From What to How Physical Physical Logical Logical Current System New  System “ What” “ How” 1 2 3 4 5 We are here
The Geometric Truth Cheap Now Right Emphasizing quality generally diminishes the  likelihood  of cost minimization and fas...
Transition From Logical to Physical Design Prepare a detailed development plan for the physical design Identify a physical...
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...
Breakeven Analysis
Evaluating a COTS Solution Evaluation Criteria Characteristics   Application Efficiency <ul><li>Acceptable response times ...
Evaluating Outsourcing     Terms of reference document that sets out the objectives, scope and approach of the evaluation ...
Typical Tangible Benefits Benefit Category Common Examples   Cost Reduction     Reduction in labor or headcount Less paper...
Typical Intangible Benefits <ul><li>Improved employee morale </li></ul><ul><li>Improved corporate image </li></ul><ul><li>...
Typical System Costs Cost Category Common Examples   Tangible Development   Development personnel  Data conversion costs A...
Categories of Risk Category of Risk Examples of Risk   Project Size   <ul><li>  </li></ul><ul><li>length of development sc...
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Ch08

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Ch08

  1. 1. From What to How Physical Physical Logical Logical Current System New System “ What” “ How” 1 2 3 4 5 We are here
  2. 2. 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.
  3. 3. 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
  4. 4. 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>
  5. 5. Breakeven Analysis
  6. 6. 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>
  7. 7. 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  
  8. 8. 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  
  9. 9. 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>
  10. 10. 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  
  11. 11. 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>

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