Material Chapter16

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Chapter
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Systems Applications (Step 1) (Step 3)
Acquiring and Developing Business Applications and Infrastructure

Learning Objectives
After studying this chapter, you will be able to: Describe the process of IT systems acquisition. Describe IT project identication, justication, and planning. List the major IT acquisition options and criteria for option selection. Describe the process of vendor and software selection. Understand some major implementation issues. Understand the issue of connecting IT applications to databases, other applications, networks, and business partners. Describe business process redesign and its importance to new application development.
Flickrs Application Development 2.0 Method
16.1 The Framework of IT Application Acquisition 16.2 Identifying, Justifying, and Planning IT 16.3 Acquiring IT Applications: Available Options
Selecting an Acquisition Approach and Other Implementation Issues
16.4
16.5 Connecting to Databases, Enterprise Systems,

and Business Partners: Integration (Step 4)
16.6 Business Process Redesign 16.7 Managerial Issues

Minicase:
Web Services Give Merrills Legacy Systems New Life in the Web World
Problem-Solving Activity: Online Minicases:
Determining an Effective and Efcient Approach to Managing an IT Acquisition
16.1 National Commercial Bank Jamaica Limited 16.2 How Sterngold Acquired an E-Commerce System
Integrating IT
ACC FIN MKT OM HRM IS
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IT-PERFORMANCE MODEL
In this chapter, we discuss the key issues involved in the acquisition or development of information system applications. The adage from the 1990s that what an enterprise can do depends on what its ISs can do still applies today. One could successfully argue that information systems are never builtbut are always being built! Since updated or upgraded IT applications are critical to what a business can achieve, they are also critical to protability. In this chapter, we discuss traditional and new methodologies based on Web 2.0 development methods for acquiring IT applications.
Where Do We Want to Go? Mission, Goals, Objectives
Innovative IT applications Integration of data and enterprise systems Scalable infrastructure
Web 2.0 tools Programming languages Project management tools SaaS
How Can We Improve Performance? Solutions, Critical Responses

Support business processes Share data between programs and business partners
Information Technology (IT)
How Shall We Get There? Strategy, Plans

Rapid systems development methods Agile application development processes Insourcing
How Well Are We Doing? Monitoring, Performance, Comparing
Project management techniques Cost/benefit of applications
The business performance management cycle and IT model.
FLICKRS APPLICATION DEVELOPMENT 2.0 MODEL

Flickr (flickr.com) is a popular photo-sharing Web community that had been purchased by Yahoo! in 2005. It is considered the best photo-management and -sharing application on the Web, and an excellent example of Web 2.0 functionality. Flickr lets users upload their photos and tag them with descriptive words. Users develop relationships with other users. They can display photos in sets, or albums where a single photo can appear multiple times, and groups that are organized around special interests. Users can also add photos to Flickr Web pages, RSS feeds, e-mails, and blogs for their friends and family to view. Flickrs active community and addictive sharing features have attracted many millions of users. Developing applications for Flickr, or any other popular user market that is always in flux, requires a fast and agile methodology.
Developing Web 2.0 Applications

On July 18, 2008, Flickrs application developers released the updated Web site. The deployment was the 36th new release within one week where 627 changes had been made by their 21 Web 2.0 developers. Such constant tweaking of an application, called a perpetual beta, is common in the Web 2.0 world for a consumer market that is always in flux. Traditionally, a beta version is the rst version of a software application that is released while it is still actively being debugged and rened. Beta level software generally includes
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all features as well as known nonserious problems or bugs. Quick, incremental updates with close user involvement (similar to how users participate in wiki development) are key characteristics of the emerging software development paradigm championed by Web 2.0 businesses.
Rapid vs Traditional Systems Development Methods

