Discussion: Analyzing Information System Infrastructure (300 words)

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PART 4 Planning, Acquiring,and Building Systems

Chapter 11 Strategic Planning and Project Management

Chapter 12 System Acquisition and Development

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CHAPTER

11 Strategic Planning and Project Management

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Know?Did Yo u

• Over 2,000 years ago, the ancient Greek philosopher and scientist Aristotle identified the essence of good project management when he said: “First, have a defi- nite, clear practical ideal: a goal or an objective. Sec- ond, have the necessary means to achieve your ends: wisdom, money, materials, and methods. Third, adjust all your means to that end.”

• A 2015 study of 50,000 projects from around the world, ranging from small system enhancements to massive systems reengineering implementations, found that roughly 71 percent of all information system projects fail or face major challenges such as lateness, budget overruns, and lack of required features.

Principles Learning Objectives

• Organizations that are more advanced in their planning processes develop multiple-year strate- gic plans.

• State the benefits of creating a strategic plan.

• Identify and briefly describe the phases of a goals-based strategic planning process.

• Explain what SWOT analysis is and how it is used.

• Identify and briefly describe the components of a strategic plan.

• The strategic planning process for the IS organi- zation and the factors that influence it depend on how the organization is perceived by the rest of the organization.

• State the purpose of the IS strategic plan.

• Identify four drivers that set information system organizational strategy and determine information system investments.

• Identify three ways the IS organization can be perceived by the rest of the organization and discuss how that influences the IS strategy.

• Organizations must always make a clear connec- tion among business objectives, goals, and pro- jects. In addition, projects must be consistent with business strategies.

• Discuss why project management is considered to be a core competency for many organizations.

• Identify and briefly discuss the five highly interre- lated parameters that define a project.

• Identify and briefly discuss the nine knowledge areas associated with the science of project management.

Why Learn about Strategic Planning and Project Management? Ever since the dawn of the computer age, business and IS executives have been working to improve the alignment between business and IS as a top business priority. In this context, alignment means that the IS organization and its resources are focused on efforts that support the key objectives defined in the strategic plan of the business. This implies that IS and business managers have a shared vision of where the organization is headed and agree on its key strategies. This shared vision will guide the IS organization in hiring the right people with the correct skills and competencies, choosing the right technologies and vendors to explore and develop, installing the right systems, and focusing on projects that will best help the organization meet its mission. Projects are the way that much of an organization’s work gets done. No matter what the industry and no matter whether the organization is a for-profit company or a nonprofit organization—large or small, multinational or local—good strategic planning coupled with good project management are positive forces that enable an organization to get results from its efforts. Knowing the basics of strategic planning and project management will make you an extremely valuable resource within any organization.

As you read this chapter, consider the following:

• What is an effective strategic planning process, who needs to participate in it, and what are the deli- verables of such a process?

• What is project management, and what are the key elements of an effective project management process?

This chapter defines strategic planning and outlines an effective process for accomplishing this critical activity. It also clarifies the importance of project management and outlines a proven process for successful project manage- ment. Organizations today need people who can develop strategic plans and lead projects.

Strategic Planning

Strategic planning is a process that helps managers identify desired out- comes and formulate feasible plans to achieve their objectives by using avail- able resources and capabilities. The strategic plan must take into account that the organization and everything around it is changing: consumers’ likes and dislikes change; old competitors leave and new ones enter the marketplace; the costs and availability of raw materials and labor fluctuate, as does the fun- damental economic environment (interest rates, growth in gross domestic product, inflation rates); and the degree of industry and government regula- tion changes.

The following is a set of frequently cited benefits of strategic planning:

● Provides a framework and a clearly defined direction to guide decision making at all levels throughout the organization

● Ensures the most effective use is made of the organization’s resources by focusing those resources on agreed-on key priorities

● Enables the organization to be proactive and take advantage of opportu- nities and trends, rather than passively reacting to them

● Enables all organizational units to participate and work together toward accomplishing a common set of goals

strategic planning: A process that helps managers identify desired out- comes and formulate feasible plans to achieve their objectives by using avail- able resources and capabilities.

458 PART 4 • Planning, Acquiring, and Building Systems

● Provides a set of measures for judging organizational and personnel performance

● Improves communication among management and the board of directors, shareholders, and other interested parties

In some organizations with immature planning processes, strategic plan- ning is an annual process timed to yield results used to prepare the annual expense budget and capital forecast. The process is focused inward, concen- trating on the individual needs of various departments. Organizations that are more advanced in their planning processes develop multiple-year plans based on a situational analysis, competitive assessments, consideration of factors external to the organization, and an evaluation of strategic options.

The CEO of an organization must make long-term decisions about where the organization is headed and how it will operate and has ultimate responsi- bility for strategic planning. Subordinates, lower-level managers, and consul- tants typically gather useful information, perform much of the underlying analysis, and provide valuable input. But the CEO must thoroughly under- stand the analysis and be heavily involved in setting high-level business objec- tives and defining strategies. The CEO also must be seen as a champion and supporter of the chosen strategies; otherwise, the rest of the organization is unlikely to “buy into” those strategies and take the necessary actions to make it all happen.

There are a variety of strategic planning approaches, including issues based, organic, and goals based. Issues-based strategic planning begins by identifying and analyzing key issues that face the organization, setting strate- gies to address those issues, and identifying projects and initiatives that are consistent with those strategies. Organic strategic planning defines the orga- nization’s vision and values and then identifies projects and initiatives to achieve the vision while adhering to the values.

Goals-based strategic planning is a multiphase strategic planning pro- cess that begins by performing a situation analysis to identify an organiza- tion’s strengths, weaknesses, opportunities, and threats. Next, management sets direction for the organization by defining its mission, vision, values, objectives, and goals. The results of the situation analysis and direction- setting phases are used to define strategies to enable the organization to fulfill its mission. Initiatives, programs, and projects are then identified and exe- cuted to enable the organization to meet the objectives and goals. These ongoing efforts are evaluated to ensure that they remain on track toward achieving the goals of the organization. The major phases in goals-based stra- tegic planning are (1) analyze situation, (2) set direction, (3) define strategies, and (4) deploy plan (see Figure 11.1).

Analyze Situation All levels and business units of an organization must be involved in assessing its strengths and weaknesses. Preparing a historical perspective that summarizes

FIGURE 11.1 The goals-based strategic planning process Goals-based strategic planning is a multiphase process for strategic planning.

Where are we now?

How will we get there?

How do we engage others?

Where do we want to go?

Strengths Weaknesses Opportunities Threats

Mission Vision Values Objectives Goals

Strategies Corporate and business unit: • Plans • Initiatives • Programs • Projects

Analyze situation

Set direction

Define strategies

Deploy plan

issues-based strategic planning: A strategic planning pro- cess that begins by identifying and analyzing key issues that face the organization, setting strategies to address those issues, and identifying projects and initiatives that are consis- tent with those strategies.

organic strategic planning: A strategic planning process that defines the organization’s vision and values and then identifies projects and initia- tives to achieve the vision while adher- ing to the values.

goals-based strategic planning: A multiphase strategic planning process that begins by performing a situation analysis to identify an organization’s strengths, weaknesses, opportunities, and threats.

CHAPTER 11 • Strategic Planning and Project Management 459

the company’s development is an excellent way to begin this strategic plan- ning step. Next, a multitude of data is gathered about internal processes and operations, including survey data from customers and suppliers and other objective assessments of the organization. The collected data is analyzed to identify and assess how well the firm is meeting current objectives and goals, and how well its current strategies are working. This process identifies many of the strengths and weaknesses of the firm.

Strategic planning requires careful study of the external environment sur- rounding the organization and assessing where the organization fits within it. This analysis begins with an examination of the industry in which the organi- zation competes: What is the size of the market? How fast is it growing or shrinking? What are the significant industry trends?

Next, the organization must collect and analyze facts about its key custo- mers, competitors, and suppliers. The goal is twofold: capture a clear picture of the strategically important issues that the organization must address in the future and reveal the firm’s competitive position against its rivals. During this step, the organization must get input from customers, suppliers, and industry experts—all of whom will likely be able to provide more objective viewpoints than employees. Members of the organization should be prepared to hear things they do not like, but that may offer tremendous opportunities for improvement. It is critical that unmet customer needs are identified to form the basis for future growth.

The most frequently used model for assessing the nature of industry com- petition is Michael Porter’s Five Forces Model, which identifies the funda- mental factors that determine the level of competition and long-term profitability of an industry (see Figure 11.2).

The fundamental factors that determine the level of competition and long- term profitability of an industry are the following:

1. The threat of new competitors will raise the level of competition. Entry barriers determine the relative threat of new competitors. These barriers include the capital required to enter the industry and the cost to custo- mers to switch to a competitor.

FIGURE 11.2 Michael Porter’s Five Forces Model This model can be used to determine the level of competition and long- term profitability of an industry.

Rivalry among existing firms

Industry competitors

Threat of new entrants

Bargaining power of suppliers

Bargaining power of buyers

Threat of substitute products

or service

Suppliers Buyers

Potential entrants

Substitutes

Michael Porter’s Five Forces Model: A model that identifies the fundamental factors that determine the level of competition and long-term profitability of an industry.

460 PART 4 • Planning, Acquiring, and Building Systems

2. The threat of substitute products can lower the profitability of industry competitors. The willingness of buyers to switch products and the relative cost and performance of substitutes are key factors in this threat.

3. The bargaining power of buyers determines prices and long-term profit- ability. This bargaining power is stronger when there are relatively few buyers but many sellers in the industry, or when the products offered are all essentially the same.

4. The bargaining power of suppliers can significantly affect the industry’s profitability. Suppliers have strong bargaining power in industries that have many buyers and only a few dominant suppliers and in industries that do not represent a key customer group for suppliers.

5. The degree of rivalry between competitors is high in industries with many equally sized competitors or little differentiation between products.

Many organizations also perform a competitive financial analysis to deter- mine how their revenue, costs, profits, cash flow, and other key financial parameters match up against those of their competitors. Most of the informa- tion needed to prepare such comparisons is readily available from competi- tors’ annual reports.

The analysis of an organization’s internal assessment and study of its external environment is summarized into a Strengths, Weaknesses, Oppor- tunities, Threats (SWOT) matrix, as shown in Table 11.1, which provides a SWOT matrix for Starbucks.1 The SWOT matrix is a simple way to illustrate what the company is doing well, where it can improve, what opportunities are available, and what environmental factors threaten the future of the orga- nization. Typically, the internal assessment identifies most of the strengths and weaknesses, while the analysis of the external environment uncovers most of the opportunities and threats. The technique is based on the assump- tion that an effective strategy derives from maximizing a firm’s strengths and opportunities and minimizing its weaknesses and threats.

Set Direction The direction-setting phase of strategic planning involves defining the mis- sion, vision, values, objectives, and goals of the organization. Determining

TABLE 11.1 SWOT analysis for Starbucks

Strengths

● Strong revenue and profit growth ● Rapid increase in global store count ● Strong comparable store sales

growth

Weaknesses

● Uneven international growth ● Investing lots of money on

expansion

Opportunities

● Rising incomes in China should fuel higher demand for “premium” Western products such as Starbucks

● Top premium coffee brand in the K-Cup category, presenting a growth opportunity

● Experimenting with various con- cept stores, including tea bars and wine bars

Threats

● Unstable price of coffee beans ● Rising competition (e.g., Dunkin’

Donuts and Tim Hortons)

Strengths, Weaknesses, Oppor- tunities, Threats (SWOT) matrix: A simple way to illustrate what a company is doing well, where it can improve, what opportunities are avail- able, and what environmental factors threaten the future of the organization.

CHAPTER 11 • Strategic Planning and Project Management 461

these will enable the organization to identify the proper strategies and pro- jects, as shown in Figure 11.3.

Vision and Mission Senior management must create a vision/mission statement that communi- cates an organization’s overarching aspirations to guide it through changing objectives, goals, and strategies. The organization’s vision/mission statement forms a foundation for making decisions and taking action. The most effective vision/mission statements inspire and require employees to stretch to reach the organization’s goals. These statements seldom change once they are for- mulated. An effective statement consists of three components: a mission state- ment, a vision of a desirable future, and a set of core values.

The mission statement concisely defines the organization’s fundamental purpose for existing. It usually is stated in a challenging manner to inspire employees, customers, and shareholders.

The organization’s vision is a concise statement of what the organization intends to achieve in the future. The following are the earmarks of a good vision:

● It motivates and inspires. ● It is easy to communicate, simple to understand, and memorable. ● It is challenging and yet achievable and moves the organization toward

greatness.

A core value is a widely accepted principle that guides how people behave and make decisions in the organization.

Table 11.2 provides the mission, vision, and values of Google.2,3

Objectives The terms “objective” and “goal” are frequently used interchangeably. For this discussion, we distinguish between the two—defining objective as a state- ment of a compelling business need that an organization must meet to achieve its vision and mission.

Each week, Walmart serves close to 260 million customers in its stores and through its Web sites globally. Recent annual revenue for the company

FIGURE 11.3 The strategic planning pyramid The strategic planning pyramid is a top-down approach to identify initia- tives, program, and projects.

Mission

Vision

Values

Objectives

Goals

Strategies

Initiatives, programs, and projects

vision/mission statement: A statement that communicates an organization’s overarching aspirations to guide it through changing objectives, goals, and strategies.

mission statement: A statement that concisely defines an organization’s fundamental purpose for existing.

vision: A concise statement of what an organization intends to achieve in the future.

core value: A widely accepted prin- ciple that guides how people behave and make decisions in the organization.

objective: A statement of a compel- ling business need that an organization must meet to achieve its vision and mission.

462 PART 4 • Planning, Acquiring, and Building Systems

exceeded $485 billion. The organization has defined its mission, vision, values, and objectives, as shown in Table 11.3.4

Goals A goal is a specific result that must be achieved to reach an objective. In fact, several goals may be associated with a single objective. The objective states what must be accomplished, and the associated goals specify how to determine whether the objective is being met.

TABLE 11.2 Google’s mission, vision, and values

Mission

To organize the world’s information and make it universally accessible and useful.

Vision

To provide access to the world’s information in one click.

Values

1) We want to work with great people.

2) Technology innovation is our lifeblood.

3) Working at Google is fun.

4) Be actively involved; you are Google.

5) Don’t take success for granted.

6) Do the right thing; don’t be evil.

7) Earn customer and user loyalty and respect every day.

8) Sustainable long-term growth and profitability are key to our success.

9) Google cares about and supports the communities where we work and live.

10) We aspire to improve and change the world.

TABLE 11.3 Walmart’s mission, vision, and values

Mission: We save people money so they can live better.

Vision: If we work together, we’ll lower the cost of living for everyone … we’ll give the world an opportunity to see what it’s like to save and have a better life.

Core Values:

● Open door policy. Managers’ doors are open to employees at all levels. ● Sundown rule. Answer employee, customer, and supplier questions on the

same day the questions are received. ● Grass roots process. Capture suggestions and ideas from the sales floor and

front lines. ● Three basic beliefs & values. Respect for the individual; service to our cus-

tomers; and striving for excellence. ● Ten-foot rule. Make eye contact, greet, and offer help to customers who come

within 10 feet. ● Servant leadership. Leaders are in service to their team.

Objectives:

● Give the consumer greater value for each product category. ● Optimize the products in each of stores by reducing the number of products

and number of suppliers. ● Improve the customer’s in-store experience and become more efficient in and

out of each store.

goal: A specific result that must be achieved to reach an objective.

CHAPTER 11 • Strategic Planning and Project Management 463

Goals track progress in meeting an organization’s objectives. They help managers determine if a specific objective is being achieved. Results, deter- mined by how well the goals are met, provide a feedback loop. Depending on the difference between the actual and desired results, adjustments may be needed in the objectives, goals, and strategies as well as with the actual pro- jects being worked on.

Some organizations encourage their managers to set Big Hairy Audacious Goals (BHAGs) that require a breakthrough in the organization’s products or services to achieve. Such a goal “may be daunting and perhaps risky, but the challenge of it grabs people in the gut and gets their juices flowing and cre- ates tremendous forward momentum.”5

In April 2012, Facebook purchased the two-year-old photo-sharing service Instagram for $1 billion, a move that many industry analysts viewed as impru- dent investment at the time.6 However, since then, Instagram usage has grown rapidly with both personal and business users. Achieving the goal of successfully integrating Instagram with Facebook expanded the company’s mobile offerings while removing a rival for users’ attention.7

The use of so-called SMART goals has long been advocated by manage- ment consultants.8 The principal advantages of SMART goals are that they are easy to understand, are easily tracked, and contribute real value to the organi- zation. The SMART acronym stands for:

● Specific. Specific goals have a much greater chance of being understood and accomplished than vague goals. Specific goals use action verbs and specify who, what, when, where, and why.

● Measurable. Goals that are measurable include numeric or descriptive measures that define criteria such as quantity, quality, and cost so that progress toward meeting the goal can be determined.

● Achievable. Goals should be ambitious yet realistic and attainable. Goals that are either completely out of reach or below standard performance are worthless and demotivating.

● Relevant. Goals should strongly contribute to the mission of the depart- ment, else why expend the effort?

● Time constrained. A time limit should be set to reach the goal to help define the priority to assign to meeting the goal.

An example of a SMART goal for a customer service organization of a large retail store might be: Reduce customer complaints about mispriced mer- chandise from 9 per day to less than 3 per day by June 30.

Define Strategies A strategy describes how an organization will achieve its vision, mission, objectives, and goals. Selecting a specific strategy focuses and coordinates an organization’s resources and activities from the top down to accomplish its mission. Indeed, creating a set of strategies that will garner committed sup- porters across the organization—all aligned on the mission and vision—is key to organizational success.

Common themes in setting strategies include “increase revenue,” “attract and retain new customers,” “increase customer loyalty,” and “reduce the time required to deliver new products to market.” In choosing from alternative strategies, managers should consider the long-term impact of each strategy on revenue and profit, the degree of risk involved, the amount and types of resources that will be required, and the potential competitive reaction. In set- ting strategies, managers draw on the results of the SWOT analysis and con- sider the following questions:

● How can we best capitalize on our strengths and use them to their full potential?

strategy: A plan that describes how an organization will achieve its vision, mission, objectives, and goals.

464 PART 4 • Planning, Acquiring, and Building Systems

● How do we reduce or eliminate the negative impact of our weaknesses? ● Which opportunities represent the best opportunities for our

organization? ● How can we exploit these opportunities? ● Will our strengths enable us to make the most of this opportunity? ● Will our weaknesses undermine our ability to capitalize on this

opportunity? ● How can we defend against threats to achieve our vision/mission, objec-

tives, and goals? ● Can we turn this threat into an opportunity?

Amazon has made a strategic decision to explore the possible use of delivery drones to gain a real competitive advantage over competitors who rely on less efficient ground transportation. Because a large percentage of Amazon packages weigh less than 5 pounds, drones could make the ideal rapid-delivery vehicles. Amazon has detailed plans for this service, however, the company cannot announce if or when the program will start until regula- tors set out the rules regarding the commercial use of drones. Such a strategy has the potential to attract new customers and increase revenue.9

Deploy Plan The strategic plan defines objectives for an organization, establishes SMART goals, and sets strategies on how to reach those goals. These objectives, goals, and strategies are then communicated to the organization’s business units and functional units so that everyone is “on the same page.” The man- agers of the various organizational units can then develop more detailed plans for initiatives, programs, and projects that align with the firm’s objec- tives, goals, and strategies. Alignment ensures that the efforts will draw on the strengths of the organization, capitalize on new opportunities, fix organi- zational weaknesses, and minimize the impact of potential threats.

The extent of strategic planning done at lower levels within the organiza- tion depends on the amount of autonomy granted those units as well as the leadership style and capabilities of the managers in charge of each unit. For these reasons, the amount of effort, the process used, and the level of creativ- ity that goes into the creation of a business unit strategic plan can vary greatly across an organization.

Alstom Transport, which develops and markets railway systems, equip- ment, and services, won a contract to supply Virgin Trains’ West Coast Main- line operations in the United Kingdom.10 Alstom supplied Virgin Trains 52 of its high-speed (125 mph) Pendolino trains. However, the train was initially too unreliable—too many trains were shut down on any given day due to maintenance issues.11 Only 38 of the 52 trains were available on a given day; however, 46 trains were needed to meet service-level goals. The situation was affecting Alstom’s relationship with Virgin Trains, and, if not improved, would likely affect contract renewal. Alstom Transport executives met and set key objectives to improve the relationship with Virgin Trains:

● Meet availability goals and improve reliability. ● Do not increase costs. ● Provide greater value to the customer.

Alstom leaders then employed a “catch-ball” process to deploy these objectives to other workers at the firm. The management team “threw” the goals back and forth with the entire management chain, including senior man- agement, operations leaders, and depot and production management. By means of this process, Alstom identified over 15 potential improvement pro- jects to support the goals, leading to an increased train availability rate— 72 percent to 90 percent—while headcount and costs were kept flat. Alstom

CHAPTER 11 • Strategic Planning and Project Management 465

Critical Thinking Exercise

won renewal of a service maintenance contract with Virgin Trains three years earlier than expected because of its improved service.12

Strategic Planning at Johns Hopkins Medicine Johns Hopkins Medicine, with headquarters in Baltimore, Maryland, is a $7.7 billion global healthcare organization that operates 6 academic and community hospitals, along with 4 suburban healthcare and surgery centers, and 39 primary and specialty care outpatient sites. The organization strives to create a culture in which diversity, inclusion, civility, collegiality, and professionalism are championed through actions, incentives, and accountability. Johns Hopkins Medicine’s mission, vision, core values, and objectives are presented in Table 11.4.13

You are a member of a three-person team within the finance organization that is working under the direction of the CFO to define a set of strategies that will support Johns Hopkins Medicine’s financial objectives and goals.

Review Questions The CFO has asked each member of the team to express his or her thoughts on two topics:

1. Should any resources from outside the finance organization be recruited to help identify and evaluate alternative strategies? Why or why not?

2. How should potential strategies for the finance organization be evaluated?

Critical Thinking Questions 1. Develop two hypothetical objectives specific to the finance organization that are

consistent with Johns Hopkins Medicine’s overall vision, mission, and objectives. 2. For each objective develop one SMART goal.

TABLE 11.4 Johns Hopkins Medicine mission, vision, values, and objectives

Mission: To improve the health of the community and the world by setting the standard of excellence in medical education, research, and clinical care.

Vision: Johns Hopkins Medicine pushes the boundaries of discovery, transforms health care, advances medical education, and creates hope for humanity. Together we will deliver the promise of medicine.

Core Values:

● Excellence and discovery ● Leadership and integrity ● Diversity and inclusion ● Respect and collegiality

Objectives:

● Attract, engage, develop, and retain the world’s best people. ● Become the exemplar for biomedical research by advancing and integrating

discovery, innovation, translation, and dissemination. ● Be the national leader in the safety science, teaching, and provision of patient-

and family-centered care. ● Lead the world in the education and training of physicians and biomedical

scientists. ● Become the model for an academically based, integrated healthcare delivery

and financing system. ● Create sustainable financial success and implement continuous performance

improvement.

466 PART 4 • Planning, Acquiring, and Building Systems

Setting the Information System Organizational Strategy The strategic plan of the information system (IS) organization must identify those technologies, vendors, competencies, people, systems, and projects in which the organization will invest to support the corporate and business unit objectives, goals, and strategies. The IS strategic plan is strongly influenced by new technology innovations (e.g., increasingly more powerful mobile devices, advanced printers that can generate three-dimensional objects from a digital file, access to shared computer resources over the Internet, advanced software that can analyze large amounts of structured and unstructured data) and innovative thinking by others both inside and outside the organization (see Figure 11.4).

The strategic planning process for the IS organization and the factors that influence it depend on how the organization is perceived by the rest of the organization. An IS organization can be viewed as a cost center/service pro- vider, a business partner/business peer, or as a game changer (see Table 11.5).

In a recent survey of more than 700 CIOs, 38 percent said that their IS organization is viewed as a cost center/service provider that is expected to reduce IS costs and improve IS services.14 The strategic planning process for such an organization is typically directed inward and focused on determining how to do what it is currently doing but cheaper, faster, and better.

The IS organization of the state of Delaware is viewed as a cost center/ service provider. One of the organization’s primary strategic initiatives is to consolidate IS resources and to eliminate redundant functions and resources within the various state agencies. The goal is to deliver significant improve- ments in customer service and to reduce costs.15

The majority of CIOs surveyed, about 52 percent, said that their IS organi- zation is viewed as a business partner/business peer that is expected to con- trol IS costs and expand IS services in support of business initiatives.16 The

FIGURE 11.4 Drivers that set IS organizational strategy and determine information system investments Planners must consider many factors in setting IS organizational strategy.

Corporate strategy

Business unit

strategies

IT organizational

strategies

Technology innovations

Innovative thinking

IT investments: • Technologies • Vendors • Competencies • People • Systems • Projects

CHAPTER 11 • Strategic Planning and Project Management 467

strategic planning process of these organizations is based on understanding the collective business plans for the next year and determining what those mean for the IS organization in terms of new technologies, vendors, compe- tencies, people, systems, and projects.

The IS organization for the city of Seattle operates under the constraint of a decreasing budget but is continually striving to expand its services and capi- talize on the latest technology developments. It employs newer technologies, such as mobile computing, to improve the interaction of city government with its constituents and to support city services on the move. The organiza- tion also seeks opportunities to access shared computer resources through cloud-based applications to gain advantages and efficiencies where it makes sense.17

Only 10 percent of surveyed CIOs stated that their IS organization is viewed by fellow employees as a game-changing organization that is asked to lead product innovation efforts and open new markets.18 Their strategic plan- ning process is outwardly focused and involves meeting with customers, sup- pliers, and leading IS consultants and vendors to answer questions like “What do we want to be?” and “How can we create competitive advantage?”19 In such organizations, IS is not only a means for implementing business-defined objectives but also a catalyst for achieving new business objectives unreach- able without IS.

GAF is a $3 billion privately held manufacturer of commercial and resi- dential roofing. GAF’s IS employees regularly collaborate with external custo- mers to learn from them and to help educate potential customers about why they should do business with GAF.20 Using these collaboration sessions to gain a better understanding of its customers’ needs, GAF developed a mobile app that allows a contractor to take a photo of a prospect’s house and then use that photo to allow the prospect to preview different GAF shingle styles and colors on an actual image of their home. The app was a game changer for the organization as it helps GAF contractors demonstrate the beauty of GAF shingles and eliminates one of the biggest barriers to closing the sale— answering the question, “How will it look on my house?”21

No matter how an IS organization is perceived, the odds of achieving good alignment between the IS strategic plan and the rest of the business are vastly increased if IS workers have experience in the business and can talk to business managers in business terms rather than technology terms. IS staff must be able to recognize and understand business needs and develop effec- tive solutions. The CIO especially must be able to communicate well and should be accessible to other corporate executives. However, the entire bur- den of achieving alignment between the business and IS cannot be placed solely on the IS organization.

TABLE 11.5 The IS strategic planning spectrum Cost Center/Service Provider

Business Partner/ Business Peer Game Changer

Strategic planning focus Inward looking Business focused Outward looking

IS goals Reduce IS costs; improve IS services

Control IS costs; expand IS services

Make IS investments to deliver new products and services

Strategy React to strategic plans of business units

Execute IS projects to support plans of business

Use IS to achieve competi- tive advantage

Typical projects Eliminate redundant or ineffective IS services

Implement corporate database and/or enterprise systems

Provide new ways for cus- tomers to interact with organization

468 PART 4 • Planning, Acquiring, and Building Systems

Identifying IS Projects and Initiatives In mature planning organizations, IS workers are constantly picking up ideas for potential projects through their interactions with various business man- agers and from observing other IS organizations and competitors. They also keep abreast of new IS developments and consider how innovations and new technologies might be applied in their firm. As members of the IS organiza- tion review and consider the corporate objectives, goals, and strategies, they can generate many ideas for IS projects that support corporate objectives and goals. They also recognize the need for IS projects that help other corporate units fulfill their business objectives. Often, experienced IS managers are assigned to serve as liaisons with the business units in order to gain a deeper understanding of each business unit and its needs. The IS managers are then able to help identify and define IS projects needed to meet those needs.

Most organizations find it useful to classify various potential projects by type. One such classification system is shown in Table 11.6.

Prioritizing IS Projects and Initiatives Typically, an organization identifies more IS-related projects and initiatives than it has the people and resources to staff. An iterative process of setting priorities and determining the resulting budget, staffing, and timing is needed to define which projects will be initiated and when they will be executed. Many organizations create an IS investment board of business unit executives to review potential projects and evaluate them from several different perspectives:

1. First and foremost, each viable project must relate to a specific organiza- tional goal. These relationships make it clear that executing each project will help meet important organizational objectives (see Figure 11.5).

2. Can the organization measure the business value of the initiative? Will there be tangible benefits, or are the benefits intangible? Tangible bene- fits can be measured directly and assigned a monetary value. For exam- ple, the number of staff before and after the completion of an initiative

TABLE 11.6 Project classification example Project Type Definition Risk Factors Associated with Project Type

Breakthrough Creates a competitive advantage that enables the organization to earn a greater than normal return on investment than its competitors

High cost; very high risk of failure and potential business disruption

Growth Generates substantial new revenue or profits for the firm

High cost; high risk of failure and potential business disruption

Innovation Explores the use of technology (or a new tech- nology) in a new way

Risk can be managed by setting cost limits, establishing an end date, and defining criteria for success

Enhancement Upgrades an existing system to provide new capabilities that meet new business needs

Risk that scope of upgrade may expand, making it difficult to control cost and schedule

Maintenance Implements changes to an existing system to enable operation in a different technology envi- ronment (e.g., underlying changes in hardware, operating systems, or database management systems)

Risk that major rework may be required to make system work in a new technology environment; potential for system performance degradation

Mandatory Needed to meet requirements of a legal entity or regulatory agency

Risk that mandated completion date is missed; may be difficult to define tangible benefits; costs can be skyrocketed

tangible benefit: A benefit that can be measured directly and assigned a monetary value.

CHAPTER 11 • Strategic Planning and Project Management 469

Critical Thinking Exercise

can be measured, and the monetary value is the decrease in staffing costs, such as salary, benefits, and overhead. Intangible benefits cannot directly be measured and cannot easily be quantified in monetary terms. For example, an increase in customer satisfaction due to an initiative is important but is difficult to measure and cannot easily be converted into a monetary value.

