop  custom  softwa...
In-house Development <ul><li>Custom software usually  developed and written in house </li></ul><ul><li>Alternatively, can ...
In-house Development <ul><li>Outsourcing management: </li></ul><ul><ul><li>carefully select developer </li></ul></ul><ul><...
Agenda <ul><li>Software Packages </li></ul><ul><li>In-house Development </li></ul><ul><li>Outsourcing </li></ul><ul><li>Bu...
Outsourcing <ul><li>Hiring outside company to  handle all  or part of an organization’s IT activities </li></ul><ul><li>In...
Outsourcing <ul><li>In client/server (PC)  outsourcing agreement,  firm contracts for: </li></ul><ul><ul><li>particular se...
Outsourcing Types <ul><li>Professional services  ( consulting) </li></ul><ul><li>Services ( training / data entry ) </li><...
Outsourcing Benefits of Outsourcing A business solution  Asset utilization  Access to greater expertise and  more advanced...
Outsourcing Risks of Outsourcing  Inflexibility  Loss of control  Reduced competitive advantage  Locked-in system  Not tie...
When to Outsource  <ul><li>Activity not strategic </li></ul><ul><li>Save at least 15% </li></ul><ul><li>Need technology sp...
Outsource Failures <ul><li>DT Study, 1997 </li></ul><ul><li>Vendor expertise and  sophistication </li></ul><ul><li>Improve...
Raleys  <ul><li>Prefer to acquire talented,  retail-oriented staff </li></ul><ul><li>Augments IT projects with consultants...
Agenda <ul><li>Software Packages </li></ul><ul><li>In-house Development </li></ul><ul><li>Outsourcing </li></ul><ul><li>Bu...
Reengineering <ul><li>Hammer / Champy </li></ul><ul><li>“ . . .  fundamental  rethinking  </li></ul><ul><li>and   radical ...
BPR <ul><li>Reduces company to  essential processes  </li></ul><ul><li>Focuses on  why   they are  done rather than on the...
Business Process <ul><li>“…set of tasks that directly  support the achievement  of  business objectives  by  providing a  ...
Core Processes <ul><li>4 or 5 in any organization </li></ul><ul><li>Can be broken down into  sub-processes </li></ul><ul><...
Financial Core Processes <ul><li>Product  New loan, savings  Development  checking plan </li></ul><ul><li>Sales and  New a...
Pharmaceuticals  Core Processes <ul><li>Product  R & D testing Development </li></ul><ul><li>Sales and  Market segmenta-  ...
BPR Examples <ul><li>From Martin,  Analysis  and Design of Business  Information Systems,   (Prentice Hall, 1995) </li></u...
Outsourcing A.  GM Process Flows Before B.  Outsourcing Delivery to Contrail Produce Deliver Delivery Vendor Produce Conra...
Customer Focus Before: After: Cust. P1 Cust. P3 P2 Cust. Cust. P1 P2 P3 Case  Mgr.
Buffering 3.6 Ship Product Order 3.5 Edit Order 3.5 Edit Order 3.6 Ship Product Pending Order File  After: Before:
3.1 Verify Order 3.2 Credit Check Customer Before: After: Order Order Parallel Processing   3.2 Credit Check Order (Copy 2...
Geographic Balancing Building A Building B Before: 1 3 2
Geographic Balancing 1 3 2 Building A Building B After:
BPR Challenges <ul><li>Tradition </li></ul><ul><li>Resistance </li></ul><ul><ul><li>e.g., seniority </li></ul></ul><ul><li...
BPR Challenges <ul><li>Controls </li></ul><ul><ul><li>often sacrificed for  sake of efficiency </li></ul></ul><ul><ul><li>...
Controls Example <ul><li>BPR expert recommends  that you consolidate two  sequential processes </li></ul><ul><ul><li>reduc...
Controls Example <ul><li>Calculate BPR consolidation  savings </li></ul><ul><li>Calculate probable fraud costs </li></ul><...
Consolidate, Transfer  Internally Improve, Leverage Outsource Redesign (Reengineer) State of California Guidelines “ Best-...
Agenda <ul><li>Software Packages </li></ul><ul><li>In-house Development </li></ul><ul><li>Outsourcing </li></ul><ul><li>Bu...
Prototyping <ul><li>Approach to systems  development in which  simplified working model  of system developed </li></ul><ul...
Why Prototyping <ul><li>“ When you’re working with  new system ideas with your  users, you don’t want  to go  through the ...
Why Prototyping <ul><li>Experience at AT&T,  TRW, and IBM </li></ul><ul><ul><li>30% of system requirements  will change  B...
Error Correction $ T i m e  t o  D e t e c t  Prototyping
Prototype Life Cycle  Analyze problem Develop Prototype  Operationalize Prototype Complete System Refine Prototype
Prototype Types <ul><li>Iterative : Make series  of changes until prototype  becomes the final system </li></ul><ul><ul><l...