Rapid development of Web applications can be much more effective and less expensive than traditional systems development life cycle (SDLC) methods (also described in Section 16.3 and Technology Guide 5). When applications are developed using SDLC methods, they proceed formally through a series of distinct phases, such as requirements analysis, design, coding and debugging, system testing, and implementation. One major problem with SDLC is that users usually do not participate sufciently throughout the design phases to ensure that the application meets their needsresulting in expensive re-work and delays. With SDLC, users often do not see the application until implementation, at which time it is fully developed so changes would be the most expensive. In contrast to the SDLC, the new Web 2.0 approach is an agile and fast development method during which
designers and users interact and participate closely in all of the phases. Applications are better when developers are not insulated from the people who use their applications. When developers hear users complaints or compliments directly, they are better informed and motivated than when they are detached from usersand rely instead on presentation slides and bar charts that represent users desires in a meeting room.
Benets of Agile Application Development Processes

Flickr and other Web 2.0 businesses are appling this type of development process, known as application development 2.0. This process can bring signicant benets to corporate IT departments if developers are willing to shift their approach away from traditional SDLC methods and to systems design. Constant interaction with users provides developers with almost immediate notication of bugs and users desires. Designers who are used to traditional SDLC methods tend to look at Web 2.0-focused designs as lacking discipline or structure. But in reality, designers have built discipline into the process that allows them to be very responsive to enterprises and users needs.
Lessons Learned from This Case

Based on interviews with systems analysts and executives of Web 2.0 rms, Computerworld compiled a list of ve ways that enterprise IT managers can benet from using Web 2.0 development processes, as Flickr does. 1. Break the barrier between developers and end users. Developers should interact closely with internal users to gather information and feature requirements. Enterprises might believe that their internal applications are different from external ones because employees have no choice but to use the applications no matter how unsatisfactory they are. Unsatisfactory applications, however, can increase training costs and employee turnover, and reduce productivity, all of which are a hit to the enterprises bottom line. 2. Keep it simple. Many times traditional development teams will identify a need and then develop multiple ways of meeting it, even though users would be happiest with only one way. Without close interaction with users, developers may be unaware of users preference for simple interfaces. It is better to build a very simple service or application that serves a basic need and then add features after the release than it is to create a complex, feature-rich application that tries to do a lot right from the start. Complexity makes Web applications slow and clumsy. 3. Use scripting language. Web 2.0 applications are often built with dynamic scripting languages, such as Ruby, Python, Perl, and PHP, because they are better suited for the project than Suns Java or Microsofts .Net. With dynamic scripting languages, developers can build new applications 30 to 40 percent faster than with Java or .Net. 4. Release the application early and often. To maximize user feedback and satisfaction, release the beta version as soon as possible and update constantly. 5. Let users, not developers, determine new features. Major Internet enterprises such as Amazon.com and Google
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release new features to small user groups and then compare their feedback to a control group. This method provides better validation for new features and products than customer surveys or discussions between users and product managers. Some applications are not a good t for a Web 2.0 development methodology. However, some enterprises are start-
ing to recognize the value of application development 2.0 compared to SDLC methods. Since user-focused developed techniques could reduce the number of IT development projects that are scrapped before they are completed, we expect growth in application development 2.0 methods.
Sources: Compiled from developer.yahoo.com/flickr/ (accessed August 2008), Framingham (2008), and Schroeder (2008).
16.1
The Framework of IT Application Acquisition