3. What kinds of costs (hardware, software, personnel, consultants, etc.) are associated with the project, and what is the likely total cost of the effort over multiple years? Consider not just the initial development cost but the total cost of ownership, including operating costs, support costs, and maintenance fees.

4. Preliminary costs and benefits are weighed to see if the project has an attractive rate of return. Unfortunately, costs and benefits may not be well understood at an early phase of the project, and many worthwhile pro- jects do not have benefits that are easy to quantify.

5. Risk is another factor to consider. Managers must consider the likelihood that the project will fail to deliver the expected benefits; the actual cost will be significantly more than expected; the technology will become obsolete before the project is completed; the technology is too “cutting edge” and will not deliver what is promised; or the business situation will change so that the proposed project is no longer necessary.

6. Some projects enable other projects. For example, a new customer data- base may be required before the order-processing application can be upgraded. Therefore, some sequencing of projects must be considered.

7. Is the organization capable of taking on this project? Does the IS organi- zation have the skills and expertise to execute the project successfully? Is the organization willing and able to make the required changes to receive their full value?

Business Liaison Role You have been employed as a systems analyst in the information systems organi- zation of a medium-sized consumer goods manufacturer for three years. You are quite surprised when your manager offers you a one-year special assignment as a manager supervising workers and operations in the large distribution center used to store your company’s finished products and prepare them for shipment to retail stores around the country. Your manager explains that the company wishes to groom you to become the business liaison with the distribution organization and wants you to become familiar with the entire order-fulfillment process. Based on its recent growth, the company is planning to open at least two new distribution centers in different regions of the country over the next two to three years. Man- agement has chosen you to be a key player in leading a future project to design

FIGURE 11.5 Projects must be related to goals and objectives Objectives define goals that in turn identify projects consistent with those objectives and goals.

Organizational objective

Organizational goal

Potential IT-related

project

intangible benefit: A benefit that cannot directly be measured and can- not easily be quantified in monetary terms.

470 PART 4 • Planning, Acquiring, and Building Systems

and implement the information systems and automated equipment to support these new centers.

Review Questions 1. What is the role of a business liaison person, and what skills and knowledge

do they need? 2. How would you classify the project to outfit the organization’s new distribu-

tion center?

Critical Thinking Questions 1. For you, personally, what are the pros and cons of accepting this position? 2. Would you take this assignment? Why or why not?

Project Management

A project is a temporary endeavor undertaken to create a unique product, ser- vice, or result. Each project attempts to achieve specific business objectives and is subject to certain constraints, such as total cost and completion date. Organiza- tions must always make clear connections among business objectives, goals, and projects; also, projects must be consistent with business strategies. For example, an organization may have a business objective to improve customer service by offering a consistently high level of service that exceeds customers’ expectations. Initiating a project to reduce costs in the customer service area by eliminating all but essential services would be inconsistent with this business objective.

At any point in time, an organization may have dozens or even hundreds of active projects, aimed at accomplishing a wide range of results. Projects are dif- ferent from operational activities, which are repetitive activities performed over and over again. Projects are not repetitive; they come to a definite end once the project objectives are met or the project is cancelled. Projects come in all sizes and levels of complexity, as you can see from the following examples:

● A senior executive led a project to integrate two organizations following a corporate merger.

● A consumer goods company executed a project to launch a new product. ● An operations manager led a project to outsource part of a firm’s opera-

tions to a contract manufacturer. ● A hospital executed a project to load an app on physicians’ smartphones

that would enable them to access patient data. ● A computer software manufacturer completed a project to improve the

scheduling of help desk technicians and reduce the time on hold for call- ers to its telephone support services.

● A staff assistant led a project to plan the annual sales meeting. ● A manager completed a project to enter her departmental budget into a

preformatted spreadsheet template.

Unfortunately, IS-related projects are not always successful. The Standish Group has been tracking the success rate of IS projects for over 20 years, and although the success rate has improved over time due to improved methods, training, and tools, roughly 71 percent of all IS projects fail or face major chal- lenges such as lateness, budget overruns, and lack of required features.22

Researchers Hamel and Prahalad defined the term core competency to mean something that a firm can do well and that provides customer benefits, is hard for competitors to imitate, and can be leveraged widely to many pro- ducts and markets.23 Today, many organizations recognize project manage- ment as one of their core competencies and see their ability to manage

core competency: Something that a firm can do well and that provides customer benefits, is hard for competi- tors to imitate, and can be leveraged widely to many products and markets.

CHAPTER 11 • Strategic Planning and Project Management 471

projects better as a way to achieve an edge over competitors and deliver greater value to shareholders and customers. As a result, those organizations spend considerable effort identifying potential project managers and then training and developing them. For many managers, their ability to manage projects effectively is a key to their success within an organization.

Project Variables Five highly interrelated parameters define a project—scope, cost, time, quality, and user expectations. If any one of these parameters changes for a project, there must be a corresponding change in one or more of the other parameters. A brief discussion of these parameters follows.

Scope Project scope is a definition of which tasks are included and which tasks are not included in a project. Project scope is a key determinant of the other proj- ect factors and must carefully be defined to ensure that a project meets its essential objectives. In general, the larger the scope of the project, the more difficult it is to meet cost, schedule, quality, and stakeholder expectations.

For example, the California Case Management System was a major IS proj- ect intended to automate court operations for the state of California with a common system across the state that would replace 70 different legacy sys- tems. At the start of the project, planners expected the system to cost $260 million; however, court administrators terminated the project after spending $500 million on the effort. Today, it is estimated that the project would have cost nearly $2 billion if it had run to completion. While a variety of factors contributed to this waste of resources, one primary cause was inadequate con- trol of the project scope, with some 102 changes in requirements and scope approved over the life of the project.24

Cost The cost of a project includes all the capital, expenses, and internal cross- charges associated with the project’s buildings, operation, maintenance, and support. Capital is money spent to purchase assets that appear on the organi- zation’s balance sheet and are depreciated over the life of the asset. Capital items typically have a useful life of at least several years. A building, office equipment, computer hardware, and network equipment are examples of cap- ital assets. Computer software also can be classified as a capital item if it costs more than $1,000 per unit, has a useful life exceeding one year, and is not used for research and development.

Expense items are nondepreciable items that are consumed shortly after they are purchased. Typical expenses associated with an IS-related project include the use of outside labor or consultants, travel, and training. Software that does not meet the criteria to be classified as a capital item is classified as an expense item.

Many organizations use a system of internal cross-charges to account for the cost of employees assigned to a project. For example, the fully loaded cost (salary, benefits, and overhead) of a manager might be set at $120,000 per year. The sponsoring organization’s budget is cross-charged this amount for each manager who works full time on the project. (The sponsoring business unit is the business unit most affected by the project and the one whose budget will cover the project costs.) So, if a manager works at a 75 percent level of effort on a project for five months, the cross-charge is $120,000 � 0.75 � 5/12 ¼ $37,500. The rationale behind cross-charging is to enable sound economic decisions about whether employees should be assigned to project work or to operational activities. If employees are assigned to a project, cross-charging helps organizations determine which project makes the most economic sense.

project scope: A definition of which tasks are included and which tasks are not included in a project.

sponsoring business unit: The business unit most affected by the project and the one whose budget will cover the project costs.

472 PART 4 • Planning, Acquiring, and Building Systems

Organizations have different processes and mechanisms for budgeting and controlling each of the three types of costs: capital, expense, and internal cross-charge. Money from the budget for one type of cost cannot be used to pay for an item associated with another type of cost. Thus, a project with a large amount of capital remaining in its budget cannot use the available dol- lars to pay for an expense item even if the expense budget is overspent.

Table 11.7 summarizes and classifies various types of common costs asso- ciated with an IS-related project.

Time The timing of a project is frequently a critical constraint. For example, in most organizations, projects that involve finance and accounting must be scheduled to avoid any conflict with operations associated with the closing of end- of-quarter books. Often, projects must be completed by a certain date to meet an important business goal or a government mandate.

CGI, a Canadian consulting, systems integration, outsourcing, and solu- tions company, was awarded a $36 million contract in December 2012 to build the Vermont Health Connect state health exchange.25 Work on the proj- ect quickly fell behind schedule—with CGI failing to meet more than half of Vermont’s 21 performance deadlines—so the state and CGI entered into an amended $84 million contract in August 2013 to complete the project.26 The Vermont Health Connect site launched in October 2013 as required to meet American Affordable Care Act mandates, but with serious deficiencies. Users were unable to edit their information, and the site did not work for small businesses. Despite calls to dump CGI after the flawed launch, state officials decided to continue working with CGI to complete the site. In April 2014, the state and CGI signed off on yet another agreement that set a new schedule for delivering missing functionality and included financial penalties for missed deadlines.27 When CGI failed to meet a May deadline for enabling users to edit their information, the state extended the deadline again—without asses- sing any penalties.28 CGI failed to meet the revised deadline, and in August 2014, the state fired CGI and announced it would transition the remaining work to a new contractor. In the end, Vermont paid CGI $66.7 million for

TABLE 11.7 Typical IS-related project costs Development Costs

Capital Internal

Cross-Charge Expense

Employee-related expenses

● Employees’ effort X

● Travel-related expenses X

● Training-related expenses X

Contractor and consultant charges X

IS-related capital and expenses

● Software licenses (software purchases that qualify as a capital expense) X

● Software licenses (software that does not qualify as a capital expense) X

● Computing hardware devices X

● Network hardware devices X

● Data capture/data entry equipment X

Total development costs X X X

CHAPTER 11 • Strategic Planning and Project Management 473

completed work on the $84 million contract.29,30 CGI was replaced by Optum, a healthcare technology company based in Minnesota that is owned by United Health Group, the nation’s largest health insurer.31

Quality The quality of a project can be defined as the degree to which the project meets the needs of its users. The quality of a project that delivers an IS- related system may be defined in terms of the system’s functionality, features, system outputs, performance, reliability, and maintainability.

Failure to meet users’ functionality and performance needs detracted from the initial introduction of the iPhone 6. Apple sold an astounding 10 million of the iPhone 6 and iPhone 6 Plus models in the first few days they were available. Unfortunately, the new iPhones had both hardware and software problems that caused the devices to fail to meet users’ functionality and per- formance expectations. Apple’s new mobile operating system iOS 8 for the devices came without promised apps that used a health and fitness feature called HealthKit. In addition, it turned out that the iPhone 6 Plus was too pli- able, with some users complaining that the phone bent when sitting in their pockets for extended periods. Then, when Apple released an iOS 8 update aimed at fixing the HealthKit problem, some users complained the update had caused their iPhones to lose the ability to make phone calls.32

User Expectations As a project begins, stakeholders will form expectations—or will already have expectations—about how the project will be conducted and how it will affect them. For example, based on previous project experience, the end users of a new IS system may expect that they will have no involvement with the system until it is time for them to be trained. However, the project manager may fol- low a more progressive development process that requires users to help define system requirements, evaluate system options, try out system proto- types, develop user documentation, and define and conduct the user accep- tance test.

As another example, end users may expect to participate in weekly proj- ect status meetings to hear progress reports firsthand. However, the project manager may not have considered involving them in the status meetings or may not even be planning weekly meetings.

Both examples illustrate the huge differences in expectations that can exist between stakeholders and project members. It is critical to a project’s success to identify expectations of key stakeholders and team members; any differences must be resolved to avoid future problems and misunderstandings.

The five project parameters—scope, cost, time, quality, and user expectations—are all closely interrelated, as shown in Figure 11.6. For example, if the time allowed to complete the project is decreased, it may require an increase in project costs, a reduction in project quality and scope, and a change of expectations among the project stakeholders, as shown in Figure 11.7.

FIGURE 11.6 The five parameters that define a project The five parameters that define a project are all highly interrelated.

Time Cost

Expectations Quality

Scope

Th or ir A ro n St ef an ss on /S hu tt er st oc k. co m

quality: The degree to which a project meets the needs of its users.

474 PART 4 • Planning, Acquiring, and Building Systems

What Is Project Management? Project management is the application of knowledge, skills, and techniques to project activities to meet project requirements. Project managers must deliver a solution that meets specific scope, cost, time, and quality goals while managing the expectations of the project stakeholders—the people involved in the project or those affected by its outcome.

The essence of artistic activity is that it involves high levels of creativity and freedom to do whatever the artist feels. Scientific activity, on the other hand, involves following defined routines and exacting adherence to laws. Under these definitions, part of project management can be considered an art, because project managers must apply intuitive skills that vary from project to project and even from team member to team member. The “art” of project management also involves salesmanship and psychology in convincing others of the need to change and that this project is right to do.

Project management is also part science because it uses time-proven, repeatable processes and techniques to achieve project goals. Thus, one chal- lenge to successful project management is recognizing when to act as an artist and rely on one’s own instinct and when to act as a scientist and apply funda- mental project management principles and practices. The following section covers the nine areas associated with the science of project management.

Project Management Knowledge Areas According to the Project Management Institute (PMI), project managers must coordinate nine areas of expertise: scope, time, cost, quality, human resources, communications, risk, procurement, and integration as shown in Figure 11.8.

Scope Management Scope management includes defining the work that must be done as part of the project and then controlling the work to stay within the agreed-upon scope. Key activities include initiation, scope planning, scope definition, scope verification, and scope change control.

Functional decomposition is a frequently used technique to define the scope of an information system by identifying the business processes it will affect. Figure 11.9 shows an example of a functional decomposition chart for a stock management system. A process is usually initiated in response to a

FIGURE 11.7 Revised project definition A change in any one of the project variables (cost, time, scope, or expectations) can impact the other variables.

Time

Cost

Expectations

Quality Scope

A nd re y Po po v/ Sh ut te rs to ck .c om

project management: The appli- cation of knowledge, skills, and techni- ques to project activities to meet project requirements.

project stakeholders: The people involved in the project or those affected by its outcome.

scope management: A set of activities that include defining the work that must be done as part of a project and then controlling the work to stay within the agreed-upon scope.

functional decomposition: A fre- quently used technique to define the scope of an information system by identifying the business processes it will affect.

CHAPTER 11 • Strategic Planning and Project Management 475

specific event and requires input, which it processes to create output. Often a process generates feedback that is used to monitor and refine the process.

To create the functional decomposition chart, begin with the name of the system and then identify the highest-level processes to be performed. Each process should be given a two-word “verb-subject” name that clearly defines the process. Next, break those high-level processes down into lower-level sub- processes. Typically, two or three levels of decomposition are sufficient to define the scope of the system.

FIGURE 11.8 The nine project management knowledge areas There are nine areas associated with the science of project management.

Scope

Time

Cost

Quality

Human resources

Communications

Risk

Procurement

Integration

Stock management

system

Manage stock

Check stock

Order stock

Receive stock

Store stock

Add new

supplier

Update supplier

data

Delete supplier

Manage suppliers

FIGURE 11.9 Functional decomposition of a stock management system project Functional decomposition is used to define the scope of the system.

476 PART 4 • Planning, Acquiring, and Building Systems

To avoid problems associated with a change in project scope, a formal scope change process should be defined before the project begins. The proj- ect manager and key business managers should decide whether they will allow scope changes at any time during the project, only in the early stages of the project, or not at all. The trade-off is that the more flexibility you allow for scope changes, the more likely the project will meet user needs for fea- tures and performance. However, the project will be more difficult to com- plete within changing time and budget constraints as it is harder to hit a moving target.

The change process should capture a clear definition of the change that is being requested, who is requesting it, and why. If the project team has decided not to allow any scope changes during the project, then each new requested scope change is filed with other requested changes. Once the origi- nal project is complete, the entire set of requested scope changes can be reviewed and the project team can decide which, if any, of the changes will be implemented and when. Often, it is cheaper to initiate one project to implement numerous related changes rather than start several independent projects. A follow-on project can then be considered to implement the recom- mended changes. The scope, cost, schedule, and benefits of the project must be determined to ensure that it is well defined and worth doing.

If the project team has decided to allow scope changes during the project, then time and effort must be allowed to assess how the scope change will affect the interrelated project variables of cost, schedule, quality, and expecta- tions. This impact on the project must be weighed against the benefits of implementing the scope change, and the team must decide whether to imple- ment the scope change. Of course, there may be alternatives for implementing a particular scope change, and the pros and cons must be weighed for each. The time required just to research scope changes can add considerable cost and time to the original project. Each scope change should be approved for- mally or rejected by the project manager and key stakeholders.

Time Management Time management includes defining an achievable completion date that is acceptable to the project stakeholders, developing a workable project sched- ule, and ensuring the timely completion of the project. Successful project time management requires identifying specific tasks that project team members and/or other resources must complete; sequencing these tasks, taking into account any task dependencies or hard deadlines; estimating the amount of resources required to complete each task, including people, material, and equipment; estimating the elapsed time to complete each task; analyzing all this data to create a project schedule; and controlling and managing changes to the project schedule.

The bigger the project, the more likely that poor planning will lead to sig- nificant problems. Well-managed projects use effective planning tools and tech- niques, including schedules, milestones, and deadlines. A project schedule identifies the project activities that must be completed, the expected start and end dates, and what resources are assigned to each task. A project schedule is needed to complete a project by a defined deadline, avoid rework, and ensure that people know what to do and when to do it. A project milestone is a criti- cal date for completing a major part of the project, such as program design, coding, testing, and release (for a programming project). The project deadline is the date the entire project should be completed and operational—when the organization can expect to begin to reap the benefits of the project.

In a systems development project, each activity is assigned an earliest start time and an earliest finish time. Each activity is also allocated slack time, which is the amount of time an activity can be delayed without delaying the entire project. The critical path of a project consists of all activities that, if

time management: A set of activi- ties that includes defining an achiev- able completion date that is acceptable to the project stakeholders, developing a workable project schedule, and ensuring the timely completion of the project.

project schedule: A plan that identifies the project activities that must be completed, the expected start and end dates, and what resources are assigned to each task.

project milestone: A critical date for completing a major part of the proj- ect, such as program design, coding, testing, and release (for a programming project).

project deadline: The date the entire project should be completed and operational—when the organization can expect to begin to reap the benefits of the project.

slack time: The amount of time an activity can be delayed without delaying the entire project.

critical path: All project activities that, if delayed, would delay the entire project.

CHAPTER 11 • Strategic Planning and Project Management 477

delayed, would delay the entire project. These activities have zero slack time. Any problems with critical path activities will cause problems for the entire project. To ensure that critical path activities are completed on time, project managers use certain approaches and tools such as Microsoft Project to help compute these critical project attributes.

Although the steps of systems development seem straightforward, larger projects can become complex, requiring hundreds or thousands of separate activities. For these systems development efforts, formal project management methods and tools are essential. Program Evaluation and Review Tech- nique (PERT) is a formal approach for estimating project duration based on three time estimates for an activity: the most optimistic time where everything goes right (TO), the most likely time (TM) given normal problems and oppor- tunities, and the most pessimistic case where everything goes wrong (TP). A formula can then be applied to determine the expected time to complete a task (TE), as shown below:

TE ¼ ðTO þ 4TM þ TPÞ=6

The standard deviation of time required for the task is (TP�TO)/6 and is an indication of the degree of uncertainty in time required to accomplish the task. The smaller the standard deviation, the less variability in estimates of the time required to complete the task.

Some project managers insist on three time estimates for each task of the project. Others develop three time estimates only for those tasks about which they are most uncertain.

A Gantt chart is a graphical tool used for planning, monitoring, and coor- dinating projects; it is essentially a grid that lists activities and deadlines. Each time a task is completed, a marker such as a darkened line is placed in the proper grid cell to indicate the completion of a task.

The development of a work breakdown structure is a critical activity needed for effective time management. A work breakdown structure (WBS) is an outline of the work to be done to complete the project. You start by breaking the project into various stages or groups of activities that need to be performed. Then, you identify the tasks associated with each project stage. A task typically requires a week or less to complete and produces a specific deliverable—tangible output like a flowchart or end-user training plan. Then the tasks within each stage are sequenced. Finally, any predecessor tasks are identified—these are tasks that must be completed before a later task can begin. For example, the testing of a unit of program code cannot begin until the program has been coded, compiled, and debugged. Next, you must deter- mine how long each task in the WBS will take.

Thus, building a WBS allows you to look at a project in great detail to get a complete picture of all the work that must be performed. Development of a WBS is another approach to defining the scope of a project—work not included in the WBS is outside the scope of the project.

Table 11.8 shows a sample WBS for a project whose goal is to establish a wireless network in a warehouse and install RFID scanning equipment on forklift trucks for the tracking of inventory. The three phases of the project in Table 11.8 are “Define warehouse network,” “Configure forklift trucks,” and “Test warehouse network.” Figure 11.10 shows the associated schedule in the form of a Gantt chart, with each bar in the chart indicating the start and end dates of each major activity (heavy black lines) and task (lighter lines).

Cost Management Cost management includes developing and managing the project budget. This area involves resource planning, cost estimating, cost budgeting, and cost control. As previously discussed, a separate budget must be established

Program Evaluation and Review Technique (PERT): A formal method for estimating the dura- tion of a project using three time esti- mates for an activity: shortest possible time, most likely time, and longest possible time; working with those esti- mates, a formula is used to determine a single PERT time estimate.

Gantt chart: A graphical tool used for planning, monitoring, and coordi- nating projects; it is essentially a grid that lists activities and deadlines.

work breakdown structure (WBS): An outline of the work to be done to complete the project.

predecessor task: A task that must be completed before a later task can begin.

cost management: A set of activi- ties that include the development and management of the project budget.

478 PART 4 • Planning, Acquiring, and Building Systems

for each of the three types of costs—capital, expense, and internal cross- charge—and money in one budget cannot be spent to pay for another type of cost.

One approach to cost estimating uses the WBS to estimate all costs (capi- tal, expense, and cross-charge) associated with the completion of each task. This approach can require a fair amount of detail work, such as determining the hourly rate of each resource assigned to the task and multiplying by the hours the resource will work on the task, estimating the cost per unit for sup- plies and multiplying that by the number of units required, and so on. If pos- sible, the people who will complete the tasks should be allowed to estimate the time duration and associated costs. This approach helps them to better understand the tasks they are expected to complete, gives them some degree of control in defining how the work will be done, and obtains their “buy-in” to the project schedule and budget. You can develop a project duration based on the sequence in which the tasks must be performed and the duration of each task. You can also sum the cost of each task to develop an estimate of the total project budget. This entire process is outlined in Figure 11.11, and the resulting budget is depicted in Table 11.9.

As an example, suppose that a company plans to implement a new soft- ware package for its accounts payable process. The company must spend

TABLE 11.8 Work breakdown structure Task Duration (in days) Start Date End Date Predecessor Tasks

1 Implement warehouse network 28 5/06/16 6/14/16

2 Define warehouse network 25 5/06/16 6/09/16

3 Conduct survey 3 5/06/16 5/10/16

4 Order RF equipment 14 5/11/16 5/30/16 3

5 Install RF equipment 6 5/31/16 6/07/16 4

6 Test RF equipment 2 6/06/16 6/08/16 5

7 Configure forklift trucks 19 5/06/16 6/01/16

8 Order RFID scanners for trucks 12 5/06/16 5/23/16

9 Install RFID scanners on trucks 5 5/24/16 5/30/16 8

10 Test RFID scanners 2 5/31/16 6/01/16 9

53 Test warehouse network 28 5/06/16 6/14/16

12 Develop test plan 2 5/06/16 5/09/16

13 Conduct test 3 6/10/16 6/14/16 6, 10, 12

D I e m a N k s a T Duration Start End Predecessor Tasks

1 k r o w t e N e s u o h e r a W t n e m e l p m I 28d 5/06/16 6/14/16

2 k r o w t e N e s u o h e r a W e n i f e D 25d 5/06/16

3 y e v r u S t c u d n o C 3d 5/06/16 5/10/16

5/30/164 t n e m p i u q E F R r e d r O 14d 5/11/16 3

5 t n e m p i u q E F R l l a t s n I 6d 5/31/16

5/31/16

6/06/16

6/09/16

5/09/16

6/07/16

6/08/16

6 t n e m p i u q E F R t s e T 2d 5

7 skcurTtfilk r o F e r u g i f n o C 19d 5/06/16 6/01/16

8 s k c u r T r o f s r e n n a c S D I F R r e d r O 12d 5/06/16 5/23/16

5/30/169 s k c u r T n o s r e n n a c S D I F R l l a t s n I 5d 5/24/16 8

0 1 s r e n n a c S D I F R t s e T 2d 6/01/16 9

1 1 k r o w t e N e s u o h e r a W t s e T 28d 5/06/16 6/14/16

2 1 n a l P t s e T p o l e v e D 2d 5/06/16

3 1 Conduct test 3d 6/10/16 6/14/16 2 1 , 0 1 , 6

8 / 5 2 1 / 5

3 1 / 5 1 / 6

2 / 6 9 / 6

0 1 / 6 1 1 / 6

8 / 5 5 2 / 5

6 2 / 5 1 / 6

2 / 6 3 / 6

8 / 5 1 1 / 5

2 1 / 6 6 1 / 6

9 1 / 4 6 2 / 4 3 / 5 0 1 / 5 7 1 / 5 4 2 / 5 1 3 / 5 7 / 6 4 1 / 6 1 2 / 6 May June

FIGURE 11.10 Gantt chart A Gantt chart depicts the start and finish dates for project tasks.

CHAPTER 11 • Strategic Planning and Project Management 479

Define goal

Divide project into stages

Identify tasks in each stage

Define deliverables for each task

Assign resources to tasks

Estimate task duration

Sequence tasks

BudgetSchedule

FIGURE 11.11 Work breakdown structure (WBS) Development of a WBS leads to definition of a project schedule and budget.

TABLE 11.9 Project budget

Task Capital Expense Cross- Charges

1 Implement warehouse network

2 Define warehouse network

3 Conduct survey $2,400

4 Order RF equipment $9,000

5 Install RF equipment $7,800

6 Test RF equipment $960

7 Configure forklift trucks

8 Order RFID scanners for trucks $12,500

9 Install RFID scanners on trucks $2,400

10 Test RFID scanners $1,200

11 Test warehouse network $960

12 Develop test plan

13 Conduct test $1,440

TOTAL costs $21,500 $10,200 $6,960

480 PART 4 • Planning, Acquiring, and Building Systems

$150,000 on computer hardware (capital) and pay the software vendor $20,000 for its time and effort to implement the software (expense). The ven- dor must also be paid $125,000 for the software package license (capital). In addition, one business manager will spend six months leading the implemen- tation effort full time. Six months’ worth of the fully loaded cost of the man- ager (say, $120,000 per year) must be charged to the cross-charge budget of the accounting organization. The cross-charge is a total of $60,000.

Quality Management Quality management is a set of activities designed to ensure that a project will meet the needs for which it was undertaken. This process involves quality planning, quality assurance, and quality control. Quality planning involves determining which quality standards are relevant to the project and determin- ing how they will be met. Quality assurance involves evaluating the progress of the project on an ongoing basis to ensure that it meets the identified qual- ity standards. Quality control involves checking project results to ensure that they meet identified quality standards.

In many IS-related systems development projects, the source of the majority of defects uncovered in system testing can be traced back to an error in specifying requirements. Thus, most organizations put a heavy emphasis on accurately cap- turing and documenting system requirements and carefully managing changes in user requirements over the course of the project. A useful checklist for assessing the validity of system requirements includes the following questions:33

● Does the requirement describe something actually needed by the customer?

● Is the requirement correctly defined? ● Is the requirement consistent with other requirements? ● Is the requirement defined completely? ● Is the requirement verifiable (testable)? ● Is the requirement traceable back to a user need?

Hewlett Packard’s Quality Center, Jama from Jama Software, and Inno- slate from Systems and Proposal Engineering Company are three examples of requirements management software.

Human Resource Management Human resource management are activities designed to make the most effective use of the people involved with a project. Human resources manage- ment includes organizational planning, staff acquisition, and team develop- ment. The project manager must be able to build a project team staffed with people with the right mix of skills and experience and then train, develop, coach, and motivate them to perform effectively on the project.

All members of a project team may be assigned, or the project manager may have the luxury of selecting all or some team members. Ideally, team members are selected based on their skills in the technology needed for the project, their understanding of the business area affected by the project, their expertise in a specific area of the project, and their ability to work well on a team. Often, compromises must be made. For example, the best available sub- ject matter expert may not work well with others, which becomes an addi- tional challenge for the project manager.

Experienced project managers have learned that forming an effective team to accomplish a difficult goal is a challenge in itself. It takes considerable effort and a willingness to change on the part of all team members in order for a team to reach high levels of performance. A useful model to describe how teams develop and evolve is the forming-storming-norming-performing- adjourning model, which was first proposed by Bruce Tuckman (see Figure 11.12).34

quality management: A set of activities designed to ensure that a project will meet the needs for which it was undertaken.

quality planning: The determination of which quality standards are relevant to the project and determining how they will be met.

quality assurance: The evaluation of the progress of the project on an ongoing basis to ensure that it meets the identified quality standards.

quality control: The checking of project results to ensure that they meet identified quality standards.

human resource management: Activities designed to make the most effective use of the people involved with a project.

forming-storming-norming- performing-adjourning model: A model that describes how teams develop and evolve.

CHAPTER 11 • Strategic Planning and Project Management 481

During the forming stage, the team meets to learn about the project, agrees on basic goals, and begins to work on project tasks. Team members are on their best behavior and try to be pleasant to one another while avoid- ing any conflict or disagreement. Team members work independently of one another and focus on their role or tasks without understanding what others are attempting to do. In the formation stage, the team’s project manager tends to be highly directive and tells members what needs to be done. If the team remains in this stage, it is unlikely to perform well, and it will never develop breakthrough solutions to problems or effectively solve a conflicting set of priorities and constraints.

The team has moved into the storming stage when it recognizes that dif- ferences of opinion exist among team members and allows these ideas to compete for consideration. Team members will raise such important questions as “What problems are we really supposed to solve?” “How can we work well together?” “What sort of project leadership will we accept?” The team might argue and struggle, so it can be an unpleasant time for everyone. An inexperi- enced project manager, not recognizing what is happening, may give up, feel- ing that the team will never work together effectively. The project manager and team members must be tolerant of one another as they explore their dif- ferences. The project manager may need to continue to be highly directive.

If the team survives the storming stage, it may enter the norming stage. During this stage, individual team members give up their preconceived judg- ments and opinions. Members who felt a need to take control of the team give up this impulse. Team members adjust their behavior and begin to trust one another. The team may decide to document a set of team rules or norms to guide how they will work together. Teamwork actually begins. The project manager can be less directive and can expect team members to take more responsibility for decision making.

