The document discusses the key stages in the Systems Development Life Cycle (SDLC), including systems strategy, project initiation, development, and maintenance. It describes the objectives of each stage, such as assessing business needs during systems strategy and conducting feasibility studies and cost-benefit analysis during project initiation. Accountants play an important role by ensuring economic feasibility analysis, accurate cost reporting, and that systems have appropriate controls.

1. Accounting Information Systems, 6th
edition
James A. Hall
COPYRIGHT © 2009 South-Western, a division of Cengage Learning. Cengage Learning and South-Western
are trademarks used herein under license

2. Objectives for Chapter 13
• Identify the key stages in the SDLC
• How a firm’s business strategy shapes its information
system
• The relationship between strategic systems planning
and legacy systems
• What transpires during systems analysis
• The TELOS model for assessing project feasibility
• Cost-benefit analysis issues related to information
systems projects
• The role of accountants in the SDLC

3. The Systems Development
Life Cycle (SDLC)
A logical sequence of activities used to:
identify new systems needs
develop new systems to support those needs
A model for reducing risk through planning, execution,
control, and documentation
The SDLC model may be shown in five stages.
We’ll look at the first two in this chapter and the
remaining three in chapter 14.

4. Systems Development Life Cycle
1. Systems Strategy
- Assessment
- Develop Strategic Plan
1. Systems Strategy
- Assessment
- Develop Strategic Plan
2. Project Initiation
- Feasibility Study
- Analysis
- Conceptual Design
- Cost/Benefit Analysis
2. Project Initiation
- Feasibility Study
- Analysis
- Conceptual Design
- Cost/Benefit Analysis
3. In-house Development
- Construct
- Deliver
3. In-house Development
- Construct
- Deliver
4. Commercial Packages
- Configure
- Test
- Roll-out
4. Commercial Packages
- Configure
- Test
- Roll-out
5. Maintenance & Support
- User help desk
- Configuration Management
- Risk Management & Security
5. Maintenance & Support
- User help desk
- Configuration Management
- Risk Management & Security
SSystemystem Interfaces, ArchitectureInterfaces, Architecture
and Uand Userser RRequirementsequirements
BBusinessusiness RRequirementsequirements
High Priority Proposals undergoHigh Priority Proposals undergo
Additional Study and DevelopmentAdditional Study and Development
FeedbackFeedback::
User requests for New SystemsUser requests for New Systems
Selected System ProposalsSelected System Proposals
go forward for Detailedgo forward for Detailed
DesignDesign
New and RevisedNew and Revised
Systems Enter intoSystems Enter into
ProductionProduction
Business Needs and
Strategy
Legacy Situation
FeedbackFeedback::
User requests for SystemUser requests for System
Improvements and SupportImprovements and Support

5. Overview of Phases 1 and 2
Phase 1 - Systems Strategy
understand the strategic needs of the organization
examine the organization’s mission statement
analyze competitive pressures on the firm
examine current and anticipated market conditions
consider the information systems’ implications
pertaining to legacy systems
consider concerns registered through user feedback
produce a strategic plan for meeting these various and
complex needs
produce a timetable for implementation

6. Overview of Phases 1 and 2
Phase 2 - Project Initiation
assess systems proposals for consistency with the
strategic systems plan
evaluate feasibility and cost-benefit characteristics of
proposals
consider alternative conceptual designs
select a design to enter the construct phase of the SDLC
examine whether the proposal will require in-house
development, a commercial package, or both

7. Systems Development Participants
Systems Professionals: analyze problems in current
systems and formulate solutions
systems analysts
systems designers
programmers
End Users: primary users of the system
addressing their needs is critical to success
Stakeholders: individuals who have an interest in the
system but are not end users

8. Systems Steering Committee
Usually includes the CEO, CFO, CIO, senior management
from user areas and computer services, and internal
auditors
Typical responsibilities:
provide guidance
resolve conflicts
review projects and assigning priorities
budget and allocate funds
review the status of projects
determine whether projects should be continued

10. Assessing Strategic
Information Needs
Strategic systems planning involves the allocation of
resources at the macro level.
usually a time frame of three to five years
Key inputs in developing a sound systems strategy
include:
strategic business needs of the organization
situations involving legacy systems
end user feedback