This chapter focuses on the acqusition of IT applications (also referred to as software or systems).We include in acquisition all approaches: buying, leasing, or building. The acquisition issue is complex for various reasons: 1. 2. 3. 4. There is a wide range of sizes and types of IT applications. Applications keep changing over time. Applications may involve several business partners. There is no single way to acquire IT applications.
The diversity of IT applications requires a variety of acquisition methodologies and approaches. Small applications (e.g., EC storefronts) can be developed with HTML, scripting languages, Java, or another programming language. They can also be quickly implemented by using commercial packages or Web 2.0 methods (as described in the Flickr case), or leased from an application service provider (ASP). Larger or specialized applications can be developed in-house or outsourced (see Chapter 13). Building medium-to-large applications requires extensive integration with existing information systems such as corporate databases, intranets, enterprise resource planning (ERP), and other application programs. While the process of IT application acquisition varies, it follows a fairly standard form in many cases.
THE IT ACQUISITION PROCESS
The acquisition process of an IT application has ve major steps, which are shown in Figure 16.1 and discussed below. Step 1. Planning, Identifying, and Justifying IT-Based Systems. IT-based systems are usually built as enablers of some business process(es). Therefore, their planning must be aligned with the organizations overall business plan and the specic tasks they intend to support. Often processes may need to be redesigned or restructured to fully reap the benets of the supporting IT applications. Also, the systems may need to be justied (e.g., by a cost-benet analysis; see Chapters 13 and 17). Both of these activities may be complex, especially for systems that require a signicant investment to acquire, operate, and maintain. The output of this step is the decision to invest (or not) in a specic application and a timetable, budget, and assigned responsibility.This step is usually done in-house, with consultants if needed. All other steps can be done in-house or outsourced. Step 2. Creating an IT Architecture. IT architecture, as discussed in Chapter 2, is a plan for organizing the underlying infrastructure and applications of the IT project. The architecture plan includes the following: Data required to fulll the business goals and vision Application modules that will deliver and manage the information and data Specic hardware and software on which the application modules will run
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16.1 The Framework of IT Application Acquisition

Project Identification, Justification, and Planning (Step 1) IT an enabler From business goals to information needs System-required functionalities Need to solve problems Business process restructuring, redesign Identify IT projects Justify IT investment
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IT Architecture (Step 2) Information architecture Data architecture Application architecture Technical architecture Organization architecture Feasibility IT Infrastructure
Acquisition (Development) Options (Step 3) Build Buy Business Partners Lease Partner How, which methodology What, from whom What, from whom Which partner, how to partner
Management Vendor management Project management Evaluation
Business Partners
Testing, Installation, and Integration (Step 4) Business Partners Testing, installation, integration, training, security, conversation, deployment, etc. Operations, Maintenance, and Updating (Step 5) Operations Maintenance and updating Replacement
Figure 16.1 The process of IT application acquisition. Security, scalability, and reliability required by the applications Human resources and procedures for implementing the IT project Various IT tools and methodologies can be used to support the creation of an IT application architecture. The results obtained from step 2 are routed to the strategic planning level; e.g., to a steering committee. Based on the results of step 2, the application portfolio (a portfolio is a set of applications) or a specic project may be changed. For example, the steering committee may scale down a specic project because it is too risky at that time. Once the architecture is compiled and the project gets nal approval, a decision about how to acquire the specic IT application must be made. Step 3. Selecting an Acquisition Option. IT applications can be acquired through several alternative approaches that will be discussed in detail in Section 16.3. The major options are Build the system in-house Have a vendor build a custom-made system Buy an existing application and install it, with or without modications, in-house or through a vendor Lease standard software from an ASP, or lease through utility computing or a software-as-a-service (SaaS) arrangement Enter into a partnership or alliance that will enable the company to use someone elses application Use a combination of these approaches The consideration criteria for selecting among the various options are presented in Section 16.4. Once an option is chosen, the system can be acquired. At the end of this step, an application is ready to be installed and deployed. No matter what option is chosen, you most likely will have to select one or more vendors, and then work with and manage these vendors.
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Chapter 16 Acquiring and Developing Business Applications and Infrastructure