Some teams advance beyond the norming stage into the performing stage. At this point, the team is performing at a high level. Team members are com- petent, highly motivated, and knowledgeable about all aspects of the project. They have become interdependent on one another and have developed an effective decision-making process that does not require the project manager. Dissent is expected, and the team has developed an effective process to ensure that everyone’s ideas and opinions are heard. Work is done quickly and with high quality. Problems that once seemed unsolvable now have “obvious” solutions. The team’s effectiveness is much more than the sum of

FIGURE 11.12 Tuckman’s forming- storming-norming- performing-adjourning model Forming an effective team is a chal- lenge in itself.

FormingAd jou

rn ing

P erform

ing

S to

rm in

Norming

Project results

482 PART 4 • Planning, Acquiring, and Building Systems

the individual members’ contributions. The project manager encourages par- ticipative decision making, with the team members making most of the decisions.

Adjourning, the final stage in the model, involves the dissolution of the team. Ideally, this occurs when the project has been completed successfully and all team members can move on to new projects or assignments with a positive sense of accomplishment. From an organizational perspective, it is important that team members be recognized and rewarded for their contributions.

No matter what stage a team is operating in, it commonly will revert to less advanced stages in the model when confronted with major changes in the work to be done, a change in project leadership, or substantial changes in the team’s makeup. The project manager and business managers must recognize and con- sider this important dynamic when contemplating project changes.

Another key aspect of human resource management is getting the project team and the sponsoring business unit to take equal responsibility for making the project a success. The project team members must realize that on their own they cannot possibly make the project a success. They must ensure that the business managers and end users become deeply involved in the project and take an active role. The project team must actively involve the end users, provide information for them to make wise choices, and insist on their partici- pation in major decisions. The business unit must remain engaged in the proj- ect, challenge recommendations, ask questions, and weigh options. It cannot simply sit back and “let the project happen to them.” Key users need to be identified as part of the project team with responsibility for developing and reviewing deliverables. Indeed, some organizations require that the project manager comes from the sponsoring business unit. Other organizations assign co-project managers to IS-related projects—one from the IS organization and one from the business unit.

In addition to the development team, each project should have a project steering team—made up of senior managers representing the business and IS organizations—to provide guidance and support to the project. The num- ber of members on the steering team should be limited (three to five) to sim- plify the decision-making process and ease the effort to schedule a quorum of these busy executives. The project manager and select members of the development team should meet with the steering team on an as-needed basis, typically at the end of each project phase or every few months. The three key members of the steering team include: (1) the project champion who is a well-respected manager with a passion to see the project succeed and who removes barriers to the success of the project, (2) the project spon- sor who is a senior manager from the business unit most affected by the project and who ensures the project will indeed meet the needs of his or her organization, and (3) the IS manager who ensures proper IS staffing for the project and ensures the project uses approved technology and ven- dors. These roles are further explained in Figure 11.13 and outlined in Table 11.10.

Many projects also draw on key resources who are not assigned to the project team but who provide valuable input and advice. A subject matter expert is someone who provides knowledge and expertise in a particular aspect important to the project. For example, an accounting system project may seek advice from a member of the internal auditing group in defining the mandatory control features of a new system. A technical resource is essentially a subject matter expert in an IS topic of value to the project. For example, the accounting system project may seek advice from a database management system guru (either inside or outside the company) to minimize the response time for certain key business transactions.

project steering team: A group of senior managers representing the business and IS organizations that provide guidance and support to a project.

project champion: A well- respected manager with a passion to see a project succeed and who removes barriers to the success of the project.

project sponsor: A senior manager from the business unit most affected by a project and who ensures the project will indeed meet the needs of his or her organization.

subject matter expert: Someone who provides knowledge and expertise in a particular aspect important to the project.

technical resource: A subject matter expert in an IS topic of value to the project.

CHAPTER 11 • Strategic Planning and Project Management 483

Communications Management Communications management involves the generation, collection, dissemi- nation, and storage of project information in a timely and effective manner. It includes communications planning, information distribution, performance reporting, and managing communications to meet the needs of project share- holders. The key stakeholders include the project steering team, the team

FIGURE 11.13 Project organization A project steering team is critical to the success of any project.

Subject matter experts

Project team

members

Technical resources

Project manager

Project steering team

Champion Sponsor IS manager

TABLE 11.10 Responsibilities of the project steering team Project Champion Project Sponsor IS Manager

Well-respected senior manager with a passion to see the project succeed

Senior manager of business unit most affected by the project

Well-respected IS manager

Assures that project goals and objectives are aligned with organizational goals and objectives

Ensures that the business unit’s expectations and needs are clearly communicated and understood

Ensures the project is staffed with appro- priate IS staff

Convinces other senior managers of the pro- ject’s merits in order to gain their approval to fund and staff it

Ensures that the project solution is truly workable and consistent with business and end-user requirements

Ensures technology and vendors sug- gested for inclusion in the project are consistent with IS strategy

Acts as a vocal and visible champion for the project to gain the support of others

Works to overcome resistance to change and prepare the organization to embrace the new system and way of doing things

Identifies and removes barriers to project success

Identifies workers from the business unit to be assigned on a full- or part-time basis to project

Resolves any issues outside the control of the project manager

Provides advice and counsel to the project team

Keeps informed of major project activities and developments

Has final approval of all requests for changes in project scope, budget, and schedule

Signs off on approvals to proceed to each succeeding project phase

communications management: The generation, collection, dissemina- tion, and storage of project information in a timely and effective manner.

484 PART 4 • Planning, Acquiring, and Building Systems

itself, end users, and others who may be affected by the project (potentially customers or suppliers).

In preparing a communications plan, the project manager should recognize that the various stakeholders have different information needs in the project. A useful tool for identifying and documenting these needs is the stakeholder analysis matrix, shown in Table 11.11. This matrix identifies the interests of the stakeholders, their information needs, and important facts for managing com- munications with the champion, sponsor, project team members, and key end users associated with the project. The project manager should include his or her manager in this analysis. Based on analysis of this data, the preferred form and frequency of communication is identified for each stakeholder.

If the project team is unable to recruit either a project champion or spon- sor, the problem may be that management does not see clearly that the benefits of the project outweigh its costs, or that the project appears to run counter to organizational goals and strategies. A potential project without either a cham- pion or a sponsor is highly unlikely to get the needed resources, and for good reason. No project should be started without both a champion and a sponsor.

Risk Management “Things will go wrong, and at the worst possible time,” according to a variation of Murphy’s Law, a popular adage. Project risk is an uncertain event or condi- tion that, if it occurs, has a positive or a negative effect on a project objective. Known risks are risks that can be identified and analyzed. For example, in cre- ating a new IS-related system that includes the acquisition of new computing

TABLE 11.11 Sample stakeholder analysis matrix Key Stakeholders Ray Boaz Klem Kiddlehopper John Smith Forklift Drivers

Organization Project champion and VP of supply chain

Project sponsor and warehouse manager

Experienced forklift driver

15 different drivers

Useful facts ● Very persuasive ● Trusted by CEO

● Risk taker, very aggressive

● Will push this through, no matter what

● Has driven forklift truck for five years

● Well respected by peers

● Not highly motivated to make project a success

Level of interest High High Medium Low

Level of influence High Medium High Low

Suggestions on managing relationship

● Demands respect, some- what formal

● Speak in busi- ness terms, never get tech- nical; no surprises!

● Poor listener, forgets details

● Put it in writing

● Must keep John enthusiastic about project

● Don’t ignore ● Attend occa-

sional shift changeover meeting

Information needs ● ROI, budget, and schedule

● Schedule and potential opera- tional conflicts

● Schedule, espe- cially timing of training

● Safety and pro- ductivity issues

● Schedule, espe- cially timing of training

● Safety issues

Information medium, format, and timing

● Biweekly face- to-face meeting

● Newsletter ● Biweekly face-

to-face

● Newsletter ● Catch-as-catch

can

● Brief updates at weekly depart- ment meeting

project risk: An uncertain event or condition that, if it occurs, has a positive or a negative effect on a project objective.

CHAPTER 11 • Strategic Planning and Project Management 485

and/or networking hardware, a known risk might be that the hardware will take longer than expected to arrive at the installation site. If the hardware is delayed by several weeks, it could have a negative effect on the project comple- tion date. Countermeasures can be defined to avoid some known risks entirely, and contingency plans can be developed to address unavoidable known risks if they occur. Of course, some risks simply cannot be anticipated.

A hallmark of experienced project managers is that they follow a deliber- ate and systematic process of risk management to identify, analyze, and manage project risks. Having identified potential risks, they can make plans to avoid them entirely. When an unavoidable risk occurs and becomes an issue, the project team has already defined an alternative course of action to minimize the impact on the project. They waste no time executing the backup plan. Unknown risks cannot be managed directly; however, an experienced project manager will build some contingency into the project budget and schedule to allow for their occurrence.

While inexperienced project managers realize that things may go wrong, they often fail to identify and address known risks and do not build in contin- gencies for unknown risks. Thus, they are often unsure of what to do, at least temporarily, when a project setback occurs. In their haste to react to a risk, they may not implement the best course of action.

The project manager needs to lead a rigorous effort to identify all risks asso- ciated with the project. The project team, business managers, and end users should participate in the effort. These resources can include seasoned project managers and members of the organization’s risk management department. After each risk is identified and defined, as shown in Table 11.12, the group should attempt to classify the risk by the probability that it will occur and the impact on the project if the risk does occur. Both the probability and the impact can be clas- sified as high, medium, or low, as shown in the example in Table 11.13.

Dark ¼ High risk/high impact; risk management plan is needed Lightest ¼ Medium or high risk and impact; risk management plan recommended Lighter ¼ Low or medium risk and impact; risk management plan not needed

TABLE 11.12 Identification of project risks Risk Example

R1 The required new servers arrive at the installation site more than two weeks late.

R2 Business pressures make key end users unavailable to develop the user acceptance test by the date it is needed.

R3 Business pressures make end users unavailable during the time sched- uled for training.

R4 One or more end-user computers have insufficient memory or CPU capacity to run the new software efficiently (or at all).

Rn ….

TABLE 11.13 Example of an assessment of project risks Impact on Project

Low Medium High

High R10 R2, R3

Probability risk occurs Medium R5, R6 Rn R1

Low R8, R11 R7, R9 R4

risk management: A deliberate and systematic process designed to iden- tify, analyze, and manage project risks.

486 PART 4 • Planning, Acquiring, and Building Systems

The project team then needs to consider which risks need to be addressed in the risk management plan. Generally, the team can ignore risks with a low probability of occurrence and low potential impact. Risks with a high proba- bility of occurrence and a high potential impact need to have a risk owner assigned. The risk owner is responsible for developing a risk management strategy and monitoring the project to determine if the risk is about to occur or has occurred. One strategy is to take steps to avoid the risk altogether, while another is to develop a backup plan. The risk management plan can be documented as shown in Table 11.14.

One of the biggest risks associated with a project is that considerable time, energy, and resources might be consumed with little value to show in return. To avoid this potential risk, an organization must ensure that a strong rationale exists for completing a project. The project must have a direct link to an organizational strategy and goal, as shown in Figure 11.14. In this exam- ple, assume that an organization has been losing sales because of customer dissatisfaction. It has set an objective of improving customer service, with a goal of increasing the retention rate of existing customers. The organization has defined one of its key strategies as improving customer service to world- class levels. A project that is consistent with this strategy and that can deliver results to achieve this goal is clearly aligned with the organization’s objectives.

● Objective. Improve customer service. ● Goal. Reduce customer turnover from 25 percent per year to 10 percent

by June 2017 by responding to 95 percent of customers’ inquiries within 90 seconds, with less than 5 percent callbacks about the same problem.

● Strategy. Improve customer service to world-class levels. ● Project. Implement a state-of-the-art customer call center with “24/7”

availability and a well-trained staff.

TABLE 11.14 Risk management plan Risk Description Risk Owner Risk Strategy Current Status

R2 Business pressures make key end users unavail- able to develop the user acceptance test by the deadline.

Jon Andersen, man- ager of end users in the business area

Try to avoid this problem by starting development of the user acceptance test three weeks earlier than originally planned. Monitor progress carefully.

Key users have been identified and have started developing the test.

R3 Business pressures make end users unavailable during the time sched- uled for training.

Jon Andersen, man- ager of end users in the business area

Try to avoid this problem by hiring and training four temporary workers to fill in for end users as they participate in training.

Three of four temporary workers have been hired. Their training is sched- uled to begin next week.

R1 The required new servers arrive at the installation site more than two weeks late.

Alice Fields, team member responsible for hardware acquisition

Set a firm delivery dead- line with the vendor, with a substantial dollar penalty for each day that the equipment is late.

The contract with the penalty clause has been signed by the vendor, who agrees to provide a shipment status update each Tuesday and Friday.

risk owner: The individual responsi- ble for developing a risk management strategy and monitoring the project to determine if the risk is about to occur or has occurred.

CHAPTER 11 • Strategic Planning and Project Management 487

Risk management software—such as Risk Management from Intelex, Full Monte from Barbecana, and @Risk from Intaver Institute—integrates with project scheduling software and can reflect the potential impact of various risks on the project schedule and cost. Use of such software can lead to more realistic estimates for project milestones and budgets.

Procurement Management Procurement management are activities related to the acquisition of goods and/or services for a project from sources outside the performing organiza- tion. Procurement management is divided into the following processes:

● Plan purchase and acquisition. This process determines what is needed and when.

● Plan contracting. This process documents requirements for products and services and identifies potential providers.

● Request seller responses. This process obtains bids, information, propo- sals, or quotations from potential providers.

● Select seller. During this process, offers are reviewed, the preferred pro- vider is identified, and negotiations are started.

● Contract administration. This process manages all aspects of the con- tract and the relationship between the buyer and the provider. The pro- cess includes tracking and documenting the provider’s performance, managing contract changes, and taking any necessary corrective actions.

● Contract closure. This process completes and settles the terms of any contracts, including resolving any open items.

The make-or-buy decision is a key decision made during the plan pur- chase and acquisition process. The make-or-buy decision involves comparing the pros and cons of in-house production versus outsourcing of a given prod- uct or service. In addition to cost, two key factors to consider in this decision are (1) “Do we have a sufficient number of employees with the

FIGURE 11.14 Projects must be well linked to an organizational goal and strategy Objectives, goals, strategy, and projects should be aligned.

Objective: Improve

customer service

Goal: Reduce customer

turnover from 25% to 10% by

June 2017

Strategy: Improve

customer service to

world-class levels

Project: Implement

state-of-the-art customer call

center

procurement management: A set of activities related to the acquisition of goods and/or services for the project from sources outside the performing organization.

make-or-buy decision: The act of comparing the pros and cons of in- house production versus outsourcing of a given product or service.

488 PART 4 • Planning, Acquiring, and Building Systems

skills and experience required to deliver the product or service at an acceptable level of quality and within the required deadlines?” and (2) “Are we willing to invest the management time, energy, and money required to identify, recruit, train, develop, and manage people with the skills to do this kind of work?”

A contract is a legally binding agreement that defines the terms and con- ditions of the buyer-provider relationship, including who is authorized to do what, who holds what responsibilities, costs and terms of payment, remedies in case of breach of contract, and the process for revising the contract. Con- tract types fall into three main categories:

● Fixed-price contract. With this type of contract, the buyer and provider agree to a total fixed price for a well-defined product or service. For example, the purchase of a large number of laptop computers with specified capabilities and features frequently involves a fixed-price contract.

● Cost-reimbursable contract. This type of contract requires the buyer to pay the provider an amount that covers the provider’s actual costs plus an additional amount or percentage for profit. Three common types of cost- reimbursable contracts exist. In a cost-plus-fee or cost-plus-percentage of cost contract, the provider is reimbursed for all allowable costs and receives a percentage of the costs as a fee. In a cost-plus-fixed-fee con- tract, the provider is reimbursed for all allowable costs and receives a fixed fee. In a cost-plus-incentive-fee contract, the provider is reimbursed for all allowable costs. In addition, a predetermined fee is paid if the pro- vider achieves specified performance objectives—for example, the provi- der’s hardware must be received, installed, and operational by a specific date. In such contracts, buyers run the risk of paying more for the work but are rewarded by having their objectives met or exceeded. Providers run the risk of reduced profits if they fail to deliver, but can be rewarded for superior performance.

● Time and material contract. Under this type of contract, the buyer pays the provider for both the time and materials required to com- plete the contract. The contract includes an agreed-upon hourly rate and unit price for the various materials to be used. The exact number of hours and precise quantity of each material are not known, how- ever. Thus, the true value of the contract is not defined when the contract is approved. If not managed carefully, time and material contracts actually can motivate suppliers to extend projects to maximize their fees.

Poor procurement management can result in serious project problems and even a project’s outright cancellation.

Project Integration Management Project integration management is perhaps the most important knowledge area because it requires the assimilation of all eight other project management knowledge areas. Project integration management requires the coordination of all appropriate people, resources, plans, and efforts to complete a project successfully. Project integration management comprises seven project man- agement processes:

1. Developing the project charter that formally recognizes the existence of the project, outlines the project objectives and how they will be met, lists key assumptions, and identifies major roles and responsibilities.

fixed-price contract: A contract in which the buyer and provider agree to a total fixed price for a well-defined product or service.

cost-reimbursable contract: A contract that requires the buyer to pay the provider an amount that covers the provider’s actual costs plus an addi- tional amount or percentage for profit.

time and material contract: A contract that requires the buyer to pay the provider for both the time and materials required to complete the contract.

project integration management: The coordination of all appropriate people, resources, plans, and efforts to complete a project successfully.

CHAPTER 11 • Strategic Planning and Project Management 489

Critical Thinking Exercise

2. Developing a preliminary project scope statement to define and gain con- sensus about the work to be done; over the life of the project, the scope statement will become fuller and more detailed.

3. Developing the project management plan that describes the overall scope, schedule, and budget for the project; this plan coordinates all subsequent project planning efforts and is used in the execution and control of the project.

4. Directing and managing project execution by following the project man- agement plan.

5. Monitoring and controlling the project work to meet the project’s perfor- mance objectives; this process requires regularly measuring effort and expenditures against the project tasks, recognizing when significant deviations occur from the schedule or budget, and taking corrective action to regain alignment with the plan.

6. Performing integrated change control by managing changes over the course of the project that can affect its scope, schedule, and/or cost.

7. Closing the project successfully by gaining stakeholder and customer acceptance of the final product, closing all budgets and purchase orders after confirming that final disbursements have been made, and capturing knowledge from the project that may prove useful for future projects.

As an example of a firm that excels in project integration management, consider Atos, an international IS services company that employs over 80,000 workers in more than 52 countries, with 2015 annual revenue of €10.7 billion (U.S. $12.2 billion). The firm successfully delivered the infor- mation technology systems that enabled the smooth running of the Sochi 2014 Olympic Games in Russia. Atos had the primary responsibility for proj- ect integration, consulting, systems integration, operations management, information security, and software applications development for the games. Through its experience with previous Olympics (Atos has been the world- wide IS partner for the Olympic Games, both winter and summer, since Salt Lake City in 2002), Atos has developed an effective project management process. The firm spent over four years configuring, testing, and retesting some 10,000 pieces of equipment deployed to 30 different venues. Atos coordinated the work of hundreds of subcontractors to deliver a reliable IS infrastructure and IS services in support of one of the world’s widely viewed sporting events. The Sochi project was coordinated so that custom software, thousands of workstations and laptops, tens of thousands of phones, hundreds of servers, and multiple operations centers and data centers all operated together effectively and efficiently.35

Reluctant Project Sponsor You are on the phone with the project sponsor of a $2 million project you are managing. She informs you that she accepted the role reluctantly, and now, one month into this eight-month project, she is considering withdrawing as project sponsor. She does not see the need for this role and is extremely busy with her other responsibilities.

Review Questions 1. What is the role of the project sponsor? 2. What might be the impact on the project if you attempt to proceed without a

sponsor? Is it likely that some project tasks would need to be done over if a new sponsor is appointed?

490 PART 4 • Planning, Acquiring, and Building Systems

Critical Thinking Questions 1. If you are unable to persuade the sponsor to remain on the project, should

you enlist the help of the project champion? How might you do this in such a way that you do not appear weak and ineffective and avoid creating hard feel- ings with the current sponsor?

2. After speaking to the project champion, you and she both agree that the cur- rent sponsor should be replaced with someone new. What characteristics, traits, and experiences would you look for in a new sponsor?

Summary

Principle: Organizations that are more advanced in their planning processes develop multiple-year strategic plans.

Strategic planning is a process that helps managers identify desired out- comes and formulate feasible plans to achieve their objectives using available resources and capabilities.

Goal-based strategic planning is divided into four phases: analyze situation, set direction, define strategies, and deploy plan.

The analyze situation phase involves looking internally to identify the orga- nization’s strengths and weaknesses and looking externally to determine its opportunities and threats.

An analysis of an organization’s internal assessment and study of its exter- nal environment are frequently summarized into a Strengths, Weaknesses, Opportunities, Threats (SWOT) matrix.

The set direction phase involves defining the mission, vision, values, objec- tives, and goals of the organization.

SMART goals are specific, measurable, achievable, relevant, and time constrained.

The define strategies phase involves describing how an organization will achieve its mission, vision, objectives, and goals.

Deploy plan includes communicating the organization’s mission, vision, values, objectives, goals, and strategies so that everyone can help define the actions required to meet organizational goals.

Principle: The strategic planning process for the IS organization and the factors that influence it depend on how the organization is perceived by the rest of the organization.

IS strategic planning is influenced by the corporate and business unit strategic plans as well as technology innovations and innovative thinking.

The IS strategy will set direction for the technologies, vendors, competen- cies, people, systems, and projects.

Principle: Organizations must always make a clear connection among business objectives, goals, and projects. In addition, projects must be consistent with business strategies.

A project is a temporary endeavor undertaken to create a unique product, service, or result.

CHAPTER 11 • Strategic Planning and Project Management 491

Roughly 71 percent of all IS projects are challenged, fail, or face major changes such as lateness, budget overruns, and lack of required features.

Today, many organizations have recognized project management as one of their core competencies.

Five highly interrelated parameters define a project—scope, cost, time, quality, and user expectations. If any one of these project parameters is chan- ged, there must be a corresponding change in one or more of the other parameters.

Project scope is the definition of which work is included and which work is not included in a project.

The cost of a project includes all the capital, expenses, and internal cross- charges associated with the project’s buildings, operation, maintenance, and support.

The timing of a project is frequently a critical constraint. Quality of a project can be defined as the degree to which the project meets

the needs of its users. Project management is the application of knowledge, skills, and techniques

to project activities to meet project requirements. Project managers must attempt to deliver a solution that meets specific scope, cost, time, and quality goals while managing the expectations of the project stakeholders—the people involved in the project or those affected by its outcome.

According to the Project Management Institute (PMI), project managers must coordinate nine areas of expertise: scope, time, cost, quality, human resources, communications, risk, procurement, and integration.

Scope management includes defining the work that must be done as part of the project and then controlling the work to stay within the agreed-upon scope.

Functional decomposition is a frequently used technique to define the scope of an information system by identifying the business processes it will affect.

A process is a set of logically related tasks performed to achieve a defined outcome.

Time management includes defining an achievable completion date? that is acceptable to the project stakeholders, developing a workable proj- ect schedule, and ensuring the timely completion of the project.

Cost management includes developing and managing the project budget.

Quality management is a set of activities designed to ensure that the project will meet the needs for which it was undertaken.

Human resource management activities are designed to make the most effective use of the people involved in the project.

The forming-storming-norming-performing-adjourning model describes how teams form, evolve, and dissolve.

Each project should have a project steering team—made up of senior man- agers representing the business and IS organizations—to provide guidance and support to the project. Three key members of the steering team are the project champion, project sponsor, and IS manager.

Communications management involves the generation, collection, dissemi- nation, and storage of project information in a timely and effective manner.

Risk management is a process that attempts to identify, analyze, and manage project risks. Experienced project managers follow a deliberate and systematic process of risk management to avoid risks or minimize their nega- tive impact on a project.

492 PART 4 • Planning, Acquiring, and Building Systems

Procurement management is a set of activities related to the acquisition of goods and/or services for the project from sources outside the organization.

Project integration management is a critical knowledge area of project? management that involves chartering, scoping, planning, executing, moni- toring and controlling, change control, and project closing.

Key Terms

communications management

core competency

core value

cost management

cost-reimbursable contract

critical path

fixed-price contract

forming-storming-norming-performing-adjourning model

functional decomposition

Gantt chart

goal

goals-based strategic planning

human resource management

intangible benefit

issues-based strategic planning

make-or-buy decision

Michael Porter’s Five Forces Model

mission statement

objective

organic strategic planning

predecessor task

procurement management

Program Evaluation and Review Technique (PERT)

project champion

project deadline

project integration management

project management

project milestone

project risk

project schedule

project scope

project sponsor

project stakeholder

project steering team

quality

quality assurance

quality control

quality management

quality planning

risk management

risk owner

scope management

slack time

sponsoring business unit

strategic planning

strategy

Strengths, Weaknesses, Opportunities, Threats (SWOT) matrix

subject matter expert

tangible benefit

technical resource

time and material contract

time management

vision

vision/mission statement

work breakdown structure (WBS)

Chapter 11: Self-Assessment Test

Organizations that are more advanced in their plan- ning processes develop multiple-year strategic plans.

1. Goal-based strategic planning is divided into four phases: , set direction, define strat- egies, and deploy plan.

2. Analysis of the internal assessment and external environment are frequently summarized into a

matrix.

3. includes communicating the orga- nization’s mission, vision, values, objectives, goals, and strategies so that everyone can help define the actions required to meet organizational goals. a. Analyze situation b. Define strategies c. Set direction d. Deploy plan

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4. Which of the following is an example of a SMART goal? a. Achieve 100 percent customer satisfaction

within the next year. b. Improve customer service by 50 percent. c. Reduce customer complaints about mispriced

merchandise from 12 per day to less than 3 per day by June 30.

d. The customer is always right.

The strategic planning process for the IS organiza- tion and the factors that influence it depend on how the organization is perceived by the rest of the organization.

5. IS strategic planning is influenced by the cor- porate and strategic plans as well as technology innovations and innovative thinking.

6. An IS organization can be viewed as either a cost center/service provider, a business partner/busi- ness peer, or as a game changer. True or False?

7. A clear example of a tangible benefit is .

a. the increase in employee morale from imple- menting a self-service employee benefits soft- ware package

b. the reduction in headcount in the accounting organization resulting from improvements in the payroll processing system

c. the increase in customer satisfaction from modifications to the organization’s Web site

d. the value of improved decision making resulting from self-service analytics tools

Organizations must always make a clear connection among business objectives, goals, and projects. In addition, projects must be consistent with business strategies.

8. of all IS projects are challenged or failed. a. Less than 25 percent b. Nearly half c. About 71 percent d. Over 80 percent

9. A is a temporary endeavor under- taken to create a unique product, service, or result.

10. Five highly interrelated parameters define a project—scope, cost, time, , and user expectations.

11. According to the Project Management Institute (PMI), project managers must coordi- nate areas of expertise. a. three b. five c. seven d. nine

12. The model describes how teams form, evolve, and dissolve.

Chapter 11: Self-Assessment Test Answers

1. analyze situation 2. Strengths, Weaknesses, Opportunities, Threats

(SWOT) 3. d 4. c. 5. business unit 6. True

7. b 8. c 9. project 10. quality 11. d 12. forming-storming-norming-performing-adjourning

Review Questions

1. State three benefits that an organization can achieve through strategic planning.

2. Briefly describe issues-based strategic planning, organic strategic planning, and goals-based stra- tegic planning.

3. Outline the four phases of goals-based strategic planning.

4. State the fundamental factors that determine the level of competition and long-term profitability of

an industry, and draw a sketch of Michael Porter’s Five Forces Model.

5. What is included in a SWOT matrix, and how is one used?

6. What does an organization’s vision/mission statement communicate?

7. What does the acronym SMART goal stand for? What is a BHAG?

8. How does a strategy differ from an objective?

494 PART 4 • Planning, Acquiring, and Building Systems

9. Define the term “project.” 10. What is a core competency? Project scope? Project

stakeholder? 11. Identify the five highly interrelated parameters

that define a project. What happens if one of these parameters is changed?

12. Identify and briefly describe the nine areas of expertise that a project manager must coordinate.

13. Explain how PERT and Gantt are used to develop and/or communicate the schedule of a project.

14. What is the difference between quality planning, quality assurance, and quality control?

15. Briefly describe the stages that a project team experiences over the course of a successful project.

16. What is a stakeholder analysis matrix and how is it used?

17. What is the purpose of risk management? Briefly outline a recommended risk management process.

18. Identify and briefly describe three types of con- tracts frequently used in the procurement of goods and services.

Discussion Questions

1. To what degree do you think an organization’s strategic plan is influenced by the vision, per- sonality, and leadership capabilities of the CEO? Do research to identify an example of a strategic plan developed by a CEO you consider to be a strong, charismatic leader. Briefly summarize the notable aspects of this plan.

2. Identify an event that would trigger a need to redefine the organization’s vision/mission statement.

3. What would it imply if, while performing a SWOT analysis, an organization could not identify any opportunities? What if it could not identify any threats?

4. How would you distinguish between an organi- zational weakness and a threat to the organiza- tion? How would you distinguish between a strength and an opportunity?

5. Brainstorm an approach you might use to gather data to identify the strengths and weaknesses of a competing organization. Identify resources, spe- cific tools, or techniques you might apply to gain useful insights.

6. Would you recommend that an organization set BHAGs? Why or why not? Identify an example of a BHAG from a real organization. Was that BHAG achieved?

7. Distinguish between the role of the project champion and the role of the project sponsor. Is one more important to the success of a project than the other?

8. Describe three specific actions that the ideal project sponsor would take to ensure the success of a project.

9. Is there a difference between project time man- agement and personal time management? Can someone be “good” at one but not the other? Explain your answer.

10. Discuss the team dynamics for a highly effective (or ineffective) team of which you were a member. Can you explain why the team performed so well (or poorly) using the forming-storming-norming- performing-adjourning model?

11. What sort of behaviors would indicate that the business organization is not fully engaged in a project and instead is simply replying on the project team to make the project a success? What is the danger with this attitude?

12. Identify some of the challenges of performing project integration management on a project in which team members are distributed globally and cannot physically meet in one location. How might these challenges be overcome?

13. Imagine that you are hiring a firm to complete a large but undetermined amount of project work for your firm. Which form of contract would you prefer and why?