SDLC Stage Iterative Iterative A D Throwaway Prototype Models Prototype Language 4 GL 3 GL Operations Language 4 GL 3 GL
Prototyping Advantages of Prototyping Better definition of user needs  Higher user involvement and satisfaction Faster dev...
Prototyping Disadvantages of Prototyping  Significant user time  Bypass Analysis Phase Incomplete systems development Inad...
Topics Covered <ul><li>Software Packages </li></ul><ul><li>In-house Development </li></ul><ul><li>Outsourcing </li></ul><u...
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Implementation

  1. 1. Development Strategies Dr. Yan Xiong College of Business CSU Sacramento 10/12/03
  2. 2. Agenda <ul><li>Software Packages </li></ul><ul><li>In-house Development </li></ul><ul><li>Outsourcing </li></ul><ul><li>Business Process Reengineering (BPR) </li></ul><ul><li>Prototyping </li></ul>
  3. 3. Purchase Software <ul><li>Canned software: written by computer manufacturers or software development companies </li></ul><ul><li>Sold on open market to broad range of users with similar requirements </li></ul><ul><li>Turnkey systems : combination of software and hardware sold as a package </li></ul>
  4. 4. Purchasing Software <ul><li>Companies that buy rather than develop AIS software still go through systems development life cycle (SDLC) </li></ul><ul><li>Implementation phase is reduced: </li></ul><ul><ul><li>less coding </li></ul></ul><ul><ul><li>less testing </li></ul></ul><ul><li>This is most costly </li></ul>
  5. 5. Purchasing Software <ul><li>Companies that buy rather than develop AIS software still go through systems development life cycle (SDLC) </li></ul><ul><li>Implementation phase is reduced: </li></ul><ul><ul><li>less coding </li></ul></ul><ul><ul><li>less testing </li></ul></ul><ul><li>This is most costly SDLC phase </li></ul>
  6. 6. Systems Acquisition Process Develop software internally Send RFP for hardware, if necessary Evaluate proposal No Yes Investigate software packages Send RFP for software and hardware No Yes Select best combination Will package meet needs ? Can package be modified ?
  7. 7. Alternative Screening Matrix <ul><li>Use for screening, not selection </li></ul><ul><li>Beware of implying too much accuracy </li></ul>
  8. 8. Alternative Screening Matrix <ul><li>Example: </li></ul><ul><ul><li>Vendor A score 4.35 </li></ul></ul><ul><ul><li>Vendor B score 4.25 </li></ul></ul><ul><ul><li>Vendor C score 3.25 </li></ul></ul><ul><li>Vendor C out; Vendors A and B too close to call </li></ul>
  9. 9. Alternative Screening Matrix Evaluation Criteria Crit. Weight Alternatives to be Compared A1 A2 An . . . . 1.00 Total T1 T2 Tn C1 C2 Cm . . . M Evaluation Criteria N Alternatives Wc1 Wc2 Wcm . . . . . . .
  10. 10. Determining Weights <ul><li>Rank factors in importance with most important receiving highest number </li></ul><ul><li>Total the ranks </li></ul><ul><li>Divide each factor weight by the total </li></ul><ul><li>Make individual weight adjustments if necessary </li></ul>
  11. 11. Weighting Example TOTAL 15 TOTAL 1.00 .07 1/15 1 Upgrades .20 3/15 3 Service .33 5/15 5 Ease of Use .13 2/15 2 Scalability .27 4/15 4 Cost WEIGHT CALCULATION RANK CRITERIA Most important criterion gets highest rank
  12. 12. Agenda <ul><li>Software Packages </li></ul><ul><li>In-house Development </li></ul><ul><li>Outsourcing </li></ul><ul><li>Business Process Reengineering (BPR) </li></ul><ul><li>Prototyping </li></ul>
  13. 13. In-house Development <ul><li>In the past, most organizations had information system departments develop custom software , because canned software fitting specific needs not available </li></ul><ul><li>Developing custom software difficult and error-prone </li></ul><ul><li>Also consumes a great deal of time and resources </li></ul>
  14. 14. In-house Development <ul><li>Custom software usually developed and written in house </li></ul><ul><li>Alternatively, can engage outside company to develop package or assemble it from their inventory of program modules ( objects ) </li></ul><ul><ul><li>called “ outsourcing ” </li></ul></ul><ul><li>When contracting with outside organization, must maintain control over the development process </li></ul>
  15. 15. In-house Development <ul><li>Outsourcing management: </li></ul><ul><ul><li>carefully select developer </li></ul></ul><ul><ul><ul><li>Vendor Screening Matrix </li></ul></ul></ul><ul><ul><li>sign contract </li></ul></ul><ul><ul><li>plan and monitor each step </li></ul></ul><ul><ul><li>maintain effective communication </li></ul></ul><ul><ul><li>control all costs </li></ul></ul>