A: An IT project is managed B: An IT project stumbles on crises Overrun As an IT project is developed Time A Resources Performance Cost Time B Resources Performance Underrun Cost Overrun
Figure 16.2 Triple constraints

of IT project management.
Deviations from original estimate
Step 4. Testing, Installing, Integrating, and Deploying IT Applications. Once an acquisition option has been selected, the next step involves getting the application up and running on the selected hardware and network environment. One of the steps in installing an application is connecting it to back-end databases, to other applications, and often to partners information systems. Details of the connection process are supplied in Section 16.6. This step can be done in-house or outsourced. During this step, the modules that have been installed need to be tested. A series of tests are required: Unit testing: testing the modules one at a time Integration testing: testing the combination of modules interacting with other applications Usability testing: testing the quality of the users experience when interacting with the portal or Web site Acceptance testing: determining whether the application meets the original business objectives and vision. After the applications pass all of the tests, they can be rolled out to the end users. Here developers have to deal with issues such as conversion from the old to the new system, training, changes in priorities affecting acceptance of the application, and resistance to changing processes to maximize the benet from the application. Step 5. Operations, Maintenance, and Updating. It usually takes as much time, effort, and money to operate and maintain an application as it does to acquire and install it in the rst place. For the maximizing of its continual usage, an application needs to be continually updated. Software maintenance can be a big problem due to rapid changes in the IT eld. Operation and maintenance can be done in-house and/or outsourced.
MANAGING THE DEVELOPMENT PROCESS
The IT acquisition process most likely will be a complex project that must be managed properly. Except for small applications, an IT project team is usually created to manage the process, budget, costs, and vendors. Projects can be managed with project management software, such as Microsoft Project (ofce.microsoft.com/project).Three criteria that are used to evaluate the effectiveness of IT project management are performance, time, and cost.That is, was the IT project done right, on budget, and on time? Standard project management techniques and tools are used by project managers to manage project resources to keep them on time, on budget, and within performance specications. See Figure 16.2. Finally, implementing an IT project may require restructuring one or more business processes. In the next sections, we look at steps 1, 3, and 4 in more detail.
1. List and briey discuss the ve steps of the information systems acquisition process. 2. List the options of system acquisition. 3. Describe some implementation and management issues.
Review Questions
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16.2 Identifying, Justifying, and Planning IT Systems Applications (Step 1)
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16.2
Identifying, Justifying, and Planning IT Systems Applications (Step 1)