11. Strategic Business Needs
Vision and mission
systems strategy requires an understanding of top
management’s vision, which has shaped the organization’s
business strategy
Industry and competency analysis
industry analysis: the driving forces that affect the industry
and their organization’s performance, such as important
trends, significant risks, and potential opportunities
competency analysis: a complete picture of the
organization’s effectiveness as seen via four strategic filters:
resources, infrastructure, products/services, and customers

12. Legacy Systems
Use legacy components to help develop an
architecture description.

13. End User Feedback
Identifying user needs is fundamental to everything
else
During phase 1, pertains to substantial perceived
problems rather than minor systems modifications
Has five key phases at this point in the SDLC:
recognize problems
define problems
specify systems objectives
determine feasibility and contributions of projects
 may entail prioritizing individual projects
preparing a formal project proposal

14. End User Feedback:
Recognizing the Problem
The need for a new, improved information system
is manifested through various symptoms.
Symptoms may seem vague and innocuous or go
unrecognized initially.
The point at which the problem is recognized is
often a function of management’s philosophy.
reactive management - responds to problems only
when they reach a crisis state
proactive management - alert to subtle signs of
problems and aggressively looks for ways to improve

15. End User Feedback:
Defining the Problem
Managers and end users should…
avoid leaping to a single definition of a problem
keep an open mind and gather facts before deciding
learn to intelligently interact with systems professionals
An interactive process between managers/end users
and systems professionals is necessary to arrive at
an accurate problem definition.
The next three stages of the end user feedback process
involve this interactive process.

16. End User Feedback:
Specifying System Objectives
The strategic objectives of the firm and
the operational objectives of the
information systems must be
compatible.
At this point, the objectives only need
to be defined in general terms.

17. End User Feedback:
Preliminary Project Feasibility-TELOS
Technical feasibility - is the technology necessary
available?
Economic feasibility - are the funds available and
appropriate for the system?
Legal feasibility - does the system fall within legal
boundaries?
Operational feasibility - can procedural changes be
made to make the system work?
Schedule feasibility - can the project be completed by
an acceptable time period?

18. End User Feedback:
Preparing a Formal Project Proposal
A systems project proposal provides
management with a basis for deciding
whether or not to proceed with the project.
It summarizes the findings of the study and
makes a general recommendation.
It outlines the linkage between the
objectives of the proposed system and the
business objectives of the firm.

19. Strategic Systems Plan
After collecting input, the steering committee and
systems professionals evaluate the pros and cons of
each proposal.
Assessing each potential project’s:
benefits
costs
strategic impact
Development will proceed on proposals with the
greatest potential for supporting the organization’s
business objectives at the lowest cost.

20. Relationship between Benefits, Costs,
and Strategic Impact

21. Create an Action Plan:
the Balanced Scorecard
The next step is to translate strategy into action
Many companies have found the balanced
scorecard (BSC) a useful tool for this step.
The BSC recommends viewing an organization
using four perspectives:
learning and growth
internal business process
customer
financial

22. Primary objective: capture information on orthogonal
dimensions that are important to every organization
financial: how do we look to our shareholders?
customer: how do we look to our customers?
internal business process: what must we excel
at?
learning and growth: can we continue to improve?
Second objective: prevent the proliferation of reports and
information. Concentrate only on critical success factors to
which everyone in the organization will pay attention.

23. BSC for On-Line Banking

25. Project Initiation
The second phase in SDLC involves:
understanding of users’ needs and problems
proposing multiple alternative solutions
assessing alternatives in terms of feasibility and
cost-benefit characteristics
selecting the best option and proceeding to the
construct phase
examining whether the selected option will require
in-house development, a commercial package, or
both

26. Systems Analysis
A business problem must be fully
understood before a solution can be
formulated.
A defective analysis will lead to a defective
solution.
System analysis is a two-step process
survey of current systems
analysis of users’ needs

27. Survey of Current Systems
Advantages:
allows aspects of the old system which should be
kept to be identified
aids in planning the implementation of the new
system
may allow conclusive determination of the cause of
the reported problem symptoms
Disadvantages:
the current physical tar pit
can stifle new ideas