  16. 16. Agenda <ul><li>Software Packages </li></ul><ul><li>In-house Development </li></ul><ul><li>Outsourcing </li></ul><ul><li>Business Process Reengineering (BPR) </li></ul><ul><li>Prototyping </li></ul>
  17. 17. Outsourcing <ul><li>Hiring outside company to handle all or part of an organization’s IT activities </li></ul><ul><li>In mainframe outsourcing agreement , outsourcers buy client’s computers and hire all or most of client’s employees </li></ul><ul><ul><li>Electronic Data Services (EDS) </li></ul></ul>
  18. 18. Outsourcing <ul><li>In client/server (PC) outsourcing agreement, firm contracts for: </li></ul><ul><ul><li>particular service </li></ul></ul><ul><ul><li>segment of its business </li></ul></ul><ul><ul><li>particular function </li></ul></ul><ul><ul><li>PC support </li></ul></ul>
  19. 19. Outsourcing Types <ul><li>Professional services ( consulting) </li></ul><ul><li>Services ( training / data entry ) </li></ul><ul><li>Temporary employees </li></ul><ul><ul><li>contract programmers </li></ul></ul><ul><li>Transactions ( credit reports ) </li></ul><ul><li>Systems integrators </li></ul>
  20. 20. Outsourcing Benefits of Outsourcing A business solution Asset utilization Access to greater expertise and more advanced technology Lower costs Improved development time Elimination of peaks and valleys usage Facilitation of downsizing
  21. 21. Outsourcing Risks of Outsourcing Inflexibility Loss of control Reduced competitive advantage Locked-in system Not tied to corporate goals
  22. 22. When to Outsource <ul><li>Activity not strategic </li></ul><ul><li>Save at least 15% </li></ul><ul><li>Need technology specialists </li></ul><ul><li>Increase financial flexibility </li></ul><ul><ul><li>capital to operating expenses </li></ul></ul><ul><li>Free personnel for development </li></ul><ul><li>Acquire new technologies quicker </li></ul>
  23. 23. Outsource Failures <ul><li>DT Study, 1997 </li></ul><ul><li>Vendor expertise and sophistication </li></ul><ul><li>Improved delivery quality </li></ul><ul><li>Cost reduction </li></ul><ul><li>Increased focus on core competencies </li></ul><ul><li>Transition to new technologies </li></ul>
  24. 24. Raleys <ul><li>Prefer to acquire talented, retail-oriented staff </li></ul><ul><li>Augments IT projects with consultants, contractors </li></ul><ul><li>Outsource professional services such as training and data entry </li></ul>
  25. 25. Agenda <ul><li>Software Packages </li></ul><ul><li>In-house Development </li></ul><ul><li>Outsourcing </li></ul><ul><li>Business Process Reengineering (BPR) </li></ul><ul><li>Prototyping </li></ul>
  26. 26. Reengineering <ul><li>Hammer / Champy </li></ul><ul><li>“ . . . fundamental rethinking </li></ul><ul><li>and radical redesign of business processes </li></ul><ul><li>to achieve dramatic improvements . . .” </li></ul>
  27. 27. BPR <ul><li>Reduces company to essential processes </li></ul><ul><li>Focuses on why they are done rather than on the details of how they are done </li></ul><ul><li>Completely reshapes organizational work practices and information flows to take advantage of technological advancements </li></ul>
  28. 28. Business Process <ul><li>“…set of tasks that directly support the achievement of business objectives by providing a product or service for a customer who is outside the organization or in a different organizational unit” </li></ul><ul><li>A merican Management Systems </li></ul>
  29. 29. Core Processes <ul><li>4 or 5 in any organization </li></ul><ul><li>Can be broken down into sub-processes </li></ul><ul><li>Critical to organization’s success </li></ul><ul><li>Focus redesign on these processes </li></ul>
  30. 30. Financial Core Processes <ul><li>Product New loan, savings Development checking plan </li></ul><ul><li>Sales and New accounts, Marketing acquisitions </li></ul><ul><li>Order Deposits, loans, Fulfillment withdrawals </li></ul><ul><li>Customer Financial planning, Service inquiries </li></ul>
  31. 31. Pharmaceuticals Core Processes <ul><li>Product R & D testing Development </li></ul><ul><li>Sales and Market segmenta- Marketing tion, contracts </li></ul><ul><li>Order Contract manage- Fulfillment ment, shipping </li></ul><ul><li>Customer Claims analysis Service </li></ul>
  32. 32. BPR Examples <ul><li>From Martin, Analysis and Design of Business Information Systems, (Prentice Hall, 1995) </li></ul><ul><li>All focused on Data Flow Diagrams (DFDs) </li></ul>
  33. 33. Outsourcing A. GM Process Flows Before B. Outsourcing Delivery to Contrail Produce Deliver Delivery Vendor Produce Conrail Delivery
  34. 34. Customer Focus Before: After: Cust. P1 Cust. P3 P2 Cust. Cust. P1 P2 P3 Case Mgr.