In Chapter 13, we describe the process of IT planning from a macro point of view that is, from the perspective of all IT resources in the enterprises. Recognizing the need to acquire an application can occur as a result of macro planning. However, applications can be initiated for other reasons, such as to solve a recurrent problem, as illustrated in the Swedish bank case described in IT at Work 16.1. Other sources of proposed or suggested IT project applications are Requests from user departments Vendors recommendations Need to comply with new government regulations Auditors recommendations Recommendation of the steering committee Recommendation of the IS department Top management requests Search for high-payoff projects.
IDENTIFYING HIGHPAYOFF PROJECTS
It is natural that organizations will prefer to search for high-payoff applications, especially if they are not difcult to implement. Online Minicase 16.1 illustrates how National Commercial Bank Jamaica Limited achieved a 100 percentplus return on investments (ROI) by rebuilding its IT infrastructure.
IT at Work 16.1
Web Services Get Swedish Banking Applications Talking to Each Other
Centrala Studie Stodsnamnden (CSN) is the Swedish governments banking authority responsible for providing student loans and grants to Swedes who are pursuing higher education. Each year, CSN loans out SEK$2.5 billion to a half-million people and delivers a host of nancial services to thousands more. In January 2002, at the start of the new school semester, when online trafc to the organization is typically four to ve times greater than in other months, CNSs Web site went down. Students were forced to phone CSN representatives directly to receive help with new loan and grant applications and payback information. The voice-response system, which was designed to meet a much lower demand, had proved inadequate. A group of technicians led by the production team worked hard to stabilize the Web site and ease the burden caused by overuse of the voice-response system. We found the load problem and tried to tame it by adding servers, but the solution was like patchworkand in the following weeks we could see the same pattern with instability occur, says Orjan Carlsson, Chief Architect of CSNs information technology department. Consistently poor Web site performance coupled with long waits on the telephone was enough to cause a public outcry. Given CSNs heterogeneous enterprise environmentwhich comprised everything from IBM mainframes to UNIX-based applications, to systems running Microsoft Windows NTa solution that could support cross-platform communication was a necessity. Only a exible, scalable, open-standards-based integration architecture could supply the level of interoperability the organization desired, especially for the high volume during the start of a semester. A locally based IBM team worked closely with CSN to investigate solution possibilities. Together, the technical teams decided
FIN GLOBAL
that the best way for the organization to realize cross-platform, program-to-program communication was through Web Services built on IBM WebSphere. This architecture allows CSNs disparate applications to exchange information with each other without human intervention. The team implemented a system that also eliminated the organizations reliance on an outsourced application service provider for its voice-response system. The system leverages Web Services to enable the Windows NTbased voiceresponse system to execute transactions that are easily recognized by CSNs back-end (back-ofce) operations. The new Web Servicesenabled system allows CSN to deliver student account status and transaction information to phones (voice response) and to CSNs portal at a signicantly reduced cost. Web Services are essential for us today and in the future, says Carlsson. According to Carlsson, Web Services enable a loosely coupled architecture, resulting in a highly integrated solution. Reuse of code also gives CSN an advantage. One interface can serve several business systems using different channels, making it easy to modify existing channels or add new ones, a feature that signicantly reduces total cost of ownership. CSN dramatically saves on developer costs as well as gets new functionality to market faster and with more frequency. The result is a exible and scalable Web Servicesenabled architecture that is essentially transparent to end users, giving CSN the cross-platform communication system it needs to operate efciently, serve its customers, and lower costs.
Sources: Compiled from Plummer and McCoy (2006), and IBM (2002).
For Further Exploration: How did this application arise? What does the solution provide? What role does the business partner play?
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Once potential IT projects are identied, they usually need to be justied. To do so, one can use some of the methods described in Chapter 17. Since enterprises have limited resources, they cannot embark on all projects at once. Therefore, like other proposed enterprise projects, they must be evaluated against competing demands for funds. The evaluation is usually divided into two parts. 1. First, it is necessary to explore the need for each systemthat is, nd the information needs of the users and how the application will meet those needs. 2. Second, it is necessary to justify it from a cost-benet point of view. The need for information systems is usually related to organizational planning and to the analysis of its performance vis--vis that of its competitors. The cost-benet justication looks at the wisdom of the specic IT investment compared to investing in alternative IT or other projects. You must determine if it makes sense from a business perspective to pursue the IT project at this time and if this is the best use of your companys cash. Once justication is done, a plan for the application acquisition can be made.
IT PROJECT JUSTIFICATION
PLANNING FOR THE SPECIFIC IT APPLICATION
Before an IT project is implemented, or even before a company decides how to acquire the application, it is necessary to understand the enterprisess current business processes, or way of doing business, in the area the application is going to be used. For example, if you plan to install an e-procurement application, study thoroughly the ins and outs of procurement in your business. This can be done in a systematic way, such as part of the SDLC method. After the current business processes are understood, the focus shifts to dening the objectives and business requirements of the proposed system, which determine its scope. The initial scope of the project is dened in terms of cost, effort, schedule, and deliverables, and functional specications are generated. An extensive feasibility study may be needed. It is important that the IT project (or development) team explicitly dene the scope and prove its feasibility to help avoid runaway projects. As the name implies, runaway projects seem to have no end and usually fail eventuallywasting a lot of time and resources. In addition to documenting the requirements for the new system, studying data and information ows, the planning process also requires an assessment of the risk of failure and how to manage that risk.This then leads to the creation of a time schedule, set of tasks to be performed, and set of milestones. Each milestone signies a key event in the completion of the project. Milestones are used to more accurately determine whether or not the project is on schedule. If you need the system very quickly, you will favor buying or leasing one. The planning process covers resources other than timespecically, money (budget), labor, and equipment, if needed. Project planning also examines the issue of connectivity to databases and to partners systems, relevant government regulations, what to do if some employees lose their jobs as a result of the implementation of the application, and so on. Issues such as connecting to business partners and databases are the foundations for step 2, the creation of the IT architecture. This step is discussed in detail in Technology Guide 5.
Review Questions
1. 2. 3. 4. 5. 6.
What is involved in identifying IT projects? How is such identication done? What is the basic idea of justifying an application? What is the benet of a project management approach? What is a milestone? What is one mistake that can turn a project into a runaway project?
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16.3 Acquiring IT Applications: Available Options (Step 3)
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16.3
Acquiring IT Applications: Available Options (Step 3)