28. The Survey Step
Fact-gathering techniques include observing,
participating, interviewing, and reviewing
documents.
Facts must be gathered regarding:
data sources and data stores
users
processes
data flows
controls, especially audit trails
transaction volumes
error rates
resource costs
bottlenecks and redundant operations

29. The Analysis Step
Systems analysis is an intellectual process that is
commingled with fact gathering.
A formal systems analysis report, prepared and
presented to the steering committee, contains:
reasons for system analysis
scope of study
problem identified with current system
statement of user requirements
resource implications
recommendations

30. The Conceptualization Phase
Purpose: produce alternative conceptual
solutions that satisfy the requirements
identified during systems analysis
How much detail?
enough to highlight the differences between
critical features of competing systems rather
than their similarities

31. Alternative Conceptual Designs for a
Purchasing System

32. Systems Evaluation and Selection
A critical juncture in the SDLC
a formal mechanism for selecting the one
system from the set of alternative
conceptual designs that will go forward for
construction
an optimization process that seeks to
identify the best system
a structured decision-making process that
reduces uncertainty and risk

33. The Role of Accountants
Accountants ensure that the following are
considered during evaluation and selection:
only escapable costs are used in calculations of cost
savings benefits
reasonable interest rates are used in measuring present
values of cash flows
one-time and recurring costs are completely and
accurately reported
realistic useful lives are used in comparing competing
projects
intangible benefits are assigned reasonable financial
values

34. Detailed Feasibility Study
Similar to the preliminary project
feasibility analysis (TELOS), but now
more detailed and oriented to deciding on
a specific system design. Examine:
technical feasibility
economic feasibility
legal feasibility
operational feasibility
schedule feasibility

35. Cost-Benefit Analysis:
Identify Costs

36. Cost-Benefit Analysis:
Identify Benefits—Tangible

37. Cost-Benefit Analysis:
Identify Benefits—Intangible

38. Comparing Costs and Benefits
Two methods commonly used for evaluating the
costs and benefits of information systems:
Net Present Value Method: deduct the present value of
costs from the present value of benefits over the life of the
project.
 The optimal choice is the project with the greatest net present
value.
Payback Method: do break-even analysis of total costs (one-
time costs plus present value of recurring costs) and total
benefits (present value of benefits). After the break-even
point, the system earns future profits.
 The optimal choice is the project with the greatest future
profits.

39. How Should We Get the System?
Once the optimal system is selected, decide
how to acquire it:
develop the system in-house: best for systems that
need to meet unique and proprietary business needs
purchase commercial software: best for systems that
are expected to support “best industry practices”
a mix of the first two approaches: make in-house
modifications, to varying degrees, of a commercial
system to meet the organization’s unique needs

40. Announcing the New System
Project…
can be the most delicate aspect of the SDLC.
End user support is critical to success.
All end users need to be made to understand
the objectives of the new system.
End users and managers who view the new
system as a potential benefit to their jobs,
rather than a threat, are more likely to
cooperate with the project.

41. Why are Accountants
Involved with SDLC?
The creation of an information system
consumes significant resources and has
financial resource implications.
The quality of accounting information
systems and their output rests directly on
the SDLC activities that produce them.

42. How are Accountants
Involved with SDLC?
As end users who must provide a clear
picture of their problems and needs
As members of the development team
As auditors who must ensure that the
system is designed with appropriate
internal controls and computer audit
techniques.

43. The Accountant’s Role in
Systems Strategy
Auditors should routinely review the
organization’s systems strategy.
Careful systems planning is a cost-effective
way to reduce the risk of creating unneeded,
unwanted, inefficient, and ineffective systems.
Both internal and external auditors have
vested interests in this outcome.

44. The Accountant’s Role in
Conceptual Design
Accountants should be responsible for the
conceptual system…
and the systems professionals for the physical system.
If important accounting considerations are not
conceptualized at this point, they may be
overlooked, exposing the organization to
potential financial loss.
The auditability of a system depends in part on
its design characteristics.

45. The Accountant’s Role in
Systems Selection
Economic feasibility is a primary concern to
accountants. Accountants should ensure that:
use only escapable costs in calculations of cost-savings
benefits
use reasonable interest rates in measuring present values
of cash flows
one-time v. recurring costs are accurately reported
use realistic useful lives in comparing competing projects
intangible benefits are assigned reasonable financial values