14. How would you respond to a project team mem- ber who feels that risk management is a waste of time because the future cannot be predicted? Instead, this person prefers to react to problems as they occur.

Problem-Solving Exercises

1. Complete this table. Which tasks have the highest degree of uncertainty in terms of the time required to complete them?

2. Many free and open source project management software programs are available online,

including: Asana, BaseCamp, Bitrix24, GanttPro- ject, MeisterTask, Trello, and Zoho. Choose one of these programs or use a spreadsheet or another project management program with which you are familiar. Create a Gantt chart using the

CHAPTER 11 • Strategic Planning and Project Management 495

values from this table. How long will it take to complete a project consisting of these tasks? Identify the critical path for this project.

3. Evaluate any three of the many free and open source project management software programs.

Create a spreadsheet that displays the pros, cons, and special features of each of the three programs.

Team Activities

1. Choose a company that interests your team and do research to document its strategic plan. Include a SWOT analysis and a statement of the organization’s vision, mission, objectives, goals, and strategies. Identify and briefly describe two IS-related projects that would be consistent with this plan.

2. Imagine that your team is serving as a facilitator for a strategic planning session for a new, small organization that was spun off from a much larger organization just six months ago. The CEO and four senior managers involved in the session seem drained at the close of the first day of a two-day off-site meeting. As the leadership team discusses their results, your team is struck by how conservative and uninspiring their objectives and goals are. Brainstorm ideas on what your team can do to help stimulate these managers to think more creatively and broadly.

3. Your team has been hired as consultants to work with a large city to implement a program to

place hundreds of high-tech digital cameras in strategic locations to aid in reducing crime and speeding help to victims. The cameras are state- of-the-art with infrared capability for night vision, high resolution, and rapid zoom in and out capability. Your city will be the first in the United States to deploy them. The manufacturer is a rel- atively newcomer to the digital camera industry. The program has not yet been fully funded nor has it been announced to the residents of the city. The city management and top level officers within the police department are fully behind the program, however, lower level officers and cops on the street have mixed support. Your team has been asked to perform a risk assessment for this project. You are to identify various risks that could occur; assign them a high, medium, or low level of risk, and assess the potential impact (high, medium, or low) on the project if that risk should occur.

Web Exercises

1. Steve Jobs was a strong, charismatic leader who cofounded Apple and is accredited with much of the success of the company. Some believe that Tim Cook, who became CEO in 2011, embraces a more collaborative leadership style. Do research to compare and contrast the leadership style of the two CEOs. (You may wish to view the 2013

movie Jobs, which portrays the story of Steve Jobs’ ascension from college dropout to Apple CEO.) Which CEO—Jobs or Cook—do you think developed and executed the most effective stra- tegic plan? What evidence can you find to support your opinion?

Task TO TM TP T Standard Deviation

Predecessor Task

1 3 days 7 days 14 days ______ ______ 0

2 16 days 21 days 43 days ______ ______ 1

3 6 days 8 days 15 days ______ ______ 2

4 9 days 11 days 19 days ______ ______ 2

5 18 days 21 days 38 days ______ ______ 2, 3

6 13 days 18 days 30 days ______ ______ 5

7 12 days 17 days 27 days ______ ______ 6

8 7 days 9 days 13 days ______ ______ 6, 7

496 PART 4 • Planning, Acquiring, and Building Systems

2. Do research online to identify what experts think are the keys to project success. You will find many different ideas and suggestions. Consoli- date these ideas to create a top five list.

3. Do research on the Web to learn the history of the PERT technique and identify some of the early projects that used this technique.

Career Exercises

1. Visit the Project Management Institute (PMI) Web site at www.pmi.org. Do research to learn more about the value that employers place on project management certification. What are the certifica- tions offered by PMI that you may be qualified to take? Do you think that PMI certification would enhance your career opportunities? Why or why not?

2. Can you state the vision and mission of your organization? Has it documented its core values?

Can you identify any key objectives and strategies?

3. Talk with your manager and others at work about the need for good project management in your organization. Do the people you spoke with see project management as a core competency? Do they feel that there is a shortage of good project managers?

Case Studies

Case One

UConn’s University Information Technology Services (UITS) Develops a Five-Year Strategic Plan The University of Connecticut was founded in 1881 under the name Storrs Agricultural School. As the name implies, the school was originally focused solely on agricultural studies. In 1893, the school became part of the national land-grant college program, which provided land and funding to one college in each state whose focus was on teaching practical skills in agriculture, engineering, military arts, and science.

Over the years, the school’s name changed three more times—finally becoming the University of Connecticut in 1939—while its programs expanded into areas such as social work, law, and nursing. Today, UConn, as the school is commonly called, has more than 18,000 undergraduate students at its main campus in Storrs, Connecticut, as well as 4,500 students who take classes at five smaller campuses across the state. Another 8,200 UConn students are pursuing graduate-level degrees in dentistry, education, law, medicine, and pharmacy, among others.

The 200 employees who work for the University Information Technology Services (UITS) division at UConn are responsible for deploying, managing, and maintaining IT systems and services—including classroom applications, data management, desktop and software support, email, file services, high-performance computing, mobile applications, and Web services as well as the university’s entire data network and telecommunications infrastructure.

The primary mission of UITS is “to facilitate, coordinate, or implement information technologies that effectively enable the institutional missions of research, teaching, learning, and outreach.” In an effort to ensure that it is fulfilling its mission, UITS recently undertook

an intensive strategic planning process, the end result of which was a five-year strategic plan that defines the role UITS will play in fulfilling the university’s larger mission.

From the start, UITS utilized a collaborative approach to its strategic planning process, which began with conversations with key stakeholders, including students, alumni, faculty, staff, and administrators. The information gathered during these meetings helped UITS staff assess the current state of IT services across the university. The planning process then extended for several more months, with participation by various college deans and directors, members of the president’s cabinet, and representatives from the IT Partners program, which includes three advisory committees, made up of faculty, administrators, and IT staff, respectively. At that point, UITS released a draft version of the plan and then spent more time gathering feedback from its various constituencies.

The final version of the strategic plan identifies five high- level objectives (referred to as goals in the plan) that establish how UITS will support UConn’s institutional mission and the changing IT needs of the university community:

● Goal 1: Pursue IT solutions that empower members of our community to successfully, productively, and securely engage in all of their institutional roles as individuals.

● Goal 2: Pursue IT solutions under the guidance of our academic partners that facilitate effective research, enrich teaching and learning, and enhance institutional competitiveness for extramural funding.

● Goal 3: Pursue IT solutions in concert with functional partners that support the business of the university and increase operational effectiveness.

● Goal 4: Pursue IT solutions that assist technical partners at all UConn campuses to successfully

CHAPTER 11 • Strategic Planning and Project Management 497

provide for the specific needs of their respective communities.

● Goal 5: Pursue IT solutions that can best be provided centrally and deliver them securely, efficiently, and robustly at scale.

These goals now guide UITS staff in their efforts to identify, develop, and implement specific initiatives intended to support its mission. For example, some of the UITS initiatives that fall under Goal 1 of the strategic plan relate to the delivery of mobile device services and collaboration tools that members of the university community can use no matter whether they are on or off campus. In addition, UITS has placed a priority on developing high-performance computing capabilities and instructional technologies in support of Goal 2. Initiatives connected to Goal 3 include one intended to enhance the paperless document-management tools available to the various administrative and academic departments.

According to UConn’s CIO and Vice Provost for Information Technology, Michael Mundrane, who led the strategic planning process, “Our primary goal for the plan itself was to produce a marketing document that would explain to the organization and to our community where we were going and why.” And as Mundrane explains in the plan document, “The challenge was never to generate a laundry list of technologies but was always to identify the smallest practical number of key choices that would have the greatest impact on the success of the university.”

From Mundrane’s perspective, a strategic plan offers guidance to help an IT organization ensure that “the important” is not squeezed out by “the urgent.” As he puts it, “By focusing on the big picture, you can ensure that your goals are accomplished and that it is easier to find the resources needed to tackle unexpected challenges or to pursue unique and innovative opportunities that appear throughout the year.”

Critical Thinking Questions 1. How well do the five high-level goals in the UITS stra-

tegic plan support the IT organization’s stated mission? How well do the goals address the needs of the various constituencies within the university?

2. UITS’s commitment to collaboration did not end when the UITS strategic plan was finalized. Michael Mundrane considers the plan to be a dynamic docu- ment and has pledged to actively solicit feedback from the university community every two years to reassess the plan and its relevance to the changing needs of the university. Do you think such a strong commitment to collaborative strategic planning is more or less impor- tant at a public institution, such as the University of Connecticut, versus a private company? Is it more or less difficult to implement?

3. Do you agree with Michael Mundrane’s statement that a strategic plan should be treated as a marketing doc- ument? Go to the UITS Strategic Plan Web site (http:// itstrategy.uconn.edu), and click the link to view the

strategic plan. What do you think of the final docu- ment? Is it effective as both a strategic plan and a marketing document?

SOURCES: “History,” University of Connecticut, http://uconn.edu/about- us/history, accessed April 18, 2016; “Transcript of Morrill Act (1862),” Our Documents Initiative, www.ourdocuments.gov/doc.php?flash= true&doc=33&page=transcript, accessed April 17, 2016; “2016 Fact Sheet,” University of Connecticut, http://uconn.edu/factsheet/latest.pdf, accessed April 17, 2016; “University Information Technology Services,” University of Connecticut, http://uits.uconn.edu/services, accessed April 18, 2016; “About UITS,” University of Connecticut, http://uits.uconn. edu/about-uits, accessed April 17, 2016; “UITS Strategic Plan: Annual Review and Progress Report,” University of Connecticut University Information Technology Services, October 2015, http://itstrategy.uconn. edu/wp-content/uploads/sites/850/2015/10/strategic-plan-progress- report_2015.pdf; “IT Strategic Plan: 2014–18,” University of Connecticut University Information Technology Services, accessed April 16, 2016, http://itstrategy.uconn.edu/wp-content/uploads/sites/850/2015/08/UITS- strategic-plan_2015-8-24.pdf; Mundrane, Michael R., “Why a Strategic IT Plan Is a CIO’s Best Asset,” The Enterprisers Project,” March 22, 2016, https://enterprisersproject.com/article/2016/3/why-strategic-it-plan-cios- best-asset; “IT Strategic Plan: 2014–18,” University of Connecticut University Information Technology Services, accessed April 16, 2016, http://itstrategy.uconn.edu/wp-content/uploads/sites/850/2015/08/UITS- strategic-plan_2015-8-24.pdf.

Case Two

Webcor: Building Buy-In in the Brick-and-Mortar Business Founded in 1971, Webcor Builders is one of the largest construction companies in California and one of the largest green construction companies in the United States. Committed to innovative practices, Webcor has gained considerable attention due to its award-winning work, including interior construction, historic restoration, and seismic renovation. As Webcor expanded from multifamily residences to commercial offices, interiors, retail, public works, parking structures, and federal, education, and healthcare facilities, the company opened offices first in San Francisco, and then in San Diego, Los Angeles, and Alameda. Its merger with the large Japanese construction firm Obayashi positioned the company to reach customers along the Pacific Rim, with a new office in Honolulu.

Along with developing innovations in building materials and methods, Webcor has leveraged cutting-edge information technologies—in an industry that is often slow to consider, accept, and adopt IS advances. As early as 1984, Webcor integrated the Apple desktop into its work process. In 2011, Webcor made a significant commitment to virtual design and construction in its public sector building projects. Adopting Vico Software’s 5D Virtual Construction application allowed Webcor to estimate costs, schedule projects, and manage projects with increased efficiency. With this software, Webcor can take its customers through a series of what-if scenarios that enable them to make key design decisions. Frank Haase, Director of Virtual Building at

498 PART 4 • Planning, Acquiring, and Building Systems

Webcor, explains, “We have amassed a knowledge base of real data—from past projects and from our subcontractors— that when combined with the integrated 5D approach gives us an unprecedented planning and management capability on all projects. The precise information derived from this approach, both in preconstruction planning and in ongoing construction operations, helps us to resolve issues early and to make prompt fact-based decisions.” Using the software, Webcor can also predict the scheduling and cost impact of changes that occur throughout building design and construction.

The big question many observers asked was, “How did Webcor Building manage to persuade its workforce to adopt the new technologies?” The decision to adopt the system involved fairly high risks, given the potential resistance of its end users. Vince Sarrubi, Webcor CIO, explained the complexity of the challenge, “Blue collar industries tend to focus on completing tasks, meeting deadlines, and doing what they know how to do best to minimize time loss. New technologies mean changes to physical work practices, which could mean missing a deadline. These workers live in the physical world and have been manually practicing their art for years. There’s a mentality of ‘head down and nose to the grindstone gets the work done’ and ‘if it ain’t broke, don’t fix it.’”

So, how did Webcor achieve this success? First, Sarrubi is not alone in leading the call for innovative IS utilization within the company. Webcor cites innovation as one of its strengths, and its top management has been firmly committed to technological innovation. Company CEO Andy Ball spearheaded the virtual construction project. He insists, “Change is never easy, and it has an emotional toll and it has a financial toll. Initially, it has a reduction in productivity in order to have a significant gain in productivity. So all of these things sort of work against change, but if you don’t embrace it and you don’t move forward, you’re just going to move backward and fall off the back because it occurs every day.” The management of Webcor understands the risks and advantage of innovation and is fully invested in seeing it through.

With the firm backing of the top management team, Sarrubi has used two tactics to persuade his blue-collar workforce to adopt technological innovation. First, Sarrubi searches for and hires what he calls technology “cheerleaders,” young college graduates who are more collaborative and who have embraced technology from their early years as a means of producing higher quality work in less time. According to Sarrubi, “Once older workers see a ‘greenhorn’—a new construction worker—using technology to manage a job, the older, senior superintendents begin to see the benefits of the technology and start to hop on the wagon.” This strategy successfully persuaded older employees to adopt Box, a cloud-based storage platform for the company’s

architectural drawings and financial documents. Cloud technology has facilitated low-cost collaboration and electronic document management for both Webcor and its subcontractors. Workers can use the Box application and an iPad to access drawings and 3D models, report problems, submit inspections, and notify all stakeholders of issues or changes.

Sarrubi recalls how Webcor adopted Box technology: “Our enterprise adoption of Box grew out of a trial at one job site and just took off, caught fire, adoption-wise…. All of a sudden, what started as a small group test project grew into almost one hundred Box users within a few weeks. The match that lit the Box fuse was word-of-mouth employee testimonials within the company.”

In addition to his cheerleader approach, Sarrubi also makes sure that working with the new technology is “as easy as using Amazon.” Cost, scalability, and return- on-investment are important factors the company considers when making IS decisions, but end-user preference is also a big factor in what technologies the company adopts. When deciding between different technology solutions, Sarrubi tells Webcor’s top management to “slip on the user’s boots and walk a mile.” That he feels will lead to the best IS choice.

Critical Thinking Questions 1. List the key ideas IS managers can reapply from Web-

cor Builders to improve the successful adoption of new technologies within their own organization.

2. What additional strategies can you identify to encour- age the adoption of new technology?

3. Imagine that you are a disgruntled employee and that you wish to sabotage the implementation of a new technology project at Webcor, without drawing too much attention to yourself. What might you do?

SOURCES: “Built Through Trust,” Webcor Builders, www.webcor.com, accessed October 5, 2014; “Webcor Builders Standardizes on Vico Office for Virtual Construction,” Vico Software, June 9, 2011, www.vicosoft ware.com/0/webcor-builders-standardizes-on-vico-office-for-virtual-con struction/tabid/250240/Default.aspx; Florentine, Sharon, “Construction Company CIO Builds a Better Business with the Cloud,” CIO, August 1, 2014, www.cio.com/article/2459507/leadership-management/construc tion-company-cio-builds-a-better-business-with-the-cloud.html; “Press Release: Webcor Builders Named as 2014 Contractor of the Year,” Market Watch, August 6, 2014, www.marketwatch.com/story/webcor- builders-named-as-2014-contractor-of-the-year-2014-08-06; Geron, Tomio, “Webcor Moves Construction Industry to the Cloud,” Forbes, August 21, 2013, www.forbes.com/sites/tomiogeron/2013/08/21/webcor- moves-construction-industry-to-the-cloud; Green, Laura, “Andy Ball Leads Webcor Builders into a New Age of Construction,” Smart Business, September 1, 2011, www.sbnonline.com/article/andy-ball-leads-webcor- builders-into-a-new-age-of-construction.

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Notes

1. Sun, Leo, “SWOT Analysis of Starbucks Corporation (SBUX),” Motley Fool, June 19, 2015, www.fool.com /investing/general/2015/06/19/swot-analysis-of-star bucks-corporation-sbux.aspx.

2. Thompson, Andrew, “Google’s Vision Statement & Mis- sion Statement,” Panmore Institute (blog), September 20, 2015, http://panmore.com/google-vision-statement -mission-statement.

3. Gaddam, Ajit, “List of Google Core Values,” Ask Student, www.askstudent.com/google/list-of-google-core-values/, accessed January 31, 2016.

4. Farfan, Barbara, “Wal-Mart Stores’ Mission Statement— People, Saving Money, Living a Better Life,” November 20, 2015, About.com, http://retailindustry.about.com/od /retailbestpractices/ig/Company-Mission-Statements /Wal-Mart-Mission-Statement.htm.

5. Collins, James and Porras, Jerry, Built to Last: Successful Habits of Visionary Companies, New York: Harper Collins Publishers, 1994, 1997, p. 9.

6. Raice, Shayndi and Ante, Spencer E., “Insta-Rich: $1 Bil- lion for Instagram,” The Wall Street Journal, April 10, 2012, http://online.wsj.com/news/articles/SB1000142405 2702303815404577333840377381670.

7. Kuittinen, Tero, “On Oculus Rift and Facebook’s Grand Acquisitions,” BGR, March 26, 2014, http://bgr.com /2014/03/26/facebook-oculus-rift-acquisition-analysis.

8. Doran, George T., Miller, Arthur, and Cunningham, James, “There’s a S.M.A.R.T. Way to Write Management’s Goals and Objectives,” Management Review, vol. 70, no. 11, pp. 35–36, 1981.

9. Utermohlen, Karl, “Amazon Drone Delivery: Details Finally Revealed!,” Investor Place (blog), January 19, 2016, http://investorplace.com/2016/01/amazon-drone -delivery-amzn-stock/#.VrJo0432b4g.

10. “About Us,” Alstom Transport, www.alstom.com/micro sites/transport/about-us, accessed February 3, 2016.

11. “Our Trains,” Virgin Trains, www.virgintrains.co.uk /trains, accessed February 3, 2016.

12. “‘Unreasonable Ambition’ Puts Alstom on the Fast Track for Growth,” OpEx Review, December 2012, Issue 5, www.tbmcg.com/misc_assets/newsletter/opex_1212_cover _story.pdf.

13. “About Johns Hopkins Medicine,” Johns Hopkins Medicine, www.hopkinsmedicine.org/about/, accessed February 2, 2015.

14. Nash, Kim S., “State of the CIO 2014: The Great Schism,” CIO, January 1, 2014, www.cio.com/article/2380234 /cio-roletate-of-the-cio-2014-the-great-schism/cio-role /state-of-the-cio-2014-the-great-schism.html.

15. “Statewide Information Technology 2012–2014 Strategic Plan,” Delaware Department of Technology and Infor- mation, http://dti.delaware.gov/pdfs/strategicplan/Dela ware-Statewide-IT-Strategic-Plan.pdf, September 2012.

16. Nash, “The Great Schism.” 17. “City of Seattle Enterprise Information Technology Stra-

tegic Plan 2012–2014,” City of Seattle, www.seattle.gov /Documents/Departments/InformationTechnology/RFP

/SOHIPRFPAppendixCEnterpriseITStrategic Plan20122014.pdf, accessed September 16, 2014.

18. Nash, “The Great Schism.” 19. May, Thornton, “A Strategy for Strategy: Figuring Out

How to Figure Out What IT Should Do Next,” Compu- terworld, September 2, 2014, www.computerworld.com /article/2600346/it-management/a-strategy-for-strategy -figuring-out-how-to-figure-out-what-it-should-do-next .html.

20. Nash, “The Great Schism.” 21. “GAF Creates First Ever Virtual Home Remodeler App

with ‘Instantaneous’ Roof Mapping Feature,” GAF, www.gaf.com/About_GAF/Press_Room/Press_Releases /65077248, accessed September 3, 2014.

22. Hastie, Shane and Wojewoda, Stéphane, “Standish Group 2015 Chaos Report—Q&A with Jennifer Lynch,” InfoQ (blog), October 24, 2015, www.infoq.com/articles /standish-chaos-2015.

23. Hamel, Gary and Prahalad, C.K., “The Core Competence of the Corporation,” Harvard Business Review, vol. 68, no. 3, pp. 79–93, May–June 1990.

24. Krigsman, Michael, “California Abandons $2 Billion Court Management System,” ZDNet, April 2, 2012, www .zdnet.com/blog/projectfailures/california-abandons -2-billion-court-management-system/15363.

25. Brino, Anthony, “CGI to Build Vermont’s HIX,” Govern- ment Health IT, December 20, 2012, www.govhealthit .com/news/vermont-sign-hix-it-contract-cgi.

26. Stein, Andrew, “Builder of State’s Health Care Exchange Misses Key Deadlines,” VTDigger.org (blog), September 27, 2013, http://vtdigger.org/2013/09/27/builder-states -health-care-exchange-misses-key-deadliness.

27. Goswami, Neal P., “State, CGI Sign Amended Contract with New Timetable and Penalties,” Vermont Press Bureau, April 3, 2014, www.vermontpressbureau.com /2014/04/03/state-cgi-sign-amended-contract-with-new -timeline-and-penalties.

28. True, Morgan, “CGI Misses Vermont Health Connect Deadline Again,” VermontBiz, May 21, 2014, www.ver montbiz.com/news/may/cgi-misses-vermont-health-con nect-deadline-again.

29. Remsen, Nancy, “Health Site Contractor Misses Deadline, Again,” Burlington Free Press, June 10, 2014, www.bur lingtonfreepress.com/story/news/local/2014/06/06 /health-site-contractor-misses-deadline/10090537.

30. Parker, Bruce, “Vermont Fires Creator of Its ‘Unaccept- able,’ Glitchy ObamaCare Site,” Fox News, August 5, 2014, www.foxnews.com/politics/2014/08/05/vermont -fires-creator-its-unacceptable-glitchy-obamacare-site.

31. Browning, Lynnley, “Thanks for Nothing: Obamacare Website Bunglers Fired,” Newsweek, August 6, 2014, www.newsweek.com/thanks-nothing-obamacare -website-bunglers-fired-263205.

32. Fitzpatrick, Alex, “Apple Has an iPhone Headache, But It Won’t Last Long,” Time, September 24, 2014, http://time .com/3426561/apple-iphone-6-plus-ios-8-problems.

500 PART 4 • Planning, Acquiring, and Building Systems

33. Brown, James, “6 Things to Remember When Projects Spiral Out of Control,” SAP Community Network, September 27, 2013, http://scn.sap.com/community /it-management/blog/2013/09/27/6-things-to-remember -when-projects-spiral-out-of-control.

34. Tuckman, Bruce, “Developmental Sequence in Small Groups,” Psychological Bulletin, Volume 63, pages 384–389, 1965.

35. “Lead Integrator Atos Successfully Completes Delivery of World’s Biggest IT Sports Contract for Sochi 2014 Games,” Atos, February 24, 2014, http://webcache.goo gleusercontent.com/search?q=cache:IcukDP1ZdWYJ: http://atos.net/en-us/home/we-are/news/press-release /2014/pr-2014_02_24_02.html.

CHAPTER 11 • Strategic Planning and Project Management 501

CHAPTER

12 System Acquisition and Development

master_art/Shutterstock.com

Know?Did Yo u

• Amazon is contemplating entering into competition with FedEx and UPS to deliver products directly to its customers by creating a global delivery network, with the goal of dramatically cutting costs and speeding delivery. Amazon is facing a major development effort to build the information systems to support this plan.

• The waterfall approach to system development allows for a high degree of management control. It is for this reason that this 50-year-old approach is frequently followed when an organization contracts with another to build its information system, even though the agile software development is often faster and can lead to higher quality results.

Principles Learning Objectives

• Organizations can obtain software using one of two basic approaches: buy or build.

• Identify the pros and cons associated with both buying and building software.

• A system under development following the waterfall approach moves from one phase to the next, with a management review at the end of each phase.

• Identify the advantages and disadvantages of the waterfall approach to system development.

• Identify and state the goal of each of the six phases of the waterfall approach.

• Identify and briefly describe the primary tools and techniques used during system development.

• Define five types of feasibility that must be assessed.

• Identify the purpose and participants involved in various types of testing from unit testing to user acceptance testing.

• Identify three approaches for system cutover.

• Agile development is an iterative system devel- opment process that develops a system in “sprint” increments lasting from two weeks to two months.

• Describe the agile development process.

• Identify the advantages and disadvantages of the agile system development approach.

• Describe the role of the scrum master and prod- uct owner in the scrum framework.

• Discuss extreme programming (XP) and DevOps.

• When buying off-the-shelf software, the effort required to modify the software package as well as existing software so that they work well together must be taken into account as a major factor in selecting the final vendor and software.

• Outline a process for evaluation and selection of a software package.

• Identify the key factors to be considered in selecting a software package.

Why Learn about System Acquisition and Development? Throughout this book, you have seen many examples of the use of information systems to support organizations and people in a variety of careers. But where does an organization start when looking to acquire or develop these systems? And how can you work with IS personnel, such as system analysts and computer programmers, to get the information systems that you need to succeed on the job or in your own business? This chapter provides the answers to these questions along with specific examples of how new or modified systems are initiated, analyzed, designed, constructed, tested, and implemented in a number of industries. We start with a discussion of the forces that lead an organization to acquire new software and then move on to an overview of the two basic approaches to acquiring software.

As you read this chapter, consider the following:

• What options exist for organizations to acquire or develop an information system?

• What role should end users and other stakeholders play in the acquisition or development of a new system?

Buy versus Build

Organizations continue to spend considerable time and resources developing and acquiring software to support a wide range of applications, including business intelligence and analytics; e-commerce, enterprise level functions, and mobile apps. Opportunities and problems that frequently trigger the initi- ation of an information system project include the following:

● Organizations may pursue opportunities to use information systems to support a key organization strategy or to seize a significant, and ideally long-term, competitive advantage. Amazon is evaluating just such a move—it is contemplating entering into competition with FedEx and UPS to deliver products directly to its customers. Such an aggressive supply chain move would create a global delivery network controlling the flow of goods from factories around the world to customer doorsteps in Boston, Los Angeles, or anywhere—cutting costs and speeding delivery. Major changes in information systems and business processes at Amazon will be necessary to support this plan.1

● Pressure to increase profitability and improve operational efficiencies often drives organizations to implement new approaches and technology. NBTY, Inc., a manufacturer of vitamins and nutritional supplements, has been conducting a multiyear business transformation focused on achieving oper- ational efficiency and productivity gains to meet challenging financial tar- gets mandated by NBTY’s parent Carlyle Group. The company implemented custom software to enable architects, construction workers, and contractors to quickly share information and cut the time required to remodel a Vitamin World store in half. NBTY is reapplying lessons learned from that experience to automate business processes and boost operational efficiencies for its Puritan’s Pride and Holland & Barrett brands.2

● The availability of new technology can create an opportunity to offer new services or attract new customers. Walgreens was an early adopter of mobile technology and developed a mobile app that enables customers to print photos, order prescription refills, and earn points toward future pur- chases. Walgreens went beyond these basics by allowing more than 240 third-party software providers to integrate with the company’s mobile application through APIs. Now customers can manage their medication

504 PART 4 • Planning, Acquiring, and Building Systems

schedules from their Apple Watches and earn and redeem points using Apple Pay.3

Organizations can obtain software using one of two basic approaches: buy or build. Buying off-the-shelf software is less risky and leads to quicker deploy- ment; however, maintenance and support costs may become expensive with this approach, and the software may not be an exact match to the needs and work processes of the organization. Building custom software can provide a better match to the current work processes and provide a potential competitive advantage; however, software development can be extremely costly, and it can take months or even years to develop custom software. The advantages and disadvantages of these two approaches are summarized in Table 12.1.

Buying existing software developed by a software manufacturer enables an organization to test drive and evaluate it before making a major commit- ment to purchase it and install it. Once purchased, the existing software can be installed with minimal disruption (ideally) so that user needs can be quickly met and the organization can begin reaping the benefits from the information system. Software buyers do not actually own the software, nor can they access it to make changes or improvements; they are simply licensed to use the software on a computer. With no access to the underlying source code, user organizations must pay maintenance and support costs to the man- ufacturer or to a third party authorized to fix bugs or add new functionality. For some organizations, these costs can become excessive. As a result, many organizations are turning to open source software with access to the source code permitted so that it can be studied, changed, and improved by the orga- nization’s own software professionals—with no maintenance charges. Indeed, the amount and quality of support for open source software is dependent on whether or not there are people, resources, and interest among the organiza- tions using the software to develop updates and fix bugs.

The set of activities involved in building information systems to meet users’ needs is called system development. System development projects can range from small to very large and are conducted in fields as diverse as nuclear science research and video game development. If an organization elects to build a system, it can use its own employees (perhaps augmented with contractors) to develop the system, or it can hire an outside company to manage and/or perform all of the system development work. The latter approach allows an organization to focus on what it does best, by delegating software development to companies that have world-class development capa- bilities. This can be important since the system development efforts for even

TABLE 12.1 The pros and cons of buying versus building software Strategy Pros Cons

Buy A software solution can be acquired and deployed relatively quickly. An organization can “test drive” software before acquiring it.

Unmodified, the software may not be a good match to an organization’s needs. Maintenance and support costs can become excessive.

Build Customized software is more likely to be a good match to an organization’s needs. A custom application provides the potential to achieve com- petitive advantage.

The cost to build a system can be quite high compared to the cost of purchasing off- the-shelf software. Customized software can take months or even years to deploy.

CHAPTER 12 • System Acquisition and Development 505

relatively small projects can require months, with large projects requiring years of effort. Unfortunately, in spite of everyone’s best efforts, a significant number of large system development projects are likely to fail.

Organizations can use several different approaches when developing their own software. Two of those—the waterfall and agile software development processes—are discussed in the next section, followed by a discussion of a process to follow when purchasing off-the-shelf software.

