Chapter 8


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Chapter 8

  1. 1. ISM 4113 Chapter 8 Analysis to Design
  2. 2. From What to How Physical Physical Logical Logical Current System New System “ What” “ How” 1 2 3 4 5 We are here
  3. 3. The Geometric Truth Cheap Now Right Emphasizing quality generally diminishes the likelihood of cost minimization and fast delivery. Emphasizing cost minimization or delivery time generally diminishes the quality. Emphasizing quality and delivery generally diminishes the likelihood of significant cost minimization.
  4. 4. Where are we in SDLC <ul><li>Physical Design </li></ul><ul><ul><li>Don’t get confused we are not here yet in NOMAS </li></ul></ul><ul><li>Deliverables: </li></ul><ul><ul><li>Detailed Spec of new system </li></ul></ul><ul><ul><li>Formal feasibility analysis </li></ul></ul>
  5. 5. Transition From Logical to Physical Design Prepare a detailed development plan for the physical design Identify a physical design which meets the requirements Document the physical design in detail Assess the feasibility of the physical design across all dimensions Recommend based on the outcome of the feasibility assessment
  6. 6. Selecting a Design Strategy <ul><li>Alternative Solutions </li></ul><ul><ul><li>Do Nothing! </li></ul></ul><ul><ul><li>Non-Automated Solution </li></ul></ul><ul><ul><li>Buy vs. Make </li></ul></ul><ul><ul><ul><li>Commercial off the shelf (COTS) </li></ul></ul></ul><ul><ul><ul><li>Develop system from scratch </li></ul></ul></ul><ul><ul><ul><li>Outsource IS solution </li></ul></ul></ul><ul><ul><li>Don’t forget about Hardware </li></ul></ul>
  7. 7. Evaluating a COTS Solution Evaluation Criteria Characteristics   Application Efficiency <ul><li>Acceptable response times under actual conditions </li></ul><ul><li>Efficient use of a wide variety of data storage solutions </li></ul><ul><li>Efficient use of backup and recovery mechanisms </li></ul><ul><li>  </li></ul>  Application Effectiveness <ul><li>Meets all stated requirements for the present process needs </li></ul><ul><li>Expandable & scalable to expected future needs & platform requirements </li></ul><ul><li>Logical organization of menus and data capture screens </li></ul><ul><li>Capacity for current and expected future user load </li></ul><ul><li>  </li></ul>  Usability <ul><li>Functional and logical user interface </li></ul><ul><li>Context-sensitive online help system </li></ul><ul><li>Appropriate user feedback with regard to application processes and user error </li></ul><ul><li>Non-destructive error recovery from command or menu selection errors </li></ul><ul><li>  </li></ul>  Documentation <ul><li>Well-organized and comprehensive written user documentation </li></ul><ul><li>Complete duplication of all documentation in online form </li></ul><ul><li>Comprehensive user tutorials for all application functions </li></ul><ul><li>  </li></ul>  Vendor Support <ul><li>Telephone technical support with direct access to technicians </li></ul><ul><li>Web-based support site with downloadable updates </li></ul><ul><li>Searchable web-based technical support knowledge base for first line solutions </li></ul><ul><li>  </li></ul>
  8. 8. Evaluating Outsourcing     Terms of reference document that sets out the objectives, scope and approach of the evaluation Strategic business plan (where does the organization want to be?) Analysis of how outsourcing integrates with the purchaser's strategic plan Business analysis and feasibility study (the high level requirements and how the process would work) Human resources impact assessment (may require the assistance of employment law specialists at an early stage) Request for information (RFI) (seeking suitable services and indicative costs) Cost-benefit analysis (what are the economics?) Risk analysis and business impact (what are the risks?) Business case and recommendation to management Specification of requirements (detailed statement of services and service levels required) Call for proposals from suppliers known as a request for proposal (RFP) Evaluation of proposals  