There are several options for acquiring IT applications. The major options are buy, lease, and develop in-house. Each of these is described in this section, along with several minor options.
BUY THE APPLICATIONS (OFF-THE-SHELF APPROACH)
Standard features required by IT applications can be found in many commercial packages. This option is also known as a turnkey approach. Buying an existing package can be a cost-effective and time-saving strategy compared with in-house application development. The buy option should be carefully considered and planned for to ensure that all critical features for current and future needs are available in the selected package. Otherwise, such packages will quickly become obsolete. However, organizational needs are rarely fully satised by one software package. It is therefore sometimes necessary to acquire multiple packages to support even a single business process. These packages then need to be integrated with each other as well as with existing software (see Section 16.5). The advantages and limitations of the buy option are summarized in Table 16.1. The buy option is especially attractive if the software vendor allows for modications. However, the option may not be attractive in cases of high obsolescence rates or high package cost. Leasing an IT application can result in substantial cost and time savings. In those cases where extensive maintenance is required or where the cost of buying is very high, leasing is very advantageous, especially for small-to-medium enterprises (SMEs). Leasing is also advantageous when a company wants to experiment with a package before making a heavy up-front buy investment, protect its own internal networks, quickly utilize the application, or rely on experts to establish a major project, usually with a Web site. Leasing can be done in one of several ways: Lease the IT application from an outsourcer and then install it on the companys premises. The vendor can help with the installation and frequently will offer to contract the operation and maintenance of the system as well. Many conventional IT applications are leased this way. Lease the IT application from an application service provider (ASP) that hosts the application at its data center. An ASP is an agent or vendor who assembles the software needed by enterprises and packages them usually with outsourced development, operations, maintenance, and other services. Major ASPs for enterprise IT systems are Oracle, Microsoft, and IBM.A concept related to the lease option is software-as-a service.
LEASE THE APPLICATIONS
TABLE 16.1
Advantages and Limitations of the Buy Option