Waterfall System Development Process

The waterfall system development process is a sequential, multistage system development process in which work on the next stage cannot begin until the results of the current stage are reviewed and approved or modified as neces- sary. It is referred to as a waterfall process because progress is seen as flowing steadily downward (like a waterfall) through the various phases of develop- ment. The phases of the waterfall system development process can vary from one company to the next, but many organizations use an approach with six phases: investigation, analysis, design, construction, integration and testing, and implementation. Once the system is built, organizations complete the addi- tional steps of operation, maintenance, and disposition. See Figure 12.1.

As shown in Figure 12.1, a system under development moves from one phase of the waterfall process to the next. At the end of each phase, a review is conducted to ensure that all tasks and deliverables associated with that phase were produced and that they are of good quality. In addition, at the end of each phase, the overall project scope, costs, schedule, and benefits associated

Investigation

Analysis

Design

Construction

Integration & testing

Implementation

FIGURE 12.1 Waterfall system development process Progress flows steadily downward (like a waterfall) through the various phases of development.

waterfall system development process: A sequential, multistage system development process in which work on the next stage cannot begin until the results of the current stage are reviewed and approved or modified as necessary.

506 PART 4 • Planning, Acquiring, and Building Systems

with the project are reviewed to ensure that the project is on track and worth completing. As a result, the waterfall approach allows for a high degree of man- agement control. It is for this reason that this approach is frequently followed when an organization contracts with another to build its information system. However, a major problem with this approach is that users do not interact with the solution until the integration and testing phase when the system is nearly complete. This can lead to a mismatch between system capabilities, users’ expectations, and organizational needs. Table 12.2 lists additional advantages and disadvantages of the waterfall system development process.

The Energy Information Administration (EIA) serves as an advisor to the U.S. Department of Energy and is responsible for collecting energy data, con- ducting analysis, and making forecasts about future energy inventories, demand, and prices. Since 2011, EIA has spent close to $20 million on its IT Transformation Project, a major system development effort designed to enhance efficiencies within the agency. However, the program has been mired in poor project management and has failed to produce any significant results or benefits.4 This project obviously would have benefitted from a higher degree of management control.

System Investigation System investigation is the initial phase in the development of a new or modified business information system whose purpose is to gain a clear under- standing of the specifics of the problem to solve or the opportunity to address. What is the scope of the problem? Who is affected and how? How often does this occur? After gaining a good understanding of the problem, the next ques- tion is, “Is the problem worth addressing?” Given that organizations have lim- ited resources—people and money—this question deserves careful attention. What are the potential costs, both the one-time initial costs and recurring costs? What risks are associated with the project? If successful, what benefits, both tangible and intangible, will the system provide? The steps of the investi- gation phase are outlined next and discussed on the following pages:

1. Review system investigation request. 2. Identify and recruit team leader and team members. 3. Develop budget and schedule for investigation. 4. Perform investigation.

TABLE 12.2 Advantages and disadvantages of waterfall system development process

Advantages Disadvantages

Formal review at the end of each phase allows maximum management control.

Users get a system that meets the needs as understood by the developers; however, this might not be what the users really needed.

This approach requires creation of considerable system documentation so that system requirements can be traced back to stated business needs.

Often, user needs go unstated or are miscommunicated or misunderstood.

Approach produces many intermediate products that can be reviewed to mea- sure progress toward developing the system.

Users can’t easily review intermediate products and evaluate whether a par- ticular product (e.g., a data-flow dia- gram) will lead to a system that meets their business requirements.

system investigation: The initial phase in the development of a new or modified business information system whose purpose is to gain a clear understanding of the specifics of the problem to solve or the opportunity to address.

CHAPTER 12 • System Acquisition and Development 507

5. Perform preliminary feasibility analysis. 6. Prepare draft of investigation report. 7. Review results of investigation with steering team.

Review System Investigation Request Because system development requests can require considerable time and effort to investigate, many organizations have adopted a formal procedure for initiating a system investigation. Ideally, a system investigation request is com- pleted by members of the organization that will be most affected by the new or modified system. This request typically includes the following information:

● A preliminary statement of the problem or opportunity to be addressed (this will be refined during the course of the investigation)

● A brief discussion of how this effort aligns with previously defined com- pany and organization objectives, goals, and strategies

● Identification of the general areas of the business and business processes to be included in the scope of the study (e.g., the handling of customer discounts in the order-processing system)

The information in the system request helps senior management rational- ize and prioritize the activities of the IS department and decide which investi- gation projects should be staffed. Based on the overall IS plan, the organization’s needs and goals, and the estimated value and priority of the proposed projects, managers make decisions regarding which system investi- gation requests will be approved.

Identify and Recruit Team Leader and Team Members After managers grant approval to initiate a system investigation, the next step is to identify and recruit a person who will lead the investigation phase, fol- lowed by the other members of the investigation team. The members of the investigation team are responsible for gathering and analyzing data, preparing an investigation phase report, and presenting the results to the project steer- ing team. The system investigation team can be quite diverse, often with members located around the world. Business knowledge of the areas under study, communication, and collaboration are keys to successful investigation teams. Members of the development team may change as a project moves through the various development phases, depending on the knowledge, expe- rience, and skills required during each phase.

Develop Budget and Schedule for Investigation After the team has been formed, its members work together to develop a list of specific objectives and activities that must be accomplished during the system investigation phase along with a schedule for completing the work. The team establishes major milestones to help monitor progress and determine whether problems or delays occur in performing system investigation. The group also prepares a budget to complete the investigation including any travel required and funds necessary to cover the use of any outside resources or consultants.

Perform Investigation The major tasks to perform during investigation include refining the initial problem definition and scope described in the system investigation request, identifying the high-level business requirements the system must meet, and identifying any issues or risks associated with the project.

Joint Application Development Joint application development (JAD) is a structured meeting process that can accelerate and improve the efficiency and effectiveness of not only the investigation phase but also the analysis and

joint application development (JAD): A structured meeting process that can accelerate and improve the efficiency and effectiveness of the investigation, analysis, and design phases of a system development project.

508 PART 4 • Planning, Acquiring, and Building Systems

design phases of a system development project. JAD involves carefully planned and designed meetings in which users, stakeholders, and IS profes- sionals work together to analyze existing systems, define problems, identify solution requirements, and propose and evaluate possible solutions including costs and benefits. See Figure 12.2. The JAD process has proven to be extremely effective and efficient at accomplishing these tasks. In addition, the highly participative nature of the sessions goes a long way to helping ensure stakeholders and users buy into the results. With today’s technology, such as group decision support systems and video conferencing, it is possible to con- duct effective live JAD sessions with people located in many different places without the need for expensive travel.

The success or failure of a JAD session depends on how well the JAD facilitator plans and manages the session. It is not unusual for the facilitator to spend three hours planning and preparing for the JAD session for each hour the JAD session lasts. In addition, the participants of a JAD session must be carefully chosen to include users of the system as well as people from other organizations who will likely be affected by, provide input for, or receive output from the system. Ideally, people from the operational level as well as the executive level will attend. Table 12.3 identifies the JAD session participants as well as their role and qualifications.

The consulting firm Liquid Mercury Solutions uses JAD in working with its clients on a routine basis to define and develop information system solutions.5

Functional Decomposition Functional decomposition is a technique that involves breaking down a complex problem or system into smaller parts that are more manageable and easier to understand. It is frequently used during the investiga- tion phase to define the business processes included within the scope of the system. Recall that a process is a set of logically related tasks performed to achieve a defined outcome. A process is usually initiated in response to a spe- cific event and requires input that it processes to create output. Often, feedback is generated that is used to monitor and refine the process.

To create the functional decomposition chart (see Figure 12.3), begin with the name of the system and then identify the highest-level processes to be per- formed. Each process should have a two word “verb-subject” name that clearly

FIGURE 12.2 JAD session JAD can accelerate and improve the efficiency and effectiveness of the investigation, analysis, and design phases of a system development project. wa

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ed ia /S hu tt er st oc k. co m

CHAPTER 12 • System Acquisition and Development 509

defines the process. Next, break those high-level processes down into lower- level subprocesses. For the system investigation phase, two or three levels of decomposition are usually sufficient to define the scope of the system.

Perform Preliminary Feasibility Analysis The technical, economic, legal, operational, and schedule feasibility are assessed during the feasibility analysis, which is only a preliminary analysis that will be repeated with more accuracy during the analysis and design phases, when more details about the system and its requirements are known.

TABLE 12.3 JAD participants and their role Role Responsibilities Qualifications

Facilitator ● Determines JAD session objectives ● Plans JAD session to meet objectives ● Leads JAD session ● Encourages everyone to participate

● Excellent meeting facilitator ● Unbiased and does not take sides

Decision makers

● Resolve conflicts ● Avoid gridlock

● Stakeholders selected by project sponsor to make decisions

● Have the authority and willingness to make decisions

Users ● Describe business as it is and as it should be ● Provide business expertise ● Define problems, identify potential benefits, analyze

existing system, define requirements of a new system, and propose and evaluate possible solutions

● Represent all major areas affected ● Expert in their area of the business

System developers

● Observe carefully ● Offer technical opinion on cost or feasibility, if requested ● Gain deep understanding of customers’ needs and desires

● Member of system development team

Scribe ● Participate in discussion to clarify points and capture them accurately

● Document key points, issues, next steps, and decisions throughout the JAD session

● Publish results of JAD session and solicit feedback

● Excellent listening skills ● Experience in using software

engineering tools to document requirements and create system models

Stock management

system

Manage stock

Check stock

Order stock

Receive stock

Store stock

Add

new supplier

Update supplier

data

Delete supplier

Manage suppliers

FIGURE 12.3 Functional decomposition chart Functional decomposition is used to define the scope of the system.

feasibility analysis: An assess- ment of the technical, economic, legal, operational, and schedule feasibility of a project.

510 PART 4 • Planning, Acquiring, and Building Systems

Technical feasibility examines whether a project is feasible within the current limits of available technology. Determining the technical feasibility is critical when new technology is first being considered for use within an organization, prior to its widespread use. A number of companies are cur- rently participating in a technical feasibility study to determine if advanced positioning signals transmitted from a GPS satellite can be used to control a self-steering robotic tractor to within an accuracy of 5 centimeters. Such accuracy is needed to ensure that the self-steering robotic tractor tires can be guided to run between rows of planted rice without causing damage to the crop.6

Economic feasibility determines whether the expected benefits associ- ated with the project outweigh the expected costs sufficiently to make the project financially attractive. Cost and benefit estimates should be made for multiple years to allow for calculation of the internal rate of return or net present value of the project. It is important to recognize that at this early stage of the development process, the cost and benefit amounts are rough estimates and subject to change should the project continue. So, while the mathematics involved may make it appear that the results are precise, in actu- ality, the result is no more accurate than cash flow estimates, which are often no more than refined guesses. Table 12.4 lists some of the typical costs and benefits that need to be considered.

Organizations must guard against spending more than is appropriate as the success or failure of a system development effort will, at least to some degree, be measured against meeting the project budget. The U.K. Ministry of Defence wasted millions of pounds on a planned £1.3 billion (approximately $2.2 billion) information system designed to enable the army to recruit online. A key benefit to be derived from the project was to increase recruitment levels above historic levels; however, this goal has not been achieved.7

Legal feasibility is the process of determining whether laws or regula- tions may prevent or limit a system development project. Legal feasibility involves an analysis of existing and future laws to determine the likelihood of legal action against the system development project and the possible conse- quences of such action. For example, nearly every country in Europe and many in Latin America, Asia, and Africa have implemented data protection laws that prohibit the disclosure or misuse of information held on private individuals. These laws make it possible for the human resources departments of multinational companies to share personal employee data across country borders only in limited circumstances.

Operational feasibility is the process of determining how a system will be accepted by people and how well it will meet various system performance expectations. Assessing the operational feasibility of a project includes taking into consideration people issues, such as overcoming employee resistance to change, gaining managerial support for the system, providing sufficient moti- vation and training, and rationalizing any conflicts with organizational norms and policies. In other words, if the system is developed, will it be used? Oper- ational feasibility also takes into account the need to meet certain system per- formance requirements (e.g., response time for frequent online transactions, number of concurrent users it must support, reliability, and ease of use) that are considered important to system users and stakeholders.

Schedule feasibility is the process of determining whether a project can be completed within a desired time frame. This process involves balancing the time and resource requirements of the project with other projects. For example, many projects that involve delivering a new financial information system have a desired start-up date at the beginning of the organization’s fis- cal year. Unfortunately, it is not always possible to meet this date, and so a compromise must be made—deliver part of the system at the start of the fiscal year or wait another year to deliver the full system.

technical feasibility: The process of determining whether a project is feasible within the current limits of available technology.

economic feasibility: The process of determining whether the project makes financial sense and whether predicted benefits offset the cost and time needed to obtain them.

legal feasibility: The process of determining whether laws or regula- tions may prevent or limit a system development project.

operational feasibility: The pro- cess of determining how a system will be accepted by people and how well it will meet various system performance expectations.

schedule feasibility: The process of determining whether the project can be completed within a desired time frame.

CHAPTER 12 • System Acquisition and Development 511

TABLE 12.4 Cost/benefit table Costs Year 1 Year 2 Year … Year N

Costs to analyze, design, construct, integrate and test, and implement system

Employees

Vendor

Software customization

Travel

Hardware costs

Software tools costs

Other costs

Initial costs to establish system

Software license fees

New hardware costs

Cost to upgrade existing hardware

Cost to upgrade network

User training

Purchase of any necessary data

Cost to migrate existing data to new system

Other costs

Ongoing operations costs

Software lease or rental fees

Hardware lease or rental fees

Network usage fees

System operations and support staff

User training

Increased electric and other utilities

Costs associated with disaster recovery

Other costs

Tangible benefits (can be quantified in dollars)

Reduction in current costs

Reduction in current staff

Reduction in inventory levels

Reduction in computer hardware costs

Reduction in software costs

Other reduced costs

Increase in revenue

Increase in sales from reaching new customers

Increase in sales from charging more

Acceleration in cash flow

Other increases in revenue

Intangible benefits (difficult to quantify in dollars)

Improved customer service

Improved employee morale

512 PART 4 • Planning, Acquiring, and Building Systems

Prepare Draft of Investigation Report The system investigation ends with production of a system investigation report that summarizes the results of the system investigation and recom- mends a course of action: continue on to system analysis, modify the project in some manner and perhaps repeat the system investigation, or drop the project altogether. See Figure 12.4. A typical table of contents for a system investigation report is shown in Figure 12.5.

Review Results of Investigation with Steering Team The system investigation report is reviewed with the steering team to gain their input and counsel. Typically, the written report is shared in advance and then the project manager and selected members of the team meet with the steering team to present their recommendations.

After the project review, the steering team might agree with the recom- mendations of the system development team or it might suggest a change in project focus to concentrate more directly on meeting a specific company objective. Another alternative is that everyone might decide that the project is

FIGURE 12.4 System investigation recommendation The system investigation report summarizes the results of the system investigation and recommends a course of action.

Drop project

Continue Redefine project and

redo investigation

Systems Investigation Report

Table of Contents

EXECUTIVE SUMMARY

DESCRIPTION OF OPPORTUNITY

PROJECT SCOPE

BUSINESS REQUIREMENTS

ISSUES AND CONSTRAINTS

FEASIBILITY ANALYSIS

RECOMMENDATION

NEXT STEPS

FIGURE 12.5 Table of contents for a system investigation report A typical system investigation report begins with an executive summary and ends with a list of next steps.

system investigation report: A summary of the results of the system investigation, with a recommendation of a course of action.

CHAPTER 12 • System Acquisition and Development 513

not feasible and thus cancel the effort. This input is used to finalize the sys- tem investigation report.

System Analysis After a project has completed the investigation phase and been approved for fur- ther study, the next step is to answer the question, “What must the information system do to solve the problem or capitalize on the opportunity?” The overall emphasis of the system analysis is on gathering data on the existing system, determining the requirements for the new system, considering alternatives within identified constraints, and investigating the feasibility of alternative solutions. The primary outcome of system analysis is a prioritized list of system requirements and a recommendation of how to proceed with the project. The steps in the sys- tem analysis phase are outlined next and discussed in the following pages. Note that many of the steps were also performed during system investigation:

1. Identify and recruit team leader and team members. 2. Develop budget and schedule for system analysis activities. 3. Study existing system. 4. Develop prioritized set of requirements. 5. Identify and evaluate alternative solutions. 6. Perform feasibility analysis. 7. Prepare draft of system analysis report. 8. Review results of system analysis with steering team.

The Los Angeles Police Department (LAPD) is comprised of over 9,000 offi- cers and serves 3.9 million residents spread across the 485 square miles of the city of Los Angeles. LAPD conducted a system analysis to define the require- ments for a Use of Force System (UOFS) to monitor officer performance and behavior. The UOFS collects information about each use of force incident including suspect, officer, and witness data. The application applies a series of business rules that trigger a review and investigation into the use of force by appropriate parties, often by multiple levels of LAPD management.8

Identify and Recruit Team Leader and Team Members In many cases, there is some personnel turnover when a project moves from the system investigation phase to the system analysis phase. Some players may no longer be available to participate in the project, and new members with a different set of skills and knowledge may be required. So, the first step in system analysis is to identify and recruit the team leader and members. Ideally, some members of the original investigation team will participate in the system analysis to provide project continuity.

Develop Budget and Schedule for System Analysis Activities After the participants in the system analysis phase are determined, the team develops a list of specific objectives and activities required to complete the system analysis. The team also establishes a schedule—complete with major milestones to track project progress. The group also prepares a budget of the resources required to complete the system analysis, including any required travel expenses as well as funds to cover the use of outside resources.

Study Existing System The purpose of studying the existing system is to identify its strengths and weaknesses and examine current inputs, outputs, processes, security and con- trols, and system performance. While analysis of the existing system is impor- tant to understanding the current situation, the study team must recognize that after a point of diminishing returns, further study of the existing system will fail to yield additional useful information.

system analysis: The phase of system development that focuses on gathering data on the existing system, determining the requirements for the new system, considering alternatives within identified constraints, and investigating the feasibility of alternative solutions.

514 PART 4 • Planning, Acquiring, and Building Systems

Many useful sources of information about the existing system are avail- able, as shown in Figure 12.6. JAD sessions, direct observation with one or more members of the analysis team directly observing the existing system in action, and surveys are often used to uncover pertinent information from the various sources.

Develop Prioritized Set of Requirements The purpose of this step is to determine user, stakeholder, and organizational needs for the new or modified system. A set of requirements must be deter- mined for system processes (including inputs, processing, outputs, and feed- back), databases, security and controls, and system performance. See Figure 12.7. As requirements are identified, an attempt is made to prioritize each one by using the following categories:

● Critical. Almost all users agree that the system is simply not acceptable unless it performs this function or provides this capability. Lack of this feature or capability would cause users to call a halt to the project.

● Medium priority. While highly desirable, most users agree that although their work will be somewhat impaired, the system will still be effective without this feature or capability. Some users may argue strongly for this feature or capability but, in the end, would want the project to continue even without this capability.

● Low priority. Most users agree that their ability to use the system to accomplish their work will only be minimally impaired by lack of this feature or capability, although it would be “nice to have.” Almost no user argues strongly for this feature or capability.

Identifying, confirming, and prioritizing system requirements is perhaps the single most critical step in the entire waterfall system development pro- cess because failure to identify a requirement or an incorrect definition of a requirement may not be discovered until much later in the project, causing much rework, additional costs, and delay in the system effort.

The use of JAD sessions with a cross section of users and stakeholders in the project is an effective way to define system requirements. A technique often used in a JAD session is to ask managers and decision makers to list only the factors that are critical to the success of their areas of the organization.

FIGURE 12.6 Internal and external sources of data for system analysis JAD sessions, direct observation, and surveys are often used to uncover data from the various sources.

Internal

Sources

Users, stakeholders,

and managers

Organization

charts

Forms and

documents

Procedure manuals

and policies

Financial

reports

IS manuals

Other measures of

business process

External

Sources

Customers

Suppliers

Stockholders

Government

agencies

Competitors

Outside groups

Journals, etc.

Consultants

CHAPTER 12 • System Acquisition and Development 515

A critical success factor (CSF) for a production manager might be adequate raw materials from suppliers, while a CSF for a sales representative could be a list of customers currently buying a certain type of product. Starting from these CSFs, the processes, databases, security and control, and performance require- ments associated with each CSF can be identified.

Processes The functional decomposition performed during the investigation phase identifies the majority of the processes to be included within the scope of a new system. Now, the processes must be further defined so that they will be practical, efficient, economical, accurate, and timely to avoid project delays. In addition, the individuals or organizations responsible for complet- ing each step in the process must be identified.

A process requires input that it uses to create output. Often, feedback is generated. The questions that need to be answered during system analysis are: what data entities are required, where will this data come from, what methods will be used to collect and enter the data, who is responsible for data input, and what edits should be performed on the input data to ensure that it is accurate and complete? Another important consideration is the crea- tion of an audit trail that records the source of each data item, when it entered the system, and who entered it. The audit trail may also need to capture when the data is accessed or changed and by whom.

Because the success of a new system is highly dependent upon the acceptability of its output, the identification of common system outputs—such as printed reports, screens, and files—is critical to developing a complete set of system requirements.

Data-Flow Diagram A data-flow diagram (DFD) is a diagram used during both the analysis and design phases to document the processes of the current system or to provide a model of a proposed new system. A DFD shows not only the various processes within the system but also where the data needed for each process comes from, where the output of each process will be sent, and what data will be stored and where. The DFD does not provide any infor- mation about the process timing (e.g., whether the various processes happen in sequence or are parallel).

DFDs are easy to develop and are easily understood by nontechnical peo- ple. Data-flow diagrams use four primary symbols:

● The data-flow line includes arrows that show the direction of data movement.

FIGURE 12.7 Defining system requirements System requirements must be checked for consistency so that they all fit together.

Processes Databases

Security and controls

System performance

data-flow diagram (DFD): A dia- gram used during both the analysis and design phases to document the processes of the current system or to provide a model of a proposed new system.

516 PART 4 • Planning, Acquiring, and Building Systems

● The process symbol identifies the function being performed (e.g., check status, issue status message).

● The entity symbol shows either the source or destination of the data (e.g., customer, warehouse).

● A data store symbol reveals a storage location for data (e.g., pending orders, accounts receivable).

Figure 12.8 shows a level 1 DFD. Each of the processes shown in this dia- gram could be documented in more detail to show the subprocesses and cre- ate a level 2 DFD. Frequently, level 3 DFD diagrams are created and used in the analysis and design phases.

Databases Data modeling is the process of defining the databases that a sys- tem will draw data from as well as any new databases that it will create. The use of entity-relationship (ER) diagrams is one technique that is frequently used for this critical step. An ER diagram is used to show logical relationships among data entities, such as in Figure 12.9. An ER diagram (or any other modeling tool) cannot by itself fully describe a business problem or solution

CUSTOMER WAREHOUSE

ACCOUNTING

1.0

In-stock requestOrder

Status

message

Status data

Shipping

order

Pending

orders

Payment

Accounting data

Accounts

receivable Inventory

reports

Accounts receivable data

Invoice

Shipping

confirmation

Order

data

Order data

Check

status

3.0

Generate

shipping

order

2.0

Issue

status

messages

4.0

Manage

accounts

receivable 5.0

Produce

reports

FIGURE 12.8 Data-flow diagram A data-flow diagram documents the processes of the current system or provides a model of a proposed new system.

CHAPTER 12 • System Acquisition and Development 517

because it lacks descriptions of the related activities. It is, however, a good place to start because it describes entity types and attributes about which data might need to be collected for processing.

Security and Control Security and control considerations need to be an integral part of the entire system development process. Unfortunately, they are often treated as an afterthought, after system requirements have been defined and system design is well underway. This approach usually leads to problems that become security vulnerabilities, which can cause major security breaches resulting in significant legal and system modification expenses. A more effec- tive and less costly approach is to define security and control requirements when other system requirements are being identified. The following list pro- vides examples of areas for which security and control requirements might need to be defined:9

● Access controls, including controls to authenticate and permit access only to authorized individuals

● Encryption of electronic customer information, including while in transit or in storage on networks or systems to which unauthorized individuals may have access

● Dual control procedures, segregation of duties, and employee background checks for employees with responsibilities for or access to customer, employee, or organization-sensitive information

● Monitoring systems and procedures to detect actual and attempted attacks on or intrusions into information systems

● Measures to protect against destruction, loss, or damage of customer, employee, or organization-sensitive data due to potential environmental hazards, such as fire and water damage, technological failures, or disas- ters such as hurricanes and terrorism

● Business resumption procedures to get the system up and running with no major business disruption and with no loss of data in the event of a disaster (e.g., fire, hurricane, terrorism)

People with a special interest in security and control include the organiza- tion’s internal auditors and members of senior management. They should pro- vide input and advice during the system analysis and design phases.

System security and control requirements need to be defined in the con- text of the organization’s existing policies, standards, and guidelines. See

FIGURE 12.9 Entity-relationship (ER) diagram for a customer order database Development of ER diagrams helps ensure that the logical structure of application programs is consistent with the data relationships in the database.

Serves

Salesperson

Product

Customer

Orders

Places

Line items

Includes Specifies

Invoice

Generates

518 PART 4 • Planning, Acquiring, and Building Systems

Figure 12.10. For example, the Gramm–Leach–Bliley Act requires companies legally defined as financial institutions to ensure the security and confidentiality of customer information. Thus, financial institutions have established policies, standards, and guidelines to which any new information system must adhere.

System Performance How well a system performs can be measured through its performance requirements. Failure to meet these system performance requirements results in unproductive workers, dissatisfied customers, and missed opportunities to deliver outstanding business results. System perfor- mance is usually determined by factors such as the following:

● Timeliness of output. Is the system generating output in time to meet organizational goals and operational objectives? Since GEICO began advertising that you can save 15 percent on auto insurance in just 15 min- utes, speed has become a key factor for many consumers in selecting an insurance company. Nationwide now touts its online tool as the fastest path to a quick car insurance quote, and The General insurance company boasts, “Give us two minutes and we’ll give you an auto insurance quote.”

● Ease of use. Developing applications that managers and employees can easily learn and use is essential to ensure that people will work with the applications productively.

● Scalability. A scalable information system can handle business growth and increased business volume without a noticeable degradation in performance.

● System response time. The average response time for frequent online transactions is a key factor in determining worker productivity and cus- tomer service.

● Availability. Availability measures the hours per month the system is scheduled to be available for use. Systems typically must be unavailable a few hours a week to allow for software upgrades and maintenance.

● Reliability. Reliability measures the hours the system is actually available for use divided by the hours the system is scheduled to be available and is expressed as a percentage. Worker productivity decreases and customer dissatisfaction increases as system reliability decreases.

Identify and Evaluate Alternative Solutions The analysis team must think creatively and consider several system solution options. By looking at the problem in new or different ways, questioning cur- rent assumptions and the way things are done today, and removing current

FIGURE 12.10 Context for new system security and control requirements New system security and control requirements must be developed within the organization’s existing policies, standards, and guidelines.

• Corporate policies that define what

actions to take and why

• Baseline requirements

that must be met by

information systems

• Best practices to

implement a security

measure

• Descriptions of new

security and control

measures to implement

for this system

Guidelines

Standards

Policy

New system requirements

CHAPTER 12 • System Acquisition and Development 519

constraints and barriers, the team is free to identify highly creative and effec- tive information system solutions. Such critical analysis requires unbiased and careful questioning of whether system elements are related in the most effec- tive ways, considering new or different relationships among system elements, and possibly introducing new elements into the system. Critical analysis also involves challenging users about their needs and determining which are truly critical requirements rather than “nice to have” features.

The Pareto principle (also known as the 80–20 rule) is a rule of thumb used in business that helps people focus on the vital 20 percent that generate 80 percent of the results. This principle means that 80 percent of the desired system benefits can be achieved by implementing 20 percent of the system requirements. An 80–20 option will have a low cost and quick completion schedule relative to other potential options. However, this option may not be an ideal solution and may not even be acceptable to the users, stakeholders, and the steering team who may be expecting more. Additional candidate solu- tions can be defined that implement all or most of the critical priority system requirements and team-selected subsets of the medium and low-priority requirements. Table 12.5 illustrates some of the many potential candidates the analysis team may want to evaluate.

Perform Feasibility Analysis At this stage in the system development process, the project team has identified several promising solutions based on implementing all or most of the critical requirements and various subsets of the medium and low-priority requirements. The feasibility analysis conducted during the investigation phase is repeated for each of the candidate solutions the team wants to consider. At this stage, the analysis can be more in-depth because more is known about the system and its requirements as well as the costs and benefits of the various options.

Prepare Draft of System Analysis Report System analysis concludes with a formal system analysis report summarizing the findings of this phase of the project. The table of contents for a typical system analysis report is shown in Figure 12.11. This report is a more com- plete and detailed version of the system investigation report. At this phase of the project, the costs and benefits of the project should be fairly accurate, cer- tainly more accurate than at the end of the investigation phase.

Review Results of System Analysis with Steering Team The system analysis report is presented to the project steering team with a recommendation to stop, revise, or go forward with the system development project. Following the steering team meeting, the project team incorporates

TABLE 12.5 Additional candidates for system analysis Scope of System Build System Customize Software Package

Build system that meets all critical requirements, but no medium or low-priority requirements

Option #1

Modify package so that it meets all critical requirements, but no medium or low-priority requirements

Option #2

Build system that meets 20 percent of all requirements that will provide 80 percent of the system benefits

Option #3

Modify package so that it meets 20 percent of all requirements that will provide 80 percent of the system benefits

Option #4

Implement software package as is, with no customization to enable it to meet unique requirements

Option #5

Pareto principle (80–20 rule): An observation that for many events, roughly 80 percent of the effects come from 20 percent of the causes.

520 PART 4 • Planning, Acquiring, and Building Systems

the recommendations and suggested changes into the final report. It is not unusual for changes to the project scope, budget, benefits, or schedule to be requested based on the findings from the analysis phase. However, the proj- ect sponsor and the steering team must request and formally approve of any changes.

System Design The purpose of system design phase is to answer the question, “How will the information system solve this problem?” The primary result of the system design phase is a technical design that details system outputs, inputs, controls, and user interfaces; specifies hardware, software, databases, telecommunica- tions, personnel, and procedures; and shows how these components are inter- related. In other words, system design creates a complete set of technical specifications that can be used to construct the information system. The steps in the system design phase are outlined next and discussed in the following pages. Again, note that many of the steps were performed in the investigation and system analysis phase but are now repeated with more current and com- plete information.