  9. 9. Remember Bounded Rationality <ul><li>The Feasible Solution </li></ul><ul><ul><li>For every problem there are many solutions </li></ul></ul><ul><ul><li>Some are good </li></ul></ul><ul><ul><li>Only one is BEST </li></ul></ul><ul><ul><ul><li>Best = Feasible? </li></ul></ul></ul><ul><li>Feasible Defined: </li></ul><ul><ul><li>A solution that solves the identified problem or maximizes the … opportunity without causing any problems that were not in existence before its implementation. </li></ul></ul>
  10. 10. 3 Ways to Make a Business Case Facts Faith Fear <ul><li>“ The system will have a net present value of $753,000.” </li></ul><ul><li>“ The system will yield a minimum reduction in operating cost of $193,000 annually.” </li></ul><ul><li>“ The estimated increase in market share is 14.7%.” within the first 24 months of operation.” </li></ul><ul><li>“ IT is part of the infrastructure, we can’t cost justify it like a new fleet of trucks.” </li></ul><ul><li>“ It seems reasonable to assume that this new system will reduce our costs of servicing this market sector.” </li></ul><ul><li>“ Trust me. This is why you hired me as the IT Director.” </li></ul><ul><li>“ Our competitors are doing this even as we speak.” </li></ul><ul><li>“ Our shareholders will view us as technologically behind if we don’t do this now.” </li></ul><ul><li>“ We have a small window of opportunity here and we are wasting precious time trying to decide.” </li></ul>
  11. 11. Feasibility Dimensions <ul><li>Technical </li></ul><ul><li>Operational </li></ul><ul><li>Human Factors </li></ul><ul><li>Legal & Political </li></ul><ul><li>Economic </li></ul>
  12. 12. Technical <ul><li>Technology must be sufficient for proposed solution </li></ul><ul><ul><li>Is the technology necessary for the proposed solution practical to obtain? </li></ul></ul><ul><ul><li>Do we currently possess the technology necessary to implement the proposed solution? </li></ul></ul><ul><ul><li>Is the technology necessary to implement the proposed solution available now and has it been tested and proved? </li></ul></ul>
  13. 13. Vaporware, Beware!
  14. 14. Operational <ul><li>Solution must “fit” within the organization and be accepted by end-users </li></ul><ul><ul><li>Does the solution fit with the organizations IS Plan? </li></ul></ul><ul><ul><li>How does the implementation schedule fit with the other organization projects? </li></ul></ul><ul><ul><li>Are the necessary resources available to complete the proposed solution? </li></ul></ul><ul><ul><li>What impact can we expect if we adopt this proposed solution? </li></ul></ul>
  15. 15. Human Factors <ul><li>Usability </li></ul><ul><ul><li>Ease of use </li></ul></ul><ul><ul><ul><li>How easy is the system within the context of your day-to-day activities </li></ul></ul></ul><ul><ul><li>Perceived usefulness </li></ul></ul><ul><ul><ul><li>Does the system conform to the needs of your job </li></ul></ul></ul><ul><ul><li>Overall satisfaction </li></ul></ul><ul><ul><ul><li>Are you pleased with the system in general </li></ul></ul></ul><ul><li>End-user training </li></ul><ul><ul><li>When should this start? </li></ul></ul><ul><ul><li>Too early and … </li></ul></ul><ul><ul><li>Too late and ... </li></ul></ul>
  16. 16. Legal & Political <ul><li>Legal </li></ul><ul><ul><li>Will the solution violate any law’s, treaties, etc. </li></ul></ul><ul><li>Political </li></ul><ul><ul><li>Change and reallocation of information (info=power) will cause people to resist change </li></ul></ul><ul><ul><li>Who might resist and what measures are in place to overcome this? </li></ul></ul>
  17. 17. Economic <ul><li>Benefits > Cost (period!) </li></ul>
  18. 18. Typical Tangible Benefits Benefit Category Common Examples   Cost Reduction     Reduction in labor or headcount Less paperwork Reduction or elimination of overtime Efficiencies in distribution Consolidation of jobs or employee roles Less need for travel Reduction in supply usage Less maintenance Smaller inventory needs or carrying costs Lower costs of hardware and/or software Increase in product/process quality Improved production throughput or costs Reduction in overall cost of funds Efficient use of utilities Improved subcontractor or external vendor control Reduction in or improved effectiveness of training     Revenue Increase     Introduction of new products Improved product quality Increased efficiency in sales processes Product enhancements Improved advertising support and target marketing Development of, or access to, new markets Decreased time to market Effective bidding tools  