  35. 35. Buffering 3.6 Ship Product Order 3.5 Edit Order 3.5 Edit Order 3.6 Ship Product Pending Order File After: Before:
  36. 36. 3.1 Verify Order 3.2 Credit Check Customer Before: After: Order Order Parallel Processing 3.2 Credit Check Order (Copy 2) 3.1 Verify Order Order (Copy 1) Customer
  37. 37. Geographic Balancing Building A Building B Before: 1 3 2
  38. 38. Geographic Balancing 1 3 2 Building A Building B After:
  39. 39. BPR Challenges <ul><li>Tradition </li></ul><ul><li>Resistance </li></ul><ul><ul><li>e.g., seniority </li></ul></ul><ul><li>Time requirements </li></ul><ul><li>Lack of management support </li></ul><ul><li>Risk </li></ul><ul><ul><li>most crucial processes </li></ul></ul><ul><ul><li>on-going organization </li></ul></ul>
  40. 40. BPR Challenges <ul><li>Controls </li></ul><ul><ul><li>often sacrificed for sake of efficiency </li></ul></ul><ul><ul><li>e.g., eliminating verification process </li></ul></ul><ul><li>Accountants must ensure that what is gained by BPR is not lost through fraud, errors, etc. </li></ul>
  41. 41. Controls Example <ul><li>BPR expert recommends that you consolidate two sequential processes </li></ul><ul><ul><li>reduce personnel </li></ul></ul><ul><ul><li>reduce handoffs (errors) </li></ul></ul><ul><ul><li>increase job satisfaction </li></ul></ul><ul><li>But you will lose separation of duties </li></ul>
  42. 42. Controls Example <ul><li>Calculate BPR consolidation savings </li></ul><ul><li>Calculate probable fraud costs </li></ul><ul><ul><li>Likelihood of threat (risk) times exposure $ </li></ul></ul><ul><li>Compare </li></ul>
  43. 43. Consolidate, Transfer Internally Improve, Leverage Outsource Redesign (Reengineer) State of California Guidelines “ Best- of- Breed” Needs Improve- ment Quality Non - Critical Critical Importance
  44. 44. Agenda <ul><li>Software Packages </li></ul><ul><li>In-house Development </li></ul><ul><li>Outsourcing </li></ul><ul><li>Business Process Reengineering (BPR) </li></ul><ul><li>Prototyping </li></ul>
  45. 45. Prototyping <ul><li>Approach to systems development in which simplified working model of system developed </li></ul><ul><li>Prototype (“first draft”) quickly and inexpensively built </li></ul><ul><li>Provided to users for testing and training </li></ul>
  46. 46. Why Prototyping <ul><li>“ When you’re working with new system ideas with your users, you don’t want to go through the cost of developing a gigantic system which might take years; you’ll build a mock-up of it, which might take weeks.” </li></ul><ul><li>Brian Kilcourse, CIO </li></ul><ul><li>Longs Drug Stores </li></ul>
  47. 47. Why Prototyping <ul><li>Experience at AT&T, TRW, and IBM </li></ul><ul><ul><li>30% of system requirements will change BEFORE initial system delivery </li></ul></ul><ul><li>Production error correction model </li></ul>
  48. 48. Error Correction $ T i m e t o D e t e c t Prototyping
  49. 49. Prototype Life Cycle Analyze problem Develop Prototype Operationalize Prototype Complete System Refine Prototype
  50. 50. Prototype Types <ul><li>Iterative : Make series of changes until prototype becomes the final system </li></ul><ul><ul><li>e.g., writing a poem </li></ul></ul><ul><li>Throw-away : Once user approves, then abandon for construction purposes </li></ul><ul><ul><li>e.g., architect’s drawing of new house </li></ul></ul>
  51. 51. SDLC Stage Iterative Iterative A D Throwaway Prototype Models Prototype Language 4 GL 3 GL Operations Language 4 GL 3 GL
  52. 52. Prototyping Advantages of Prototyping Better definition of user needs Higher user involvement and satisfaction Faster development time Fewer errors More opportunity for changes Less costly Better user/analyst communication
  53. 53. Prototyping Disadvantages of Prototyping Significant user time Bypass Analysis Phase Incomplete systems development Inadequately tested and documented systems Negative behavioral reactions Unending development
  54. 54. Topics Covered <ul><li>Software Packages </li></ul><ul><li>In-house Development </li></ul><ul><li>Outsourcing </li></ul><ul><li>Business Process Reengineering (BPR) </li></ul><ul><li>Prototyping </li></ul>

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