1. Identify and recruit team leader and team members. 2. Develop schedule and budget for system design activities. 3. Design user interface. 4. Design system security and controls. 5. Design disaster recovery plan. 6. Design database. 7. Perform feasibility analysis. 8. Prepare draft of system design report. 9. Review results of system design with steering team.

Identify and Recruit Team Leader and Team Members Because some personnel turnover is likely when moving from the system analysis phase to the system design phase, the first step in system design is to identify and recruit the team leader and members. Ideally, some members of the system analysis team will participate in the system design to ensure project continuity.

Systems Analysis Report

Table of Contents

EXECUTIVE SUMMARY

DESCRIPTION OF OPPORTUNITY

PROJECT SCOPE

BUSINESS REQUIREMENTS

ISSUES AND CONSTRAINTS

SUMMARY OF ALTERNATIVES CONSIDERED

FEASIBILITY ANALYSIS

RECOMMENDATION

NEXT STEPS

FIGURE 12.11 Typical table of contents for a report on an existing system The system analysis report is a more complete and detailed version of the system investigation report.

system design: The stage of system development that answers the question, “How will the information system solve a problem?”

CHAPTER 12 • System Acquisition and Development 521

Develop Schedule and Budget for System Design Activities The system design team begins by developing a list of specific objectives and activities required to complete the system design phase. It also establishes a schedule complete with major milestones to track project progress. Some tasks may involve working with the steering team to resolve issues and ques- tions raised during the review of the system analysis phase. The group also prepares a budget for completing the system design, including any required travel costs and funds to cover the use of outside resources.

Design User Interface How users experience an information system determines whether the system will be accepted and used. In speaking about the importance of user interface design for Apple software products, Jef Raskin, an interface expert, once said, “As far as the customer is concerned, the interface is the product.”10

User interface design integrates concepts and methods from computer sci- ence, graphics design, and psychology to build interfaces that are accessible, easy to use, and efficient. Over the years, various authors have identified user interface design principles, including those listed in Table 12.6.11,12

User interface design must consider a number of components. Most sys- tems provide a sign-on procedure that requires identification numbers, pass- words, and other safeguards to improve security and prevent unauthorized use. With a menu-driven system, users select what they want to do from a list of alternatives. Most people can easily operate these types of systems. In addi- tion, many designers incorporate a help feature into the system or program. When users want to know more about a program or software feature or what type of response is expected, they can activate the help feature. Systems often use lookup tables to simplify and shorten data entry. For example, if you are entering a sales order for a company, you can type its abbreviation, such as ABCO. The program searches the customer table, and looks up the informa- tion you need to complete the sales order for the company abbreviated as ABCO.

Using screen painter software, an analyst can efficiently design the fea- tures, layout, and format of the user interface screens. See Figure 12.12. Sev- eral screens can be linked together to simulate how the user can move from

TABLE 12.6 Principles of good user interface design Principle How to Apply

Strive for consistency Consistent sequences of actions should be required in similar situations; identical terminology should be used in prompts, menus, and help screens; and consistent commands should be employed throughout.

Offer informative feedback

For every user action, there should be some system feedback. For frequent and minor actions, the response can be modest, while for infrequent and major actions, the response should be more substantial.

Offer simple error handling

As much as possible, design the system so the user cannot make a serious error. If an error is made, the system should be able to detect the error and offer simple, comprehensible instruc- tions for handling the error.

One primary action per screen

Every screen should support a single action of real value to the user.

Provide progressive disclosure

Show only what is necessary on each screen. If the user is making a choice, show enough information to allow the user to choose and then display details on a subsequent screen.

Strive for aesthetic integrity

The graphic design elements used in an interface should be simple and clean, pleasant to look at, and easy to understand.

522 PART 4 • Planning, Acquiring, and Building Systems

screen to screen to accomplish tasks. Conducting an interactive screen design session with a few users at a time is an effective process for defining the system user interface.

Design System Security and Controls The system analysis phase identified areas where system security and controls need to be defined. During the design phase, designers must develop specific system security and controls for all aspects of the information system, including hardware, software, database systems, telecommunications, and Internet opera- tions, as shown in Table 12.7. Security considerations involve error prevention, detection, and correction; disaster planning and recovery; and systems controls. The goal is to ensure secure systems without burdening users with too many identification numbers and passwords for different applications.

After the controls are developed, they should be documented in standards manuals that indicate how to implement the controls. The controls should then be implemented and frequently reviewed. It is common practice to mea- sure how often control techniques are used and to take action if the controls have not been implemented. Organizations often have compliance depart- ments to make sure the IS department is adhering to its systems controls along with all local, state, and federal laws and regulations.

Design Disaster Recovery Plan A disaster recovery plan is a documented process to recover an organiza- tion’s business information system assets including hardware, software, data, networks, and facilities in the event of a disaster. It is a component of the organization’s overall business continuity plan, which also includes an occu- pant emergency plan, a continuity of operations plan, and an incident man- agement plan. A disaster recovery plan focuses on technology recovery and identifies the people or the teams responsible to take action in the event of a disaster, what exactly these people will do when a disaster strikes, and the information system resources required to support critical business processes.

Disasters can be natural or manmade, as shown in Table 12.8. In perform- ing disaster recovery planning, organizations should think in terms of not being able to gain access to their normal place of business for an extended period of time, possibly up to several months.

FIGURE 12.12 User interface design Analysts can develop screen mock- ups and simulate how the user moves from screen to screen. Pre

ss m as te r/ Sh ut te rs to ck .c om

disaster recovery plan: A docu- mented process to recover an organi- zation’s business information system assets including hardware, software, data, networks, and facilities in the event of a disaster.

CHAPTER 12 • System Acquisition and Development 523

As part of defining the business continuity plan, organizations conduct a business impact analysis to identify critical business processes and the resources that support them. The recovery time for an information system resource should match the recovery time objective for the most critical busi- ness processes that depend on that resource. Some business processes are more pivotal to continued operations and goal attainment than others. These processes are called mission-critical processes. An order-processing system, for example, is usually considered mission-critical. Without it, the sales orga- nization cannot continue its daily activities, which generate the cash flow needed to keep the business operating.

For some companies, personnel backup can be critical. Without the right number of trained employees, the business process can’t function. For infor- mation system hardware, hot and cold sites can be used as backups. A dupli- cate, operational hardware system that is ready for use (or immediate access to one through a specialized vendor) is an example of a hot site. If the pri- mary computer has problems, the hot site can be used immediately as a backup. However, the hot site must be situated so that it will not be affected by the same disaster. Another approach is to use a cold site, which is a com- puter environment that includes rooms, electrical service, network links, data

TABLE 12.7 Using system controls to enhance security Controls Description

Input controls Maintain input integrity and security; their purpose is to reduce errors while protecting the com- puter system against improper or fraudulent input. Input controls range from using standardized input forms to eliminating data-entry errors and using tight password and identification controls.

Processing controls Deal with all aspects of processing and storage; the use of passwords and user authentication controls, backup copies of data, and storage rooms that have tight security systems are exam- ples of processing and storage controls.

Output controls Ensure that output is handled correctly; in many cases, output generated from the computer system is recorded in a file that indicates the reports and documents that were generated, the time they were generated, and their final destinations.

Database controls Deal with ensuring an efficient and effective database system; these controls include the use of user authentication controls and passwords, without which a user is denied access to certain data and information. Many of these controls are provided by database management systems.

Telecommunications controls

Provide accurate and reliable data and information transfer among systems; network controls include firewalls and encryption to ensure correct communication while eliminating the poten- tial for fraud and crime.

Personnel controls Ensure that only authorized personnel have access to certain systems to help prevent computer-related mistakes and crime; personnel controls can involve the use of user authenti- cation controls and passwords that allow only certain people access to particular data and information. ID badges and other security devices (such as smart cards) can prevent unautho- rized people from entering strategic areas in the information systems facility.

TABLE 12.8 Various disasters can disrupt business operations Intentional Man-Made Disasters Accidental Man-Made Disasters Natural Disasters

Sabotage Auto accident knocks down power lines to a data center

Flood

Terrorism Backhoe digs up a telecommunications line Tsunami

Civil unrest Operator error Hurricane/cyclone

Fire Earthquake

Volcanic eruption

mission-critical process: A pro- cess that plays a pivotal role in an organization’s continued operations and goal attainment.

hot site: A duplicate, operational hardware system that is ready for use (or immediate access to one through a specialized vendor).

cold site: A computer environment that includes rooms, electrical service, telecommunications links, data storage devices, and the like.

524 PART 4 • Planning, Acquiring, and Building Systems

storage devices, and similar equipment. If a primary computer has a problem, backup computer hardware is brought into the cold site, and the complete system is made operational.

Cloud computing has added another dimension to disaster recovery plan- ning. If your organization is hit by a disaster, information systems that are running on the cloud are likely to be operational and accessible by workers from anywhere they can access the Internet. Data is also stored safely and securely at the site of the cloud-computing service provider, which could be hundreds of miles from the organization. On the other hand, if the cloud ser- vice provider is hit by a disaster, it may cause a serious business disruption for your organization even if it is otherwise unaffected by a distant disaster. Thus, part of the evaluation of a cloud service provider must include analysis of the provider’s disaster recovery plans.

Files and databases can be protected by making a copy of all files and databases changed during the last few days or the last week, a technique called incremental backup. This approach to backup uses an image log, which is a separate file that contains only changes to applications or data. Whenever an application is run, an image log is created that contains all changes made to all files. If a problem occurs with a database, an old data- base with the last full backup of the data, along with the image log, can be used to re-create the current database.

Organizations can also hire outside companies to help them perform disaster planning and recovery. EMC, for example, offers data backup in its RecoverPoint product.13 For individuals and some applications, backup copies of important files can be placed on the Internet. Failover is another approach to backup. When a server, network, or database fails or is no longer function- ing, failover automatically switches applications and other programs to a redundant or replicated server, network, or database to prevent an interrup- tion of service. SteelEye’s LifeKeeper and Application Continuous Availability by NeverFail are examples of failover software.14,15 Failover is especially important for applications that must be operational at all times.

Design Database The database provides a user view of data and makes it possible to add and modify data, store and retrieve data, manipulate the data, and generate reports. One of the steps in designing a database involves “telling” the database man- agement system (DBMS) the logical and physical structure of the data and the relationships among the data for each user. Recall that this description is called a schema, and it is entered into the DBMS using a data definition language. A data definition language (DDL) is a collection of instructions and commands that define and describe data and relationships in a specific database.

Another important step in designing the database is to establish a data dictionary, a detailed description of all data used in the database. A data dic- tionary is valuable in maintaining an efficient database that stores reliable information with no redundancy, and it makes it easy to modify the database when necessary. Data dictionaries also help computer and system program- mers who require a detailed description of data elements stored in a database to create the code to access the data. Adhering to the standards defined in the data dictionary also makes it easy to share data among various organizations without the need for extensive data scrubbing and translation.

Perform Feasibility Analysis As a result of the work done during the design phase, the project team has a much better understanding of what it will take to build the system, how it will operate, and what benefits it can deliver. It is appropriate to reassess the technical, economic, legal, operational, and schedule feasibility based on these new learnings.

CHAPTER 12 • System Acquisition and Development 525

Prepare Draft of System Design Report System design concludes with a formal system design report summarizing the findings of this phase of the project. Any changes from the system analysis findings are highlighted and explained. The table of contents for a typical sys- tem design report is shown in Figure 12.13. This report is a more complete and detailed version of the system investigation report.

Review Results of System Design with Steering Team The system design report is presented to the project steering team with a rec- ommendation to stop, revise, or go forward with the system development project. The steering team carefully reviews the recommendations because if the project is to proceed, considerable human and financial resources will be committed and legally binding vendor contracts will be signed. Following the steering team meeting, the project team incorporates the recommendations and changes suggested into the final report.

At the end of the design phase, organizations employing the waterfall system development process freeze the scope and the user and business requirements. Any potential changes that are identified or suggested after this point must go through a formal scope change process. This process requires the organization to assess how the proposed changes affect the project feasibility, cost, and schedule. It may be necessary to rerun cost/ben- efit analyses to ensure that the project is still financially viable. Next, the proposed changes are presented to the project steering team along with their associated costs and schedule impact. The steering team must approve the changes before the project team can begin work to incorporate them into the current design. Frequently, the steering team disapproves changes to ensure that the project is completed without exceeding the current budget and schedule. If the steering team approves the changes, however, the proj- ect team might need to repeat portions of the system analysis and design phases to incorporate the changes.

Construction The system construction phase follows the completion of the system design phase when the project steering team approves of proceeding with the

Systems Design Report

Table of Contents

EXECUTIVE SUMMARY

DESCRIPTION OF OPPORTUNITY

PROJECT SCOPE

BUSINESS REQUIREMENTS

ISSUES AND CONSTRAINTS

SUMMARY OF ALTERNATIVES CONSIDERED

ALTERNATIVE RECOMMENDED

FEASIBILITY ANALYSIS

RECOMMENDATION

NEXT STEPS

FIGURE 12.13 Typical table of contents for a system design report The system design report is a more complete and detailed version of the system investigation report.

526 PART 4 • Planning, Acquiring, and Building Systems

project. System construction converts the system design into an operational system by coding and testing software programs, creating and loading data into databases, and performing initial program testing. These steps are out- lined next and are discussed in the following sections:

1. Code software components. 2. Create and load data. 3. Perform unit testing.

Code Software Components Software code must be written according to defined design specifications so that the system meets user and business needs and operates in the manner the user expects. Most software development organizations use a variety of soft- ware tools to generate program source code that conforms to those specifica- tions. The following list includes a sampling of these types of software tools:

● Some template-driven code generators can create source code automati- cally. CodeSmith Generator is an example of a template-driven code generator that automates the creation of common application source code for several languages (e.g., C#, Java, VB, PHP, ASP.NET, and SQL). The templates are designed to create typical types of business programs. Developers using CodeSmith Generator can modify a template or create a customized template to generate necessary code.16

● Screen painter programs are used to design new data-entry screens for software applications. This easy-to-use software allows developers to create screens by “painting” them and then use “dialog boxes” to define the characteristics of the data that goes in each field.

● Menu-creation software allows users to develop and format menus with features such as color palettes, graphics characters, automatically gener- ated boxes, headings, and system variables.

● Report generator software captures an image of a desired report and generates the code to produce that report based on the database and database schema you are using. In many cases, users can design and code reports with this software.

The Arizona court system, which includes the State Supreme Court, 15 Superior Courts, 85 Municipal, and 76 Limited Jurisdiction courts, decided to use software code generators to code components for a recent systems overhaul. All the courts must coordinate scheduling of court dates, keep track of state- issued citations, and track adults and juveniles on probation. Over time, the Arizona courts developed a number of systems using various programming lan- guages, making it difficult to modify programs to keep up with changes in the law. The court system is now rewriting many of its applications and standardiz- ing on the Microsoft ASP.NET architecture. The courts are using a software code generator called Visible Developer to generate 85 to 90 percent of the code.17

An organization also needs useful software documentation to accompany the software code. Technical documentation includes written details that computer operators follow to execute the program and that analysts and pro- grammers use to solve problems or modify the program. Technical documen- tation explains the purpose of every major piece of computer code. It also identifies and describes key variables.

User documentation is developed for the people who use the system. In easy-to-understand language, this type of documentation shows how the pro- gram can and should be used to perform user tasks. Linx Software produces LinxCRM, a customer relationship management system. The company imple- mented special software to help it create high-quality user documentation including annotated screen shots from the system. Linx also created a video to help train users.18

system construction: The phase of system development that converts the system design into an operational system by acquiring and installing hardware and software, coding and testing software programs, creating and loading data into databases, and performing initial program testing.

technical documentation: Written details used by computer operators to execute the program and by analysts and programmers to solve problems or modify the program.

user documentation: Written descriptions developed for people who use a program; in easy-to-understand language, it shows how the program can and should be used to meet the needs of its various users.

CHAPTER 12 • System Acquisition and Development 527

Create and Load Data This step of the construction phase involves making sure that all files and databases are populated and ready to be used with the new information sys- tem. Data for the initial loading of a new database may come from several sources—the old files or database of the system being replaced, from files of other systems used in the organization, or from data sources purchased from an outside organization. In any case, it may be necessary to write at least one new program to read the old data from these sources, reformat the data into a format compatible with the database design of the new system, and then merge these data sources together. Another program may be needed to edit the merged data for accuracy and completeness and to add new entities, attri- butes, and/or relationships. For example, if an organization is installing a new customer relationship management program, a program might need to read the old customer contact data and convert it to a format that the new system can use. However, if the old customer contact data does not contain the same data, such as a separate “bill to” and “ship to” address for existing customers, this data may need to be added manually. The “bill to” address may be used to calculate to which of the organization’s sales regions the customer belongs for sales reporting and accounting purposes. For many projects, con- siderable time and effort is expended in creating and loading a new database. See Figure 12.14.

Reformat

data from

source 1

Reformat

data from

source 2

Edit and

correct data

Manual

corrections

Merge

Reformat

data from

source 3

Reformatted

data 1

Data

source 1

Data

source 3

Reformatted

data 2

Merged data

Edited and

corrected

data

Correction

file

Load and

update

database

Database

Reformatted

data 3

Data

source 2

FIGURE 12.14 Database preparation tasks Creating and loading a new database can take considerable resources.

528 PART 4 • Planning, Acquiring, and Building Systems

Perform Unit Testing With the programs written and the database available, it is now possible for the developers to do initial testing of code components. This process is called unit testing, which involves testing individual components of code (subrou- tines, modules, and programs) to verify that each unit performs as designed. Unit testing is accomplished by developing test data that ideally will force an individual component to execute all of its various functions and user features. In addition, each program is tested with abnormal input to determine how it will handle erroneous input. As testers find problems, they modify the pro- grams to work correctly. A good set of unit tests can be saved and rerun each time any code is changed to quickly detect any new defects.

Integration and Testing Several types of testing must be conducted before a new or modified informa- tion system is ready to be put into production. These tests are outlined next and discussed in the following sections:

1. Integration testing 2. System testing 3. Volume testing 4. User acceptance testing

Integration Testing Integration testing involves linking individual components together and test- ing them as a group to uncover any defects in the interface between one com- ponent and another (e.g., component 1 fails to pass a key parameter to component 2). Even if unit testing is successful, developers cannot assume that individual components can be combined into a working system. Unfortunately, one component that functions incorrectly can affect another component and, if these problems go undetected, they can cause serious trouble later.

System Testing System testing involves testing the complete, integrated system (hardware, software, databases, people, and procedures) to validate that the information system meets all specified requirements. System testing is often done by inde- pendent testers who were not involved in developing program code. They attempt to make the system fail. They frequently employ testing called black box testing because it requires no specific knowledge of the application’s code and internal logic. In other words, the system tester is aware of what the software is supposed to do but is not aware of how it does it.

Volume Testing Volume testing involves evaluating the performance of the information system under varying yet realistic work volume and operating conditions (e.g., data- base size, number of concurrent users, number of transactions, and number of queries). The goals of volume testing are to determine the work load at which systems performance begins to degrade and to identify and eliminate any issues that prevent the system from reaching its required system-level performance.

User Acceptance Testing During user acceptance testing (UAT), trained users test the information sys- tem to verify that it can complete required tasks in a real-world operating environment and perform according to the system design specifications. UAT is also known as beta testing, application testing, and end-user testing. Unlike system testing, which ensures that the system itself works, UAT determines whether the system meets its intended business needs.

unit testing: Testing of individual components of code (subroutines, modules, and programs) to verify that each unit performs as designed.

integration testing: Testing that involves linking all of the individual components together and testing them as a group to uncover any defects in the interfaces between individual components.

System testing: Testing the com- plete, integrated system (hardware, software, databases, people, and pro- cedures) to validate that the information system meets all specified requirements.

volume testing: Testing to evaluate the performance of the information system under varying yet realistic work volume and operating conditions to determine the work load at which system performance begins to degrade and to identify and eliminate any issues that prevent the system from reaching its required service-level performance.

user acceptance testing (UAT): Testing performed by trained system users to verify that the system can complete required tasks in a real-world operating environment and perform according to the system design specifications.

CHAPTER 12 • System Acquisition and Development 529

UAT is a critical activity that must be completed successfully before newly developed software can be rolled out to the market. In the case of implement- ing a software package or software developed by an outside organization, the customer performs user acceptance testing before accepting transfer of owner- ship. UAT involves the following steps:

1. The UAT test team is selected from the set of likely users. 2. The UAT test team is trained using the currently available training material. 3. The overall UAT strategy and schedule is defined. 4. The UAT team designs test cases to exercise the functions and features of

the information system. 5. The test cases are documented in a clear and simple step-by-step manner

to make the tests easy to execute. 6. The UAT team executes the defined test cases and documents the results

of each test. 7. The software development team reviews the test results and makes any

required changes to the code so it meets the design specifications. 8. The UAT team retests the information system until all defects have been

fixed or it is agreed that certain defects will not be fixed. 9. The UAT team indicates its acceptance or nonacceptance of the informa-

tion system. If accepted, the information system is ready to be fully implemented.

10. The UAT team provides feedback on the user training material so it can be updated and improved.

Prior to releasing a new software package or a major revision of an exist- ing package, commercial software development organizations conduct alpha and beta testing. Alpha testing is a limited internal acceptance test where employees of the software development organization and a limited number of other “friendlies” use the software and provide feedback. After fixing pro- blems uncovered in alpha testing, the developer makes a beta test version of the software available to potential users outside the organization. For exam- ple, Microsoft might make a free beta test version of software available on the Internet to increase the amount of feedback.

Most software manufacturers and third-party software developers have a user acceptance document—a formal agreement the end user organiza- tion signs stating that a phase of the installation or the complete system is approved. This is a legal document that usually removes or reduces the IS vendor’s liability for problems that occur after the user acceptance docu- ment has been signed. Because this document is so important, many com- panies get legal assistance before they sign it. Stakeholders can also be involved in acceptance testing to make sure that their benefits are indeed realized.

Table 12.9 summarizes five types of testing: unit testing, integration test- ing, system testing, volume testing, and user acceptance testing.

Implementation A number of steps are involved in system implementation. These are outlined next and discussed in the following sections.

1. User preparation 2. Site preparation 3. Installation 4. Cutover

User Preparation User preparation is the process of readying managers, decision makers, employees, system users, and stakeholders to accept and use the new system.

user acceptance document: A formal agreement that the organization signs stating that a phase of the instal- lation or the complete system is approved.

user preparation: The process of readying managers, decision makers, employees, other users, and stake- holders to accept and use the new system.

530 PART 4 • Planning, Acquiring, and Building Systems

Ideally, user preparation begins in the early stages of system investigation and continues through implementation.

The major challenges to successful implementation of an information sys- tem are often more behavioral than technical. Successfully introducing an information system into an organization requires a mix of organizational change skills and technical skills. Strong, effective leadership is required to overcome the behavioral resistance to change and achieve a smooth and suc- cessful system introduction.

The dynamics of how change is implemented can be viewed in terms of the Lewin and Schein three-stage model for change: (1) ceasing old habits and creating a climate that is receptive to change; (2) learning new work methods, behaviors, and systems; and (3) reinforcing changes to make the new process second nature, accepted, and part of the job.

Leavitt’s Diamond is a change model that proposes that every organiza- tional system is made up of people, tasks, structure, and technology—any change in one of these elements will necessitate a change in the other three ele- ments. Thus, to successfully implement a new information system, appropriate changes must be made to the people, structure, and tasks affected by the new system. People must be convinced to take a positive attitude to the change and be willing to exhibit new behaviors consistent with the change. Management might need to modify the reward system to recognize those who exhibit the desired new behaviors. Training in any required new skills is also necessary.

The technology acceptance model (TAM) specifies the factors that can lead to better attitudes about the use of a new information system, along with its higher acceptance and usage. Perceived usefulness and perceived ease of use strongly influence whether someone will use an information system. Man- agement can improve that perception by demonstrating that others have used the system effectively and by providing user training and support.

The diffusion of innovation theory cautions that adoption of any innova- tion does not happen all at once for all members of the targeted population;

TABLE 12.9 Tests conducted on an information system Form of Test What Is Tested Purpose of Test Who Does It

Unit Test individual units of the system.

Verify that each unit performs as designed.

Software developers

Integration Test all of the individual units of the information system linked together.

Uncover any defects between individual components of the information system.

Software developers or inde- pendent software testers, using black box testing measures

System Test the complete, integrated system (hardware, software, databases, people, and procedures).

Validate that the information system meets all specified requirements.

Independent test team, separate from the software development team

Volume Evaluate the performance of the information system under realistic and varying work volume and operating conditions.

Determine the work load at which system performance begins to degrade and identify and eliminate any issues that prevent the system from performing at the required service level.

System development team and members of the operations organization

User acceptance

Test the complete, integrated system (hardware, software, databases, people, and procedures).

Verify the information system can complete required tasks in a real-world operating envi- ronment and do this according to the system design specifications.

Trained users of the system

CHAPTER 12 • System Acquisition and Development 531

rather, it is a drawn-out process, with some people quicker to adopt the inno- vation than others. Rogers’ diffusion of innovation theory defined five catego- ries of adopters, each with different attitudes toward innovation. When promoting an innovation to a target population, first understand the charac- teristics of the target population that will help or hinder adoption of the inno- vation and then apply the appropriate strategy. This theory can be useful in planning the roll-out of a new information system.

Because user training is so important, some companies employ a variety of training approaches including in-house, software, video, Internet, among others. The material used to train the UAT team can serve as a starting point, with changes based on feedback from the test team.

The eventual success of any system depends not only on how users work with it, but how well the IS personnel within the organization can operate and support it. The IS personnel should also attend training sessions similar to those for the users, although their sessions can provide more technical details. Effective training will help IS personnel use the new system to per- form their jobs and support other users in the organization. IBM and many other companies use online and simulated training programs to cut training costs and improve effectiveness.

Site Preparation A location for the hardware associated with the new system needs to be pre- pared, a process called site preparation. For a small system, site preparation can be as simple as rearranging the furniture in an office to make room for a computer. The computer and associated hardware in a larger system might require special wiring, air conditioning, or construction. A special floor, for example, might have to be built and cables placed under it to connect the var- ious computer components, and a new security system might be needed to protect the equipment. The project team needs to consider the amount of site preparation that may be necessary and build sufficient lead time into the schedule to allow for it.

Today, most organizations place a priority on developing IS sites that are energy efficient and secure. One company, for example, installed special secu- rity kiosks that let company visitors log on and request a meeting with a com- pany employee. The employee can see the visitor on his or her computer screen and accept or reject the visitor. If the visitor is accepted, the kiosk prints a visitor pass, which allows the person access to the building.

M&T Bank is the largest deposit holder in western New York, with head- quarters in Buffalo. The bank invested around $60 million in data centers over a three-year period to meet current business needs and strengthen its backup systems in case of disasters.19

Installation Installation is the process of physically placing the computer equipment on the site and making it operational. Although normally the manufacturer is responsible for installing computer equipment, someone from the organiza- tion (usually the IS manager) should oversee the process, making sure that all equipment specified in the contract is installed at the proper location. After the system is installed, the manufacturer performs several tests to ensure that the equipment is operating as it should.

Cutover Cutover is the process of switching from an old information system to a replacement system. Cutover is critical to the success of the organization; if not done properly, the results can be disastrous.

Hershey’s, the largest chocolate manufacturer in North America, provides a classic example of a failed system cutover. The company planned to

site preparation: Preparation of the location of a new system.

installation: The process of physically placing the computer equipment on the site and making it operational.

cutover: The process of switching from an old information system to a replacement system.

532 PART 4 • Planning, Acquiring, and Building Systems

upgrade a mix of legacy information systems into an integrated environment of the latest software from leading vendors, including SAP for ERP functional- ity, Manugistics for supply chain management, and Siebel for customer relation- ship management. The cutover was targeted for July, one of the company’s busiest months, when it was shipping orders for Halloween and Christmas. Unfortunately, Hershey’s was not well prepared, and the cutover was a fiasco. As a result, Hershey was unable to process over $100 million worth of orders. The resulting operational paralysis led to nearly a 20 percent drop in quarterly profits and an 8 percent decline in share price.

Organizations can follow one of several cutover strategies. See Figure 12.15. Direct conversion (also called plunge or direct cutover) involves stopping the old system and starting the new system on a given date. Direct conver- sion is a high-risk approach because of the potential for problems and errors when the old system is shut off and the new system is turned on at the same instant.

Shell is one of the largest corporations in the world, with recent annual revenues exceeding $265 billion.20 One of Shell’s major business units is called Downstream, an organization that converts crude oil into a range of refined products, which are moved and marketed around the world for domestic, industrial, and transport use. 21 The 37,000 workers in 36 countries in the Downstream business rely on SAP-based software to complete their

FIGURE 12.15 System cutover strategies Cutover can be through direct conversion, phase-in approach, pilot start-up, or parallel start-up.

New system

Direct conversion

Phase-in approach (by component) or pilot start-up (by group)

Parallel start-up

Old system component 1 or group 1

Old system component 2 or group 2

Old system

New system

Old system

Cutover 1

Cutover

Cutover 3Cutover 2

Old system component 3 or group 3

New system

direct conversion: A cutover strat- egy that involves stopping the old sys- tem and starting the new system on a given date; also called plunge or direct cutover.

CHAPTER 12 • System Acquisition and Development 533

work, making it a mission-critical application. A few years ago, Shell decided to upgrade to a new version of the Downstream software to access new func- tions and support services. The planning and work involved in completing the world’s largest SAP upgrade culminated in a direct cutover 18 months after that project started. Shell had many tasks to accomplish before the cutover, including updating several databases, installing new application servers, repla- cing hardware, and expanding storage capacity by 30 percent. Despite its huge complexity and the high risk associated with such a major cutover, the upgrade was a success.22

Many organizations follow a phase-in approach, where components of the new system are slowly phased in while components of the old one are slowly phased out. When everyone is confident that all components of the new system are performing as expected, the old system is completely phased out. This gradual replacement is repeated for each component until the new system has fully replaced the old system. In some cases, the phase-in approach, also called a piecemeal approach, can take several months.

Pilot start-up involves running the complete new system for one group of users rather than for all users. For example, a manufacturing company with many retail outlets throughout the country could use the pilot start-up approach and install a new inventory control system at one of its retail outlets. When the system runs without problems at the pilot location, the new inven- tory control system can then be implemented at other outlets, one by one.

Parallel start-up involves running both the old and new systems for a period of time. The performance and output of the new system are compared closely with the performance and output of the old system, and any differ- ences are reconciled. When users are comfortable that the new system is working correctly, the old system is eliminated.