  19. 19. Typical Intangible Benefits <ul><li>Improved employee morale </li></ul><ul><li>Improved corporate image </li></ul><ul><li>Increase in perceived quality of products or services </li></ul><ul><li>Perceived decrease in time to market by customers </li></ul><ul><li>Improved decision making </li></ul><ul><li>More timely information </li></ul><ul><li>Increased organizational flexibility </li></ul><ul><li>Improved resource allocation and control </li></ul><ul><li>Increased strategic or competitive advantage </li></ul><ul><li>Improved public and community relations </li></ul><ul><li>Improvements in addressing environmental concerns </li></ul><ul><li>Reduced employee turnover </li></ul><ul><li>Increased quality of work for employees </li></ul><ul><li>Proactive attention to ethical issues </li></ul><ul><li>Proactive addressing of legal issues </li></ul><ul><li>Increased workplace and/or community safety </li></ul>
  20. 20. Typical System Costs Cost Category Common Examples   Tangible Development   Development personnel Data conversion costs Analysis and design consulting fees Pre-development training Vendor installation and consulting Materials and supplies Hiring costs for new operating personnel Hardware and software acquisition or development Physical plant acquisition and/or conversion     Tangible Operating     Maintenance and upgrades (hardware and software) End-user training Annual or renewable software licenses Operational personnel Repairs (hardware and software) Depreciation of system assets Connectivity and communication charges Materials and supplies Equipment lease payments       Intangible     Potential disruption to existing productivity and environment Loss of customer goodwill Reduction in employee morale Diversion of attention to daily responsibilities  
  21. 21. Types of Economic Analysis <ul><li>Net Present Value (NPV) </li></ul><ul><li>Internal Rate of Return (IRR) </li></ul><ul><ul><li>Discount Rate that equates the PV of future cash flows to the Initial Cost </li></ul></ul><ul><ul><ul><li>Discount Rate > Cost of Funds = Surplus for Project </li></ul></ul></ul><ul><ul><ul><li>Discount Rate < Cost of Funds = Deficit for Project </li></ul></ul></ul><ul><li>Return on Investment (ROI) </li></ul><ul><ul><li>Net Cash Flow / Total Cost </li></ul></ul><ul><li>Break-even Analysis </li></ul><ul><ul><li>(Break-even year Cash flow – BE year cumulative Cash flow) / Break-even year Cash flow </li></ul></ul>
  22. 22. Breakeven Analysis
  23. 23. Categories of Risk Category of Risk Examples of Risk   Project Size   <ul><li>  </li></ul><ul><li>length of development schedule </li></ul><ul><li>number of members of development team </li></ul><ul><li>span of involvement across organizational business units </li></ul><ul><li>span of involvement across unrelated organizations </li></ul><ul><li>size of project as measured in number of applications or lines of code </li></ul><ul><li>  </li></ul>  Project Structure   <ul><li>  </li></ul><ul><li>degree to which development effort is new and/or innovative </li></ul><ul><li>extent of organizational or structural change required </li></ul><ul><li>overall managerial commitment to project </li></ul>  Analysts   <ul><li>  </li></ul><ul><li>familiarity with business environment </li></ul><ul><li>familiarity with proposed technologies </li></ul><ul><li>familiarity with similar project scopes and complexities </li></ul><ul><li>  </li></ul>  End-users   <ul><li>  </li></ul><ul><li>perception of end-users to necessity or relevance of new system </li></ul><ul><li>familiarity with system development process and change </li></ul><ul><li>familiarity with proposed system application environment </li></ul><ul><li>  </li></ul>
  24. 24. Next Class UGH#4 <ul><li>Prepare a Cost Benefit Analysis using the following assumptions: </li></ul><ul><ul><li>Net Benefit in Year 1 = 50,000 </li></ul></ul><ul><ul><ul><li>Benefit increases by $5000 each year. </li></ul></ul></ul><ul><ul><li>One Time cost = 90,000 </li></ul></ul><ul><ul><li>Recurring Costs = 25,000 each year </li></ul></ul><ul><ul><li>Discount rate = 10% </li></ul></ul><ul><li>Determine the Following: </li></ul><ul><ul><li>NPV </li></ul></ul><ul><ul><li>ROI </li></ul></ul><ul><ul><li>Break-Even Point </li></ul></ul>
  25. 25. For Next Class <ul><li>Read Glass Article </li></ul>