Week 12: Chapter - Acquiring Information Systems and Applications

1. One of the major problems that organisations face is to allocate fixed costs among different IT tasks. Fixed costs refer to costs that remain the same regardless of any change in the activity level.


Another complication regarding the assessment of costs of IT is that the cost of a system does not end when the system is installed.Maintaining, debugging, and improving the system can result in an accumulation of costs over many years.


2. Intangible benefits from IT are difficult to quantify. In such cases, it is most likely that an inputwill be requested about the intangible benefits that an information system provides for you.


3. NPV stands for net present value. NPV method is used to convert future values of benefits to their present value equivalent by “discounting” them at the organisation’s cost funds. The method works best when the costs and benefits are well defined enough to be converted into monetary values.


Return on Investment (ROI) measures management’s effectiveness in generating profits with its available assets. The ROI measure is a percentage, and the higher the percentage return,the better.


Business case approach refers to a written document that managers use tojustify funding one o more specific applications or projects. It describes what you do, how you do it, and how a new system could better support you. A business case also provides the bridge betweenthe initial plan and its execution.


4. Outsourcing services are provided by:

· Software companies such as IBM and Oracle, who offer services for developing, operating, and maintaining IT applications.

· IT outsourcers such as EDS

· Large CPA companies

· Management consultants


5. An application service provider (ASP) is an agent or a vendor who assembles the software needed by enterprises and packages the software with services such as development, operations, and maintenance. Next, the customer accesses these applications via the Internet or VANs through a standard Web browser interface.


The advantages of ASP include:

· save costs

· reduce software maintenance and upgrades

· reduce user training

· make the company more competitive by reducing time-to-time market and enhance the company’s ability to adapt to changing market conditions.


6. ASP also has some disadvantages:

· ASPs might not offer adequate security protection.

· Software might not be perfect fit for the desired application.

· Company must make certain that the speed of the Internet connection between the customer and the Asp is adequate to handle the requirements of the application.


7. The selection and management of vendors and software packages is a major aspect of developing an IT application. The steps are as follows:


Step 1: Identify Potential Vendors. Through various sources such as software catalogs, web searches, peers in other companies, lists provided by hardware vendors, and technical and trade journals, companies can identify potential software.


Step 2: Determine the Evaluation Criteria. A vital part in evaluating a vendor and a software package is to develop a well defined set of evaluation criteria.


Step 3: Evaluate Vendors and Packages. The goal of the evaluation is to determine the gaps between the company’s needs and the capabilities of the vendors and their application packages.


Step 4: Choose the Vendor and Package. Once the company has narrowed down the list of potential suppliers, it can begin negotiations with these vendors to determine how their packages might be modified to remove any discrepancies with the company’s IT needs.


Step 5: Negotiate a contract. The contract with the software vendor is vital and specifies both the price of the software and the type and amount of support that the vendor agrees to provide.


Step 6: Establish a Service Level Agreement. A service level agreement (SLA) is a formal agreement that specifies how work is to be divided between the company and its vendors.


8. A request for proposal (RFP) is a document that is sent to potential vendors inviting them to submit a proposal describing their software package and how it would meet the company’s needs.