System Operation and Maintenance The steps involved in system operation and maintenance are outlined next and discussed in the following sections.

1. Operation 2. Maintenance 3. Disposal

Operation System operation involves the use of a new or modified system under all kinds of operating conditions. Getting the most out of a new or modified sys- tem during its operation is the most important aspect of system operations for many organizations. To provide adequate user support, many companies establish a formal help desk for their employees and customers. A help desk consists of computer systems, manuals, people with technical expertise, and other resources needed to solve problems and give accurate answers to ques- tions. End users, who experience problems accessing or using an information system, can access the help desk’s Web site or request support via a call or text to the help desk.

Monitoring is the process of measuring system performance by tracking the number of errors encountered, the amount of memory required, the amount of processing or CPU time needed, and other performance indicators. If a particular system is not performing as expected, it should be modified or a new system should be developed or acquired.

System performance products can measure all components of an informa- tion system, including hardware, software, database, and network systems. Microsoft Visual Studio, for example, has features that allow system developers to monitor and review how applications are running and performing, enabling

phase-in approach: A cutover strategy that involves slowly replacing components of the old system with those of the new one; this process is repeated for each application until the new system is running every applica- tion and performing as expected; also called a piecemeal approach.

pilot start-up: A cutover strategy that involves running the complete new system for one group of users rather than for all users.

parallel start-up: A cutover strategy that involves running both the old and new systems for a period of time and closely comparing the output of the new system with the output of the old sys- tem; any differences are reconciled. When users are comfortable that the new system is working correctly, the old system is eliminated.

system operation: Involves the use of a new or modified system under all kinds of operating conditions.

monitoring: The process of measur- ing system performance by tracking the number of errors encountered, the amount of memory required, the amount of processing or CPU time needed, and other performance indicators.

534 PART 4 • Planning, Acquiring, and Building Systems

developers to make changes if needed. IBM Tivoli OMEGAMON XE is a suite of performance monitors designed for the analysis of IBM mainframe operating systems—such as z/OS and z/VM—and various subsystems, such as CICS, DB2, and IMS. Precise Software Solutions has system performance products that pro- vide around-the-clock performance monitoring for ERP systems, Oracle database applications, and other programs.23 HP also offers a software tool called Business Technology Optimization (BTO) to help companies analyze the performance of their computer systems, diagnose potential problems, and take corrective action if needed. When properly used, system performance products can quickly and efficiently locate actual or potential problems.

Allscripts is a $2.6 billion publicly traded company that provides practice management, electronic healthcare records, and financial software to hun- dreds of physician practices, hospitals, and other healthcare organizations. Its customers typically have between 7 and 20 servers running Allscripts applica- tions at all times, and keeping the software running without interruption is a major challenge. To solve this problem, Allscripts has its customers install eG performance monitoring software from Citrix to monitor the network, operat- ing system, and applications on its servers. This enables Allscripts to quickly identify and fix system and software problems before they affect users.24

System review is the process of analyzing a system to make sure it is operating as intended. System review often compares the performance and benefits of the system as it was designed with the actual performance and benefits of the system in operation.

U.S. citizens were alarmed and dismayed when an audit of 731 Veterans Affairs (VA) hospitals and clinics found that some 57,000 veterans nationwide in need of medical care experienced wait times of 90 days or longer for their first medical appointments. An additional 64,000 veterans were not even on the VA electronic waiting list for doctor appointments that they had requested. Shockingly, 13 percent of VA employees interviewed said they were told to falsify records so that wait times would appear shorter.25 In a separate audit of its information systems, the VA inspector reported that the agency had continuing problems protecting its mission-critical systems. The audit found that although the VA had made progress developing security poli- cies and procedures, it still suffered from “significant deficiencies related to access controls, configuration management controls, continuous monitoring controls, and service continuity practices designed to protect mission-critical systems.”26 It is not clear to what degree these system shortcomings contrib- uted to the incorrect reporting of wait times.

Internal employees, external consultants, or both can perform a system review. An organization’s billing application, for example, might be reviewed for errors, inefficiencies, and opportunities to reduce operating costs. In addi- tion, the billing application might be reviewed if corporations merge, if one or more new managers require different information or reports, or if federal laws on bill collecting and privacy change. This is an event-driven approach to system review.

Maintenance System maintenance is a stage of system development that involves chang- ing and enhancing the system to make it more useful in achieving user and organizational goals. Reasons for program maintenance include the following:

● Poor system performance, such as slow response time for frequent transactions

● Changes in business processes ● Changes in the needs of system stakeholders, users, and managers ● Bugs or errors in the program ● Technical and hardware problems

system review: The process of analyzing a system to make sure it is operating as intended.

system maintenance: A stage of system development that involves changing and enhancing the system to make it more useful in achieving user and organizational goals.

CHAPTER 12 • System Acquisition and Development 535

● Corporate mergers and acquisitions ● Changes in government regulations ● Changes in the operating system or hardware on which the application

runs

Organizations can perform system maintenance in-house, or they can hire outside companies to perform maintenance for them. Many companies that use information systems from Oracle or SAP, for example, hire those compa- nies to maintain their systems. System maintenance is important for indivi- duals, groups, and organizations. Individuals looking to system-maintenance services, for example, can use the Internet, computer vendors, and indepen- dent maintenance companies, including YourTechOnline.com (www.yourte chonline.com), Geek Squad (www.geeksquad.com), and PC Pinpoint (www .pcpinpoint.com). Organizations often have personnel dedicated to system maintenance. Software maintenance for purchased software can cost 20 per- cent or more of the purchase price annually.

The maintenance process can be especially difficult for older software. A legacy system is an old system, which might have cost millions of dollars to develop, patch, and modify over the years. The maintenance costs for legacy systems can become quite expensive, and, at some point, it becomes more cost effective to switch to new programs and applications than to repair and maintain the legacy system.

Royal Bank of Scotland (RBS) and National Westminster Bank (NatWest) are two of the United Kingdom’s largest and most established banks. How- ever, some customers of these banks have experienced problems using ATMs or debit cards due to problems with legacy banking systems. Some of the banks’ systems are over 30 years old and were originally designed to handle simple branch banking. Over the years, the banks have had to make changes to support ATMs, online banking, and mobile banking as well as changes to accommodate new regulatory requirements. Many of these changes were implemented by different development teams using different programming languages running on different computers and operating systems, making it impossible for one person or team to fully comprehend the entire system.27

The two banks recently announced that they will be spending £1 billion (approximately $1.7 billion USD) to improve their personal and small busi- ness banking services to make it easier for customers on the move.28

Four generally accepted categories signify the amount of change involved in maintenance. A slipstream upgrade is a minor system upgrade—typically a code adjustment or minor bug fix. Many companies don’t announce to users that a slipstream upgrade has been made; however, because a slip- stream upgrade usually requires recompiling all the code, it can create entirely new bugs. This maintenance practice explains why the same computers some- times work differently with what is supposedly the same software. A patch is a minor change to correct a problem or make a small enhancement. The fix is usually patched into an existing program; that is, the programming code representing the system enhancement is usually added to the existing code. Many patches come from off-the-shelf software vendors. Although slipstream upgrades and patches are minor changes, they can cause users and support personnel big problems if the programs do not run as before. A new release is a significant program change that often requires changes in the documenta- tion of the software. Finally, a new version is a major program change, typi- cally encompassing many new features. Figure 12.16 shows the relative amount of change and effort required to test and implement these four cate- gories of system maintenance.

Because of the amount of effort that can be spent on maintenance, many organizations require a request for maintenance form to be completed and approved before authorizing the modification of an information system. This

slipstream upgrade: A minor system upgrade-typically a code adjustment or minor bug fix; it usually requires recompiling all the code, and in so doing, it can create entirely new bugs. patch: A minor system change to correct a problem or make a small enhancement; it is usually an addition to an existing program.

release: A significant program change that often requires changes in the documentation of the software.

version: A major program change, typically encompassing many new features.

536 PART 4 • Planning, Acquiring, and Building Systems

form is usually signed by a business manager who documents the need for the change and identifies the priority of the change relative to other work that has been requested. The IS group reviews the form and identifies the programs that need to be changed, determines the programmer to assign to the project, estimates the expected completion date, and develops a technical description of the change. A cost/benefit analysis might be required if the change requires substantial resources. The completed change request is then reviewed and pri- oritized relative to the other change requests that have been made.

Disposal At some point, an existing information system may become obsolete, uneco- nomical to operate and/or maintain, or unrepairable. Information systems typically evolve to this stage in the life cycle because the system can no longer be modified to keep up with changing user and business requirements, outdated technology causes the system to run slowly or unreliably, or key vendors are no longer able or willing to continue to provide necessary service or support.

System disposal is a stage of system development that involves those activ- ities that ensure the orderly dissolution of the system, including disposing of all equipment in an environmentally friendly manner, closing out contracts, and safely migrating information from the system to another system or archiving it in accordance with applicable records management policies. The steps involved in system disposal are outlined and discussed in the following sections.

1. Communicate intent. 2. Terminate contracts. 3. Make backups of data. 4. Delete sensitive data. 5. Dispose of hardware.

Communicate Intent A memo communicating the intent to terminate the infor- mation system should be distributed to all key stakeholders, months in advance of the actual shutdown. This ensures that everyone is aware of the shutdown and allows time for them to convert to the new system or process replacing the terminated system. For example, the Microsoft Windows XP operating system was released in 2001. Microsoft announced in September 2007 that it would end support of this popular operating system in April 2014. Despite the end-of-life announcement, an estimated 25 percent of con- sumers and businesses including 75 percent of ATMs in the United States had not converted to a replacement operating system by early 2014.29

FIGURE 12.16 System-maintenance efforts This chart shows the relative amount of change and effort associated to test and implement slipstream upgrades, patches, releases, and versions.

Patch Release

Client effort to test and implement change

Slipstream upgrade

Amount of change

to system

Version

system disposal: A stage of system development that involves those activities that ensure the orderly disso- lution of the system, including disposing of all equipment in an environmentally friendly manner, closing out contracts, and safely migrating information from the system to another system or archiving it in accordance with applicable records management policies.

CHAPTER 12 • System Acquisition and Development 537

Critical Thinking Exercise

Terminate Contracts The various vendors who provide hardware, software, or services associated with the information system must be notified well in advance to avoid any penalty fees associated with abrupt termination of a contract.

Make Backups of Data Prior to deleting files associated with the system, backup copies of data must be made according to the organization’s records- management policies.

Delete Sensitive Data Extreme care must be taken to remove customer, employee, financial, and company-sensitive data from all computer hardware and storage devices before disposing of it. Otherwise, an organization’s dis- carded equipment could become a treasure trove to competitors or identity thieves. When a file is deleted, the bits and pieces of the file physically stay on a computer hard drive until they are overwritten, and they can be retrieved with a data recovery program. To remove data from a hard drive perma- nently, the hard drive needs to be wiped clean. The program used should overwrite or wipe the hard drive several times. An alternative is to remove the hard drive and physically destroy it.

Dispose of Hardware After backing up and then removing data from drives, members of the project team can dispose of obsolete or damaged computer hardware. Governments, environmental agencies, and leading hardware man- ufacturers are attempting to reduce hazardous materials in electronic pro- ducts; however, some hardware components still contain materials that are toxic to the environment. Responsible disposal techniques should be used regardless of whether the hardware is sold, given away, or discarded. Many computer hardware manufacturers including Dell and HP have developed programs to assist their customers in disposing of old equipment.

Now that we have discussed the waterfall system development process, we turn our attention to discussion of the agile system development process.

User Acceptance Testing for New Accounting System You are a member of the finance and accounting organization of a midsized sporting goods retailer. You are knowledgeable of all facets of your firm’s current accounting systems and have been working in accounts receivable for the past three years. The firm is implementing a new cloud-based accounting system to han- dle general ledger, accounts payable, accounts receivable, and payroll tasks. You have been selected to plan and lead the user acceptance testing for the accounts receivable portion of the system. This will be a full-time activity for you over the next two-to-three months, and during that time, other employees will fill in to take care of most of your day-to-day responsibilities.

Review Questions 1. Outline the tasks that must be accomplished to successfully complete user

acceptance testing. 2. Your normal work activities and responsibilities have not allowed you time to

become familiar with this project and the new system and its capabilities. What actions would you take to get caught up quickly?

Critical Thinking Questions 1. How would you go about selecting and recruiting end users to participate in

the user acceptance testing? How would you determine how many end users are needed for testing?

2. What do you think might be the biggest barriers to completion of the user acceptance testing in a timely manner?

538 PART 4 • Planning, Acquiring, and Building Systems

Agile Development

Agile development is an iterative system development process that develops the system in “sprint” increments lasting from two weeks to two months. Unlike the waterfall system development process, agile development accepts the fact that system requirements are evolving and cannot be fully understood or defined at the start of the project. Agile development concentrates instead on maximizing the team’s ability to deliver quickly and respond to emerging requirements— hence the name agile. In an agile development project, the team stops and ree- valuates the system every two weeks to two months, giving it ample opportunity to identify and implement new or changed system requirements.30

Scrum is an agile development framework that uses a team-based approach in order to keep the development effort focused and moving quickly. Scrum emphasizes individuals and interactions over processes and tools, work- ing software over comprehensive documentation, customer collaboration over contract negotiation, and responding to change over following a plan.31

A scrum master is the person who coordinates all scrum activities, and a scrum team consists of a dozen or fewer people who perform all system development activities from investigation to testing so there is less personnel turnover than on the typical waterfall system development project. The scrum master does not fill the role of a traditional project manager and has no peo- ple management responsibilities. Instead, the primary responsibility of the scrum master is to anticipate and remove barriers to the project team produc- ing its deliverables and meeting the project schedule.32

The product owner is a person who represents the project stakeholders and is responsible for communicating and aligning project priorities between the stakeholders and development team. The product owner holds the prod- uct vision; he or she is responsible for describing what should be built and why—but now how.33

Using the scrum method, the product owner works with the stakeholders and team to create a prioritized list of project requirements called a product backlog. Next, a sprint planning session is held, during which the team selects the highest priority requirements from the top of the product backlog to cre- ate the sprint backlog; they then decide how to implement those require- ments. The team sets a certain amount of time—typically two to eight weeks—to complete its work. During the sprint, each day at the same time, the team meets briefly (15 minutes at most) to share information necessary for coordination. At this meeting, team members describe what they com- pleted the previous day and identify any obstacles that stand in their way of completing the day’s activities. The sprint is complete when the team presents a working system that incorporates the new requirements and that can be used and evaluated. During the sprint review meeting, the team shares what it learned from the current sprint iteration so that knowledge can be applied in the next sprint iteration. See Figure 12.17. Along the way, the scrum master keeps the team focused on its goals.34

Agile development requires cooperation and frequent face-to-face meet- ings with all participants, including system developers and users, as they modify, refine, and test the system’s capabilities and how it meets users’ needs. Organizations are using agile development to a greater extent today to improve the results of system development, including global projects requir- ing IS resources distributed in many locations. Agile is often better suited for developing smaller information systems than larger ones. During an agile project, the level of participation of stakeholders and users is much higher than in other approaches. Table 12.10 lists advantages and disadvantages of agile development.35

agile development: An iterative system development process that develops the system in "sprint" increments lasting from two weeks to two months.

scrum: An agile development framework that emphasizes a team- based approach in order to keep the development effort focused and moving quickly.

scrum master: The person who coordinates all the scrum activities of a team.

product owner: A person who represents the project stakeholders and is responsible for communicating and aligning project priorities between the stakeholders and development team.

CHAPTER 12 • System Acquisition and Development 539

Extreme programming (XP) is a form of agile software development that promotes incremental development of a system using short development cycles to improve productivity and to accommodate new customer require- ments. Other essentials of extreme programming include programming in pairs, performing extensive code review, unit testing of all code, putting off the programming of system features until they are actually needed, use of a flat project management structure, simplicity and clarity in code, expecting changes in system requirements as the project progresses and the desired solution is better understood, and frequent communication with the customer and among programmers. These qualities make extreme programming com- patible with agile software development.36

DevOps is the practice of blending the tasks performed by the develop- ment staff (who are typically responsible for design, coding, and testing) and the IT operations groups (who typically handle operational deployment tasks, such as server provisioning and job scheduling) to enable faster and more reliable software releases.37 This approach is key to successful agile develop- ment environments where organizations go live with new software releases every two to four weeks. And in many organizations, DevOps is being used as part of a continuous deployment strategy, in which releases are launched daily—and in some cases, multiple times a day. Many industry experts view DevOps as an outgrowth of the agile development movement, with an exten- sion of agile development principles to include systems and operations rather than just code.

Requirements

refinement

meeting

Sprint

planning

session

Prioritized list of

system requirements

(product backlog)

Requirements

to implement

during this iteration

(sprint backlog)

2–8 week

sprint

Daily scrum

meeting

Sprint

review

meeting

Working

system of

requirements

implemented

so far

FIGURE 12.17 The Scrum agile software development process The Scrum agile approach develops a system in sprint increments lasting from two weeks to two months.

TABLE 12.10 Advantages and disadvantages of agile development Advantages Disadvantages

For appropriate projects, this approach puts an application into production sooner than any other approach.

It is an intense process that can burn out system developers and other project participants.

Documentation is produced as a by-product of completing project tasks.

This approach requires system analysts and users to be skilled in agile system development tools and agile techniques.

Agile forces teamwork and lots of interaction between users and stakeholders.

Agile requires a larger percentage of stakeholders’ and users’ time than other approaches.

extreme programming (XP): A form of agile software development that promotes incremental development of a system using short development cycles to improve productivity and to accom- modate new customer requirements.

DevOps: The practice of blending the tasks performed by the development and IT operations groups to enable faster and more reliable software releases.

540 PART 4 • Planning, Acquiring, and Building Systems

Under traditional software development approaches, the application development team gathers business requirements, writes code, and tests programs in an isolated development environment. The code is then released to the IT operations group to deploy in the real-world operational environment of end users. This involves gluing together all the components of an application, including databases, messaging infrastructure, external services, the passing and receiving of data to/from other systems, and third-party dependencies.

DevOps principles reshape all the move-into-production activities so that they become automated, collaborative, continuous, incremental, iterative, and self-service. Responsive teams adopt DevOps practices of self-service configu- ration, automated provisioning (using predefined procedures that are carried out electronically without requiring human intervention), continuous build, continuous integration, continuous delivery, automated release management, and incremental testing, as shown in Figure 12.18.

Although DevOps can mean slightly different things depending on how it is deployed at different companies, at its core, DevOps places a priority on collaboration, with operations staff and development engineers participating together, over the entire systems life cycle—from design and development through testing and implementation.38

Starwood Hotels and Resorts Worldwide used the DevOps approach with good success on a $150 million project aimed at redoing the company’s cen- tral reservation system. As Starwood has continued to implement DevOps, it has found the process has led to a more complete description of user require- ments, a 66 percent reduction in time to deploy systems, and 20 percent fewer errors in production.39

Table 12.11 compares the key features of the agile and waterfall system development processes.

FIGURE 12.18 DevOps is part of a continuous deployment strategy in which releases can be launched daily DevOps blends tasks performed by development staff and IT operations groups. Source: Chris Haddad, “Overcome DevOps Adoption Barriers to Accelerate Software Delivery,” Tech Well Insights, May 8, 2015, www.techwell.com/techwell-insights/2015 /05/overcome-devops-adoption-barriers- accelerate-software-delivery.

Define acceptance

criteria

Define acceptance

criteria

Define acceptance

criteria

PlanPlan

Automated testing

BuildBuild

Release

DeployDeploy Continuous monitoring Continuous monitoring

OperateOperate

CHAPTER 12 • System Acquisition and Development 541

Critical Thinking Exercise

Firm’s First Agile Project You were hired into a new company that was impressed with your two years of experience as a scrum master on a variety of information systems projects. Your new firm has a large in-house information system development staff that is trained and experienced in the use of the waterfall software development process. You have been assigned responsibility as a scrum master for a key project that will be the firm’s first agile project. You have also been asked to train the project man- ager, team, and newly appointed product owner in the agile process and their associated roles and responsibilities.

Review Questions 1. As part of the team’s initial project kickoff meeting, you have been asked to

briefly summarize the differences between the waterfall and agile software development process. What would you say?

2. Following your discussion, one of the team members asks, “so why are we changing to a new software development process? We are all comfortable with the way we do things now.” What do you say?

Critical Thinking Questions 1. There is likely to be some confusion over the role of project manager, scrum

master, and product owner. What can you do to avoid this potential problem? 2. What other potential problems can you anticipate as the team moves forward

with its first agile project? What can be done to avoid these potential issues?

Buying Off-the-Shelf Software

Today, most organizations purchase or rent the software they need rather than make it—simply because it costs too much and takes too long to build a quality information system. Organizations elect to build proprietary systems only when its information system requirements are unique. This may be because of the nature of the business or because the organization is attempt- ing to build an information system that will provide it with a strategic compet- itive advantage.

A software application can vary from an unmodified, commercial off- the-shelf (COTS) software package at one extreme to a custom, written- from-scratch program at the other extreme. Between those two extremes is a range of options based on the degree of customization. A comparison of the

TABLE 12.11 Comparison of approaches to system development

Characteristic

Software Development Approach

Agile Waterfall

Description An iterative process that develops the sys- tem in sprint increments lasting 2–8 weeks; each increment focuses on implementing the highest priority requirements that can be completed in the allotted time

A sequential multistage process where work on the next stage cannot begin until the results of the previous stage are reviewed and approved or modified as necessary

Basic assumption System requirements cannot be fully defined at start of project

All critical system requirements must be fully defined before any coding begins

How requirements and design are defined

Users interacting with system analysts and working software

Users interacting with system analysts and system documentation and/or models

Associated processes Scrum Structured system analysis and design

542 PART 4 • Planning, Acquiring, and Building Systems

two extreme approaches is shown in Table 12.12. One question that must be answered during system analysis phase is: which solution approach is best for this particular system? This decision is often called the make-or-buy decision.

Package Evaluation Phase As with system development, purchasing off-the-shelf software requires that an organization go through several steps to ensure that it purchases the soft- ware that best meets its needs and then implements it effectively. These steps are part of the package evaluation phase of a project that comes after the sys- tem analysis phase as shown in Figure 12.19. At this point in the project, the scope of the system and critical business and user requirements should be known. There should be a rough budget and schedule as well.

Package Evaluation Phase

1. Identify potential solutions. 2. Select top contenders. 3. Research top contenders. 4. Perform final evaluation of leading solutions. 5. Make selection. 6. Finalize contract.

Identify Potential Solutions The project team should make a preliminary assessment of the software mar- ketplace to determine whether existing packages can meet the organization’s needs. The primary tool for doing this is the request for information (RFI), a document that outlines an organization’s needs and requests vendors to respond with information about if and how they can meet those needs and the time and resources required. See Figure 12.20. The RFI outlines the scope of the desired system and preliminary system requirements based on the results so far of the system analysis. Importantly, the RFI should ask each ven- dor to identify two or three customers who may be contacted as references. The RFI is typically sent to several vendors who are thought to be capable of providing the desired software.

TABLE 12.12 Comparison of developed and off-the-shelf software Factor Develop (Make) Off-the-Shelf (Buy)

Cost The cost to build the system can be difficult to estimate accurately and is frequently higher than off-the-shelf

The full cost to implement an off-the-shelf solution is also difficult to estimate accurately but is likely to be less than a custom software solution

Needs Custom software is more likely to satisfy your needs

Might not get exactly what you need

Process improvement

Tend to automate existing business processes even if they are poor

Adoption of a package may simplify or streamline a poor existing business process

Quality Quality can vary depending on the program- ming team

Can assess the quality before buying

Speed Can take years to develop Can acquire it right now

Staffing and support Requires in-house skilled resources to build and support a custom-built solution

Requires paying the vendor for support

Competitive advantage

Can develop a competitive advantage with good software

Other organizations can have the same software and same advantage

request for information (RFI): A document that outlines an organiza- tion’s hardware or software needs and requests vendors to provide information about if and how they can meet those needs and the time and resources required.

CHAPTER 12 • System Acquisition and Development 543

Select Top Contenders The project team will review the information provided by the vendors in response to the RFI and narrow their choice down to the most promising alternatives for further evaluation. This may require a visit to a vendor’s place of business to meet key managers and observe a demo of the vendor’s system. This selection is made on the basis on how well the vendor’s software appears to meet the organization’s needs, preliminary cost and timing esti- mates, information gleaned from references, and how easy the vendor has been to work with so far.

Research Top Contenders A final evaluation begins with a detailed investigation of the contenders’ pro- posals as well as in-depth discussions with two or three customers of each contender to learn about their experience with the vendor and the software.

FIGURE 12.19 Software package implementation process Software package implementation eliminates several of the phases of the waterfall approach.

Investigation

Systems analysis

Package evaluation

Integration & testing

Implementation

Request for Information Table of Contents

DESCRIPTION OF DESIRED SYSTEM PRELIMINARY SYSTEM REQUIREMENTS INFORMATION REQUESTED WHO TO CONTACT FOR FURTHER INFORMATION DATE RESPONSE DESIRED

FIGURE 12.20 Recommended table of contents for a request for information The RFI outlines the desired system and its requirements, identifying key pieces of data that the soft- ware vendor must include in the proposal.

544 PART 4 • Planning, Acquiring, and Building Systems

An organization must carefully evaluate each vendor’s software package to see how well it supports the business processes that are within the scope of the project. Looking at each business process, the organization should deter- mine if the package supports the process fully and exactly as it needs to be performed. If not, must the software be modified to meet the organization’s requirements, or must the organization modify its business process? If an organization decides it must modify the software to meet its business require- ments, it must then determine who will do the necessary modifications, how long will they take, and how much will they cost.

Often purchased software must integrate with other existing software (e.g., a new accounts payable and accounts receivable software package must integrate with the firm’s existing general ledger system). The amount of effort required to modify the new software and existing software so that they work well together must be determined and taken into account as a major factor in selecting the final vendor and software.

For major software purchases, the contenders should be asked to make a final presentation and to fully demonstrate their solution using a performance evaluation test conducted in a computing environment (e.g., computing hardware, operating system software, database management system) and with a workload (e.g., number of concurrent users, database size, and number of transactions) that matches the intended operating conditions. Such a test can help measure system performance attributes such as ease of use and response time.

Make Selection Selecting the best software package solution involves weighing the following factors:

● How well the vendor’s solution matches the needs of the users and business

● The amount of effort required to integrate the new software with existing software

● Results of the performance evaluation test ● Relative costs (including any software modifications) and benefits ● The technical, economic, legal, operational, and schedule feasibility ● Input from legal and purchasing resources on the legal and financial

viability of the contender ● Feedback from customers on how well the software performs as well as

on the quality of the support provided by the vendor

Finalize Contract Once a selection is made, a contract with the vendor must be negotiated and finalized. Although the vendor may insist that everyone signs a standard con- tract, every contract should be thoroughly reviewed by experienced members of an organization’s legal and purchasing departments. Recognize that the standard contract is written from the vendor’s perspective and protects its interests, not yours. Request a copy of the vendor’s standard contract at the start of the software package evaluation process and allow at least two months for review and negotiation of a final contract.

Organizations that use the cloud-computing or software-as-a-service approach need to take special precautions in signing contracts with the ser- vice provider. The contract should clarify how the provider ensures data pri- vacy, handles discovery if there is a lawsuit, resolves service-level problems, and manages disaster recovery; it should also detail where the cloud- computing servers and computers are located. Organizations should confirm this information in discussions with other customers of the service provider and by a visit to the service provider’s facilities.

performance evaluation test: A comparison of vendor options con- ducted in a computing environment (e.g., computing hardware, operating system software, database manage- ment system) and with a workload (e.g., number of concurrent users, database size, and number of transactions) that matches its intended operating conditions.

CHAPTER 12 • System Acquisition and Development 545

Critical Thinking Exercise

A contract covering the modification of a software package should have provisions for monitoring system modification quality and progress, owner- ship and property rights of the new or modified system, contingency provi- sions in case something doesn’t work as expected, and dispute resolution if something goes wrong. Customizing the package actually changes the pack- age into custom-made software, resulting in the potential loss of support from the original vendor. This might necessitate third-party support, which should be factored into the contract negotiations.

Integration and Testing Several types of testing must be conducted before a software package is ready to be put into production. This is particularly true if the software package has been modified to meet the needs of the organization or the software package must inte- grate with existing information systems (e.g., a new accounts payable system must integrate with the organization’s existing general ledger system). The following types of tests, already discussed earlier in the chapter, need to be completed.

1. Integration testing 2. System testing 3. Volume testing 4. User acceptance testing

Implementation The organization cannot just count on the vendor to execute the implementa- tion of the package—full and active participation by the project’s stakeholders and end users is essential to success. Key implementation tasks include:

● Use data-flow diagrams to map current business processes and require- ments to the software, and identify any gaps that must be filled by chang- ing current processes or by modifying the software.

● Install the software and configure all of its capabilities and options to meet the project requirements.

● Customize any aspects of the solution needed for the organization. ● Integrate existing software with the new software. ● Train end users. ● Test the software to ensure that it meets all processes and requirements. ● Convert historical data from the old software so that it can be used by the

new software. ● Roll out the new software to users in a live work environment. ● Provide for ongoing end-user support and training.

Hospital Switches Electronic Health Record Software Midwest Regional Hospital (fictional) is a 500-bed general medical and surgical facility with 25,000 admissions and 7,500 annual inpatient and 17,500 outpatient surgeries annually. Its emergency room has 52,000 visits each year. It is a non- profit hospital that treats both adult and child patients. Over 1,200 nurses, techni- cians, doctors, and physicians practice at the hospital.

An electronic health record (EHR) is an electronic version of a patient’s medi- cal history that is maintained by the provider over time and may include all of the key administrative clinical data relevant to that person’s care, including demo- graphics, progress notes, problems, medications, vital signs, past medical history, immunizations, laboratory data, and radiology reports. The EHR automates access to this information, and the more sophisticated versions of EHR software can also produce an online “digital chart” that displays up-to-date patient information in

546 PART 4 • Planning, Acquiring, and Building Systems

real time, complete with decision support tools for physicians and nurses. One of the key features of an EHR is that health information can be created and managed by authorized providers in a digital format capable of being shared with other providers across more than one healthcare organization, including laboratories, specialists, medical imaging facilities, pharmacies, emergency facilities, and school and workplace clinics.

Midwest Hospital was an early pioneer in the adoption of EHR software, implementing the technology in 2004. Unfortunately, the vendor that Midwest selected has not been able to keep up with evolving regulatory requirements and the changing needs of its healthcare clients. Its software is fast becoming obsolete, and it is rumored that the firm will soon eliminate support of its software. You have been hired as a consultant to lead a project to replace the original software with software from one of the current leading EHR software providers— Allscripts, Cerner Corporation, or Epic Systems Corporation.

Review Questions 1. Is there a need to conduct a preliminary software package evaluation? Why or

why not? 2. What tasks would you attempt to complete in your first two weeks as a project

leader?

Critical Thinking Questions 1. The hospital administrators have made it clear to you that the software vendor

must be chosen and the software installed as soon as possible. What measures do you feel comfortable taking to accelerate the process without raising the risk of choosing the wrong software or having a rough system start-up?

2. A safety-critical system is one whose failure or misuse may cause human injury or death. Given that an EHR system can be considered to be such a sys- tem, which tasks associated with software implementation deserve special attention?

Summary

Principle: Organizations can obtain software using one of two basic approaches: buy or build.

Buying off-the-shelf software is less risky and leads to quicker deployment; however, maintenance and support costs may become expensive with this approach, and the software may not be an exact match to the needs and work processes of the organization.

Building custom software can provide a better match to the current work processes of the organization and provide a potential competitive advantage; however, the cost can become extremely high, and it can take months or even years to develop the software.

Principle: A system under development following the waterfall approach moves from one phase to the next, with a management review at the end of each phase.

The set of activities involved in building information systems to meet users’ needs is called system development.

CHAPTER 12 • System Acquisition and Development 547

The waterfall system development process cycle is a sequential, multistage system development process in which work on the next stage cannot begin until the results of the current stage are reviewed and approved or modified as necessary. It is referred to as a waterfall process because progress is seen as flowing steadily downward (like a waterfall) through the various phases of development.

The phases of the waterfall system development process can vary from one company to the next, but many organizations use an approach with six phases: investigation, analysis, design, construction, integration and testing, and imple- mentation. Once the system is built, organizations complete the additional steps of operation and maintenance and disposition.

At the end of each phase, a review is conducted to ensure that all tasks and deliverables associated with that phase were produced and that they are of good quality. In addition, at the end of each phase, the overall project scope, costs, schedule, and benefits associated with the project are reviewed to ensure that the project is on track and worth completing. As a result, the waterfall system development process allows for a high degree of manage- ment control.

System investigation is the key initial phase in the development of a new or modified business information system. The purpose of this phase is to gain a clear understanding of the specifics of the problem to solve or the opportunity to address.

Joint application development (JAD) is a structured meeting process that can accelerate and improve the efficiency and effectiveness of not only the investigation phase but also the analysis and design phases of a system devel- opment project.

Functional decomposition is a technique used primarily during the investi- gation phase to define the business processes included within the scope of the system.

The technical, economic, legal, operational, and schedule feasibility are assessed during the feasibility analysis.

After a project has completed the investigation phase and been approved for further study, the next step is system analysis, which answers the question, “What must the information system do to solve the problem or capitalize on the opportunity?”

The overall emphasis of analysis is gathering data on the existing system, determining the requirements for the new system, considering alternatives within identified constraints, and investigating the feasibility of alternative solutions.

Identifying, confirming, and prioritizing system requirements is perhaps the single most critical step in the entire waterfall system development process because failure to identify a requirement or an incorrect definition of a require- ment may not be discovered until much later in the project, causing much rework, additional costs, and delay in the systems effort.

A data-flow diagram (DFD) is a diagram used during both the analysis and design phases to document the processes of the current system or to provide a model of a proposed new system. A DFD shows not only the various processes within the system but also where the data needed for each process comes from, where the output of each process will be sent, and what data will be stored and where.

The purpose of system design phase is to answer the question, “How will the information system solve this problem?” The primary result of the system design phase is a technical design that details system outputs, inputs, controls, and user interfaces; specifies hardware, software, databases, telecommunica- tions, personnel, and procedures; and shows how these components are

548 PART 4 • Planning, Acquiring, and Building Systems

interrelated. In other words, system design creates a complete set of technical specifications that can be used to construct the information system.

During the design phase, designers must develop specific system security and controls for all aspects of the information system, including hardware, soft- ware, database systems, telecommunications, and Internet operations.

System construction converts the system design into an operational system by coding and testing software programs, creating and loading data into data- bases, and performing initial program testing.

Several types of testing must be conducted before a new or modified infor- mation system is ready to be put into production, including unit testing, inte- gration testing, system testing, volume testing, and user acceptance testing.

System implementation includes the following activities: user preparation, site preparation, installation, and cutover.

System operation involves using the new or modified system under all kinds of operating conditions. Getting the most out of a new or modified system during its operation is the most important aspect of system operations for many organizations.

System maintenance involves changing and enhancing the system to make it more useful in achieving user and organizational goals. There are many reasons why system maintenance is required.

System disposal involves those activities that ensure the orderly dissolution of the system, including disposing of all equipment in an environmentally friendly manner, closing out contracts, and safely migrating information from the system to another system or archiving it in accordance with applicable records management policies.

Principle: Agile development is an iterative system development process that develops a system in “sprint” increments lasting from two weeks to two months.

Unlike the waterfall system development process, agile development accepts the fact that system requirements are evolving and cannot be fully understood or defined at the start of the project. Agile development concen- trates instead on maximizing the team’s ability to deliver quickly and respond to emerging requirements—hence the name agile.

Scrum is an agile development framework that uses a team-based approach in order to keep the development effort focused and moving quickly. Scrum emphasizes individuals and interactions over processes and tools, working soft- ware over comprehensive documentation, customer collaboration over contract negotiation, and responding to change over following a plan.

A scrum master is the person who coordinates all scrum activities, and a scrum team consists of a dozen or fewer people who perform all system devel- opment activities from investigation to testing.

The product owner is a person who represents the project stakeholders and is responsible for communicating and aligning project priorities between the stakeholders and development team. The product owner holds the product vision; he or she is responsible for describing what should be built and why— but now how.

Extreme programming (XP) is another agile software development approach that promotes incremental development of a system using short development cycles to improve productivity and to accommodate new cus- tomer requirements.

DevOps is the practice of blending the tasks performed by the develop- ment and IT operations groups to enable faster and more reliable software releases. This approach is key to successful agile development.

CHAPTER 12 • System Acquisition and Development 549

Principle: When buying off-the-shelf software, the effort required to modify the soft- ware package as well as existing software so that they work well together must be taken into account as a major factor in selecting the final vendor and software.

Today, most organizations purchase or rent the software they need rather than build it—simply because it costs too much or takes too long to build a quality information system.

The analysis team should make a preliminary assessment of the software marketplace to determine whether existing packages can meet the organiza- tion’s needs. The primary tool for doing this is the request for information (RFI), a document that outlines an organization’s hardware or software needs and requests vendors to respond with information about if and how they can meet those needs and the time and resources required.

A preliminary evaluation of software packages and vendors began dur- ing system analysis when the two or three strongest contenders were identi- fied. The final evaluation begins with a detailed investigation of the contenders’ proposals as well as discussions with two or three customers of each vendor.

Key Terms

agile development

cold site

cutover

data-flow diagram (DFD)

DevOps

direct conversion

disaster recovery plan

economic feasibility

extreme programming (XP)

feasibility analysis

hot site

installation

integration testing

joint application development (JAD)

legal feasibility

mission-critical processes

monitoring

operational feasibility

parallel start-up

Pareto principle (80–20 rule)

patch

performance evaluation test

phase-in approach

pilot start-up

product owner

release

request for information (RFI)

schedule feasibility

scrum

scrum master

site preparation

slipstream upgrade

system analysis

system construction

system disposal

system testing

system design

system investigation

system investigation report

system maintenance

system operation

system review

technical documentation

technical feasibility

unit testing

user acceptance document

user acceptance testing (UAT)

user documentation

user preparation

version

volume testing

waterfall system development process

550 PART 4 • Planning, Acquiring, and Building Systems

Chapter 12: Self-Assessment Test

Organizations can obtain software using one of two basic approaches: buy or build.

1. software is less risky and leads to quicker deployment; however, maintenance and support costs may become expensive. a. Custom b. Enterprise c. Off-the-shelf d. Personal productivity

2. software can provide a better match to the current work processes of the orga- nization and may provide a potential competitive advantage; however, software development can be extremely costly, and it can take months or even years to complete. a. Custom b. Enterprise c. Off-the-shelf d. Personal productivity

A system under development following the water- fall approach moves from one phase to the next, with a management review at the end of each phase.

3. Many organizations use a waterfall approach with six phases, including investigation, analysis, design, , integration and testing, and implementation.

4. The waterfall approach allows for a high degree of management control, but it does not allow for user interaction with the system until the inte- gration and testing phase, when the system is nearly complete. True or False?

5. The purpose of the system investigation phase is to . a. define what the information system must do

to solve the problem or capitalize on the opportunity

b. gain a clear understanding of the specifics of the problem to solve or the opportunity to address

c. gather data on the existing system and determine the requirements for the new system

d. identify, confirm, and prioritize system requirements

6. is a diagram used to document the processes of the current system or to provide a model of a proposed new system.

7. The overall emphasis of the phase is on gathering data on the existing system,

determining the requirements of the new system, considering alternatives within identified con- straints, and investigating the feasibility of alter- native solutions. a. investigation b. analysis c. design d. construction

8. The primary tool for assessing the software mar- ketplace to determine whether existing packages can meet the organization’s needs is the . a. system investigation report b. request for quotation c. RFI d. system design report

9. The phase converts the system design into an operational system by coding and testing software programs, creating and loading data into databases, and performing initial pro- gram testing. a. system analysis b. system construction c. system implementation d. system testing and integration

Agile development is an iterative system development process that develops a system in “sprint” increments lasting from two weeks to two months.

10. is an agile development framework that uses a team-based approach in order to keep the development effort focused and moving quickly.

11. In the scrum framework, the is a person who represents the project stakeholders and is responsible for communicating and align- ing project priorities between stakeholders and the development team. a. project manager b. scrum master c. product owner d. project sponsor

12. is the practice of blending the tasks performed by the development and IT operations groups to enable faster and more reliable soft- ware releases. a. Scrum b. Extreme programming c. JAD d. DevOps

CHAPTER 12 • System Acquisition and Development 551

When buying off-the-shelf software, the effort required to modify the software package as well as existing software so that they work well together must be taken into account as a major factor in selecting the final vendor and software.

13. A preliminary evaluation of software packages and vendors begins during the

phase when the two or three strongest conten- ders are identified. a. system investigation b. system design c. system analysis d. feasibility analysis

Chapter 12: Self-Assessment Test Answers

1. c 2. a 3. construction 4. True 5. b 6. Data-flow diagram 7. b

8. c 9. b 10. Scrum 11. c 12. d 13. c

Review Questions

1. What are primary characteristics of the water- fall system development process? What is the rationale for using the term “waterfall” to describe it?

2. Identify and state the purpose of each of the six phases of the waterfall system development process.

3. Why do many organizations have a formal pro- cess for requesting a system investigation?

4. What are the four different kinds of feasibility that must be assessed? Why is the feasibility of a system reviewed during the investigation, analy- sis, and design phases?

5. What is the difference between tangible and intangible benefits? Identify five tangible benefits that are frequently associated with an information system.

6. What are the key elements of a system investiga- tion report?

7. What is the purpose of studying the existing sys- tem during the analysis phase?

8. Identify several areas for which system security and control requirements need to be defined.

9. Identify and briefly describe six system perfor- mance factors.

10. What is a business continuity plan? What is a disaster recovery plan?

11. Identify and briefly describe four types of testing that are conducted during the integration and testing phase.

12. Define the terms slipstream upgrade, patch, release, and version as they relate to system maintenance.

13. What is the difference between the roles and responsibilities of a scrum master and product owner?

14. What is extreme programming (XP)? What is its goal? 15. An organization has selected and is now imple-

menting a software package. Identify three key factors that will determine the cost and time required for implementation.

Discussion Questions

1. Provide two examples of opportunities or pro- blems that are likely to trigger the need for an information system project.

2. Thoroughly discuss the pros and cons of buying versus building software.

3. What are the advantages and disadvantages of following the waterfall system development process?

4. Outline the steps necessary to conduct an effec- tive joint application development (JAD) session. Who should participate in such a session? What is the role of the JAD facilitator?

5. Once a project has successfully made it through the system investigation phase, should it ever be cancelled? Why or why not?

552 PART 4 • Planning, Acquiring, and Building Systems

6. You have been assigned to write a newspaper report on a major information system project failure run by your school’s information system organization. Where would you start, and who would you speak with?

7. Why is it important for business managers to have a basic understanding of the system devel- opment process?

8. Define the Pareto principle, and discuss how it applies to prioritizing system requirements.

9. Identify and describe how three different change models that can be applied to improve

the probability of successful system implementation.

10. Describe and discuss the pros and cons of three different system cutover strategies.

11. What is the fundamental difference in approach between waterfall and agile system development?

12. How does DevOps support the agile system development process?

13. Identify and briefly discuss four key tasks asso- ciated with the successful implementation of a software package.

Problem-Solving Exercises

1. You are acquiring a new information system for The Fitness Center, a company with three fitness centers in your metropolitan area, with a total of 1,200 members and 20 to 30 full and part-time employees in each location. Through previous research efforts, the director of marketing has determined that your clientele is interested in a state-of-the-art software system to track all their fitness and health-related activities. Each piece of equipment in the gym will be modified to allow entry of the member’s ID number, record- ing the date, time of day, weight used, and number of reps or workout length. Members and fitness consultants want to be able to log in to the system from any computer or mobile device and see displays of various reports (calories burned, muscle groups worked, blood pressure, distance run, steps taken, etc.) for a user- specified time period. Use word-processing software to identify at least six high-priority requirements for such a system. Use a

spreadsheet or project management program to identify and schedule the tasks that must be performed in order to choose the best software package and implement it.

2. The preliminary investigation of a software proj- ect has been completed. Two different project teams have estimated the costs associated with the development and maintenance of a new sys- tem. One team based their estimates on the assumption that the waterfall system develop- ment process would be used for the project; the other team plans to follow the agile approach. A third option is to purchase off-the-shelf soft- ware that provides nearly all the benefits of a custom-built solution. Review the estimates below, and choose the best approach for the project: waterfall development, agile develop- ment, or off-the-shelf software implementation. Provide a solid rational for your choice. Identify any assumptions you must make in reaching your decision.

Waterfall Agile Off-the-Shelf Software

Total effort months to complete the system 45 38 6

Cost per effort month $10k $10k $10k

Cost of software package $350k

Elapsed time until a partial working version is available (months)

Not applicable 2 Not applicable

Elapsed time until all currently envisioned features are available (months)

8 5 3

Annual savings generated by the complete system $180k $180k $160k

3. A new sales ordering system needs a relational database that contains a customer table, a product inventory table, and an order table. Use a word-processing, graphics, or spread- sheet program to draw an entity-relationship

diagram showing the relationships among these entities. Next, design each of these tables showing the keys and attributes to be included in each table. Include five sample records for each table.

CHAPTER 12 • System Acquisition and Development 553

Team Activities

1. Your team has been hired to define the scope and feasibility of a project to create a database of job openings and descriptions for the companies visiting your campus each term. Students would be able to log on to the system and request an appointment with each company’s recruiter. Recruiters would be granted access to each student’s summary transcript (courses taken, but no grades shown) and resume. Describe the tasks your team would perform to complete the system investigation phase. Who else needs to be involved in the system investigation? Develop a data-flow diagram that defines the scope of this system.

2. Your team has been selected to monitor the disposal of your school’s 10-year-old student-

registration system. Develop a list of the activities that need to be completed to complete this task. Which activities are of most concern?

3. You and your team have been hired to perform a system investigation for a fast food restaurant that wants to implement new tools and processes to improve its customer service. Currently, the restaurant has a poor reputation for not correctly filling customers’ orders and for taking too long to do it. Perform a functional decomposition to define the scope and basic requirements of such a system. Brainstorm some ideas to improve the situation, and choose one to pursue based on its technical, economic, legal, operational, and schedule feasibility.

Web Exercises

1. Do research on the Web to identify application development tools that support the rapid devel- opment of high-quality apps for both iPhone and Android-based smartphones. Develop a spread- sheet that summarizes the features and pros and cons of three of these tools.

2. Do research to identify the three leading elec- tronic health record (EHR) systems. Go on social media and find comments from the users

of these systems. If you were leading a project team to select an EHR system for a large hospital, which one would you choose? Why?

3. Do research to determine the current level of adoption of DevOps around the globe. Which organizations seem to be leaders in DevOps? What initiatives are these companies taking that makes them leaders?

Career Exercises

1. A new advertising and promotion-planning system is being developed for a major manu- facturer of consumer products. Management is seeking candidates to serve as the product owner on this key $2 million, nine-month proj- ect. Identify some characteristics and desired experience that the ideal candidate would possess.

2. Perform research to learn what is required to have a successful career as a software developer for smartphones. What sort of education and experience is needed? What personal characteris- tics would be helpful in such a career? How

would one get started in such a career, and what are starting salaries?

3. Identify an information system frequently employed by people in a career field you are interested in. Discuss how you might be involved as a user in the development or acquisition of such a system for your future company. Identify three things that you could do as a project par- ticipant that would greatly improve the likelihood of a successful project. Now, identify three things that you could do (or fail to do) that could greatly diminish the probability of success of such a project.

554 PART 4 • Planning, Acquiring, and Building Systems

Case Studies

Case One

Etsy Uses DevOps for Rapid Deployment Looking for a unique gift—such as a personalized, hand- stamped fishing lure or maybe a vintage gold hairpin or even a crocheted hat for your cat? If so, you might want to join the 24 million active buyers who turn to the Web site Etsy as their source for handmade and vintage products—ranging from art and photography to clothing and jewelry to home décor and furniture.

Etsy was founded in 2005 in an apartment in Brooklyn, New York, by a small group of people who saw a need for an online exchange where crafters and artists could sell their handmade and vintage goods along with art and craft supplies. The company, which views itself as a global community of creative entrepreneurs, shoppers, manufacturers, and suppliers, now has more than 800 employees and a peer-to-peer e-commerce site that generated close to $2.4 billion in sales in 2015. Currently, the site has over 35 million items available for sale from 1.6 million active sellers around the world.

Early on, Etsy placed a high priority on developing a sophisticated technology platform to support its business, with an engineering culture centered around a philosophy that the company has dubbed “Code as Craft” (the company even operates an engineering blog under that name). However, as with many startups, the development of Etsy’s internal structures was not always carefully planned. As a result, siloes and other barriers to collaboration gradually developed across the company, affecting its ability to keep its software development efforts on the cutting edge.

Despite those challenges, the company grew rapidly, and as early as 2008, the company was deploying new releases to its site twice a week—a pace matched by few other companies at the time. However, each of those deployments typically took over four hours to complete, and according to Michael Rembetsy, vice president of technical operations at Etsy, “Deploys were very painful. We had a traditional mindset: developers write the code and ops deploys it.” That divide often resulted in faulty releases that shut down the site for prolonged periods, causing real concern for the users around the world who relied on the site to make a living.

When Chad Dickerson, who had spent years as CTO at Yahoo!, joined Etsy as its new CTO, he quickly brought in a new technical management team, which pushed the company to adopt a more agile approach to software development in order to roll out improvements and updates with greater ease and fewer disruptions. According to Jon Cowie, an operations engineer at Etsy, “Bringing that group in is what first planted the seed of DevOps and the move to a continuous rate of delivery, and it’s all really grown from there. As the company has grown, this idea that the closer

developers and operations work together and understand each other’s problems, the more the company can achieve, has really taken hold.”

Like many companies, Etsy was attracted to DevOps as a way to create a more responsive software development process—one that allows for continuous integration and deployment. However, adopting DevOps practices has also encouraged a more collaborative approach to development— a shift that has been both challenging and rewarding for the company. Notes Cowie, “The hardest part is getting the business culture right…. You may have to deal with stakeholders at different levels who may not like this idea of relinquishing some power or giving people access to systems they previously haven’t had.”

One of the big rewards for Etsy is that its developers are now able to push code to a production server up to 60 times a day. Often, the first release is to a limited audience of employees or a small, randomly selected group of users. With testing and feedback, the code can then be pushed to the entire Etsy community. According to Rembetsy, “We started to understand that if developers felt the responsibility for deploying code to the site they would also, by nature, take responsibility for if the site was up or down, take into consideration performance, and gain an understanding of the stress and fear of a deploy.”

As Rembetsy notes, “Mistakes happen, we find them, fix them, and move on. The important thing is to learn something from the process, and never make the mistake again in the future.”

Critical Thinking Questions 1. It is perhaps not surprising that Etsy was an early

adopter of DevOps. It is a relatively small company, with a start-up culture, and its move to DevOps was championed by company leaders. Do you think deploying DevOps practices would be more difficult in a larger, more established organization? How might a company begin to make the cultural changes needed to move to the more collaborative, rapid-deployment approach that DevOps offers?

2. At Etsy, new developers are expected to begin pushing code to production on day one. That expectation is one way Etsy encourages it employees to embrace change—and a certain degree of risk—instead of fear- ing it. Would you feel comfortable working as a busi- ness manager in a company that gives individual developers so much freedom and responsibility? What would be some of the advantages to a business man- ager of such a culture? What might be some of the disadvantages?

3. What would be some of the criteria you would use to measure the success of a shift to DevOps practices within a company?

CHAPTER 12 • System Acquisition and Development 555

SOURCES: “About Etsy,” Etsy, www.etsy.com/about/?ref=ftr, April 28, 2016; Dix, John, “How Etsy Makes DevOps Work,” Network World, February 19, 2015, www.networkworld.com/article/2886672/software /how-etsy-makes-devops-work.html; Donnelly, Caroline, “Case Study: What the Enterprise Can Learn from Etsy’s DevOps Strategy,” Compu- terWeekly, June 9, 2015, www.computerweekly.com/news/4500247782 /Case-study-What-the-enterprise-can-learn-from-Etsys-DevOps-strategy; Heusser, Matthew, “Continuous Deployment Done in Unique Fashion at Etsy.com,” CIO, March 12, 2012, www.cio.com/article/2397663/devel oper/continuous-deployment-done-in-unique-fashion-at-etsy-com.html; “What Is DevOps,” The Agile Admin, https://theagileadmin.com/what-is -devops, accessed April 27, 2016.

Case Two

British Telecom Spreading Agile Development across the Globe In 2005, British Telecom (BT) took a big risk: the company dropped its use of the waterfall system development process and embraced agile development. Previously, BT had outsourced the gathering of system requirements to a third company, which would typically take three to nine months to meet with customers and stakeholders and create a requirements list. Next, the project would move back to BT where programmers often struggled to interpret the requirements and then develop and test the system within 18 months—although some projects needed more time. In late 2005, however, BT took only 90 days to roll out a new Web-based system for monitoring phone traffic. The new system allowed traffic managers to change switches and other physical devices more quickly in order to handle shifts in load along BT’s telecommunications network. The success of this initial project reverberated throughout the IT world, as BT became the first telecommunications giant to adopt agile development—sometimes developing products in three 30-day iterative cycles.

The new system development approach had other advantages, too: programmers and customers communicated closely and teams from different locations around the world, initially the United Kingdom and India, worked together to develop the system. To overcome customer doubts, BT invited them to development “hot houses” to see how the agile development process worked. Many customers became such ardent believers that they adopted the agile approach themselves. In 2010, BT used its new system development process to create the 21st Century Next Generation Access Network process, which enjoyed an 80 percent return on its initial investment within its first year. Today, BT deploys agile development to service its customers across the globe.

In 2014, for example, BT applied the agile approach to deploy telepresence solutions for the international energy and chemical producer Sasol, a company with over 34,000 employees based in 37 countries. To oversee

its operations and interact with clients, senior Sasol managers based in South Africa were traveling millions of miles each year, which was not good for the managers, the company’s budget, or the planet. As an alternative, BT installed telepresence suites across South Africa and in Houston, London, Calgary, and Hamburg. Sasol achieved a 100 percent usage rate at each of these suites, and BT secured a five-year contract to provide continued support.

BT had one major concern about agile development: previously, the company had conducted 16 or 17 types of tests before deploying a new system. Many feared that a shorter life cycle meant compromising on quality assurance. However, BT now continues testing with customers after system setup and finds that testing the product with customer involvement has significant advantages.

“The main advantage I see is that you spend more time working on the right [system] features by talking to customers all the time and working on it,” says Kerry Buckley, a software developer who worked on the initial phone-traffic monitoring system. Moreover, software engineers working at BT are excited about working on customer-facing live applications. As one engineer notes, “All your work matters and will be released to the public.” Agile development at BT has taken system developers out of their isolated bubble, inspiring them, and proving to the IT world that agile development can work.

Critical Thinking Questions 1. Are there certain personal characteristics one should

look for in candidates who will participate in or lead agile system projects? If so, what are they, and why are they important?

2. How might the establishment of telepresence suites support the use of the agile system development pro- cess? What do you think are some of the capabilities of such suites?

3. How might extreme programming and DevOps provide further improvements in the BT system development process?

SOURCES: Hoffman, Thomas, “BT: A Case Study in Agile Programming,” InfoWorld, March 11, 2008, www.infoworld.com/d/developer-world /bt-case-study-in-agile-programming-112?page=0,0; Grant, Ian, “BT Switches to Agile Techniques to Create New Products,” ComputerWeekly, January 29, 2010, www.computerweekly.com/news/1280091969 /BT-switches-to-agile-techniques-to-create-new-products; “About Sasol: Overview,” Sasol, www.sasol.com/about-sasol/company-profile/over view; accessed July 8, 2014; “Turning a Far-Flung Organisation into a Single Community,” BT, July 9, 2014, http://letstalk.globalservices.bt .com/en; “Software Engineer, IVR at BT (British Telecom),” The JobCrowd, April 23, 2014, www.thejobcrowd.com/employer/bt-british -telecom/reviews/software-engineer-ivr-at-bt-british-telecom.

556 PART 4 • Planning, Acquiring, and Building Systems

Notes

1. Schuman, Evan, “What Amazon Is Doing with Its Supply Chain Could Devastate the Competition,” Computer- world, February 12, 2016, www.computerworld.com /article/3032656/retail-it/amazons-supply-chain-move -could-prove-devastating.html

2. Boulton, Clint, “Custom Software Drives Vitamin World Stores Remodeling,” CIO, Feb 12, 2016, www.cio.com /article/3033084/software/custom-software-drives -vitamin-world-stores-remodeling.html.

3. Boulton, Clint, “Walgreens CIO Starts with the Customer and Works Backward,” CIO, February 9, 2016, www.cio .com/article/3031054/vertical-industries/walgreens-cio -starts-with-the-customer-and-works-backward.html.

4. Boyd, Aaron, “Energy IT Project Failing due to Mismanage- ment, Poor Planning,” Federal Times, November 24, 2015, www.federaltimes.com/story/government/it/management /2015/11/24/eia-it-transformation/76307870/.

5. “Joint Application Development,” Liquid Mercury Solutions, http://liquidmercurysolutions.com/whatwedo /spdev/Pages/Joint-Application-Development.aspx, accessed February 21, 2016.

6. “Utilizing a Self-Steering Robotic Tractor in the Devel- opmental Phases of Rice,” Hitachi, www.hitachi.com.au /documents/news/150114-Utilizing-a-Self-steering -Robotic-Tractor-in-the-Developmental-Phases-of-Rice .pdf, accessed February 21, 2016.

7. “Ministry of Defence ‘Wasted Millions on Failed Computer System’,” Guardian, January 13, 2014, www .theguardian.com/uk-news/2014/jan/14/ministry-of -defence-failed-computer-system.

8. “LAPD Best Policing Practices through Early Interven- tion,” Sierra-Cedar, www.sierra-cedar.com/wp-content /uploads/sites/12/2015/07/CSS-LAPD.pdf, accessed February 22, 2016.

9. “Interagency Guidelines Establishing Information Secu- rity Standards,” Board of Governors of the Federal Reserve System, www.federalreserve.gov/bankinforeg /interagencyguidelines.htm, accessed June 9, 2014.

10. Ward, Brian, “The Importance of Good Interface Design,” heehaw.digital (blog), February 27, 2013, http://blog.heehaw.co.uk/2013/02/the-importance-of -good-interface-design.

11. Shneiderman, Ben and Plaisant, Catherine, Designing the User Interface: Strategies for Effective Human- Computer Interaction, 5.ed, 2009, Pearson: New York.

12. Porter, Joshua, “Principles of User Interface Design,” Bokardo (blog), http://bokardo.com/principles-of-user -interface-design/, accessed July 3, 2014.

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14. “SteelEye LifeKeeper,” SteelEye Technology, Inc., www .ha-cc.org/high_availability/components/application _availability/cluster/high_availability_cluster/steeleye _lifekeeper, accessed June 16, 2014.

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26. Brewin, Bob, “VA Failed to Protect Critical Computer Systems, Audit Finds,” Nextgov (blog), May 29, 2014, www.nextgov.com/defense/whats-brewin/2014/05 /va-failed-protect-critical-computer-systems-audit-finds /85429.

27. Osborne, Hilary, “Why Do Bank IT Systems Keep Failing?” Guardian, January 27, 2014, www.theguardian .com/money/2014/jan/27/bank-it-systems-keep-failing- lloyds-rbs-natwest.

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30. “What Is Agile?” Agile Methodology, http://agile methodology.org, accessed August 3, 2014.

CHAPTER 12 • System Acquisition and Development 557

31. “Core Scrum: What is Scrum?,” ScrumAlliance, www .scrumalliance.org/scrum/media/ScrumAllianceMedia /Files%20and%20PDFs/Learn%20About%20Scrum /Core-Scrum.pdf, accessed April 26, 2016.

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35. De Sousa, Susan, “The Advantages and Disadvantages of Agile Development,” My PM Expert, www.my-project -management-expert.com/the-advantages-and

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37. Greene, Daniel, “What Is DevOps,” TechCrunch, May 1, 2015, http://techcrunch.com/2015/05/15/what-is-devops.

38. Barker, Colin, “What Is DevOps and Why Does It Mat- ter?,” ZDNet, www.zdnet.com/article/what-is-devops -and-why-does-it-matter.

39. Gates, Robert, “Hotel Hits the Gas Pedal with Souped Up DevOps Model,” TechTarget, March 7, 2016, http:// searchdatacenter.techtarget.com/news/4500278116 /Hotel-hits-the-gas-pedal-with-souped-up-DevOps-model.

558 PART 4 • Planning, Acquiring, and Building Systems