Disadvantages of the Buy Option Software may not exactly meet the companys needs. Software may be difcult or impossible to modify, or it may require huge business process changes to implement. The company will not have control over software improvements and new versions. (Usually it may only recommend.) Purchased software can be difcult to integrate with existing systems. Vendors may drop a product or go out of business.
Advantages of the Buy Option Many different types of off-the-shelf software are available. Much time can be saved by buying rather than building. The company can know what it is getting before it invests in the software. The company is not the rst and only user. Purchased software may avoid the need to hire personnel specically dedicated to a project. The vendor updates the software frequently. The price is usually much lower for a buy option.
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Software-as-a-Service. Software-as-a-service (SaaS) refers to software that is rented. Rather than purchase a software product and pay for occasional upgrades, a company may subscribe to an SaaS, and all updates are provided during the term of the subscription.When the subscription period expires, the software is no longer valid. Web-based applications lend themselves to the SaaS model because they can be easily controlled at the server level. SaaS usually costs less than store-bought software and requires users to install and boot up nothing more than a browser. The biggest obstacle to renting software is the inability to integrate different applications. Sharing data between a CRM program and billing software, for example, is a challenge, especially if some of your applications are hosted while others are kept in-house. The major factors driving the switch to SaaS are (DAgostino, 2005): Reducing the risks involved in acquiring new software Inuencing product and service quality via an ongoing relationship with vendors Changing usage commitments as business circumstances change Preparing nancially justiable business cases Predicting ongoing expenses more accurately, which is important with IT budgets being tightened and scrutinized for better return on investment and value
IN-HOUSE DEVELOPMENT: INSOURCING
A third development strategy is to develop or build applications in-house. Although in-house developmentinsourcingcan be time consuming and costly, it may lead to IT applications that better fit an enterprises strategy and vision (e.g., the X4ML project of Merrill Lynch discussed in the end of chapter Minicase) and differentiate it from competitors. The in-house development of IT applications, however, is a challenging task, as most applications are novel, and may involve multiple organizations. Development Options for In-House Development. Three major options exist for in-house development: Build from scratch. This option should be considered only for specialized IT applications for which components are not available. This option is expensive and slow, but it will provide the best t to the organizations needs. Build from components. The required applications are often constructed from standard components (e.g., random number generators or Web servers such as Microsofts IIS). Commercially packaged and homegrown components must integrate tightly for component-based development to meet its requirements.This is especially critical for real-time applications and for e-business systems. The scope of component integration and code reuse is broadening, too. Integrating applications. The application integration option is similar to the buildfrom-components option, but instead of components being used, entire applications are employed. This is an especially attractive option when IT applications from several business partners need to be integrated. Integration methods such as Web Services or Enterprise Application Integration (EAI) can be used. Insourcing is a challenging task that requires specialized IT procedures and resources. For this reason, most organizations usually rely on packaged applications or outsource the development and maintenance of their IT applications. Methods Used in In-House Development. Several methods can be used when you develop IT applications in-house. Two major development methods are: Systems development life cycle (SDLC). Large IT projects, especially ones that involve infrastructure, are developed according to the SDLC methodology using several tools. Details about this approach are provided in Technology Guide 5.
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16.3 Acquiring IT Applications: Available Options (Step 3)
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Prototyping methodology. With a prototyping methodology, an initial list of basic system requirements is dened and used to build a prototype. The prototype is then improved in several iterations, based on users feedback. This approach can be very rapid. The prototype is then tested and improved, tested again, and developed further, based on the users feedback. The prototyping approach, however, is not without drawbacks. There is a risk of getting into an endless loop of prototype revisions, as users may never be fully satised. Such a risk should be planned for because of the rapid changes in IT and business models. Web 2.0 or Application 2.0 methodology. As described in the Flickr opening case, this development approach involves quick, incremental updates with close user involvement. For new application developments, a beta (prototype) version is developed and then renedalso in very close collaboration with users.
END-USER DEVELOPMENT
End-user development (also known as end-user computing) is the development and use of ISs by people outside the IS department. This includes users in all functional areas at all skill levels and organizational levels: managers, executives, staff, secretaries, and others. Reasons for End-User Development. PCs have diffused throughout organizations, communication with data servers (mainframes and others) has improved, and software tools have improved in capability, quality, price, and user-friendliness. Consequently, users now have the necessary tools to develop their own IT applications, including Web-based systems. Web-based tools such as wikis and content management make end-user development more efcient and effective, as illustrated in IT at Work 16.2. Risks of End-User Development. End-user development, as discussed in IT at Work 16.2, is beneficial to both workers and the organization as a whole. It also
IT at Work 16.2
End-User Development Using Wikis
In Hawaiian, wiki wiki means quick. In IT-speak, a wiki is a Web site that lets anyone quickly add or edit content. It is a Web site designed for collaboration. The concept began small, as a grassroots way to build online knowledge repositories (such as Wikipedia.org). But startups such as JotSpot (jot.com) are out to harness the power of wikis for businesses. JotSpots wiki-based software lets companies create wikis for business processes. Here are some end-user developments utilized by JotSpots customers: Create an intranet. Publish company information, such as news or employee guidelines. Project management. Schedule project deadlines, assign tasks, and dene product specications. Collaborate with virtual teams. Communicate with remote contractors or clients. Track software bugs. Log defects and build custom queries. Call center support. Access case histories and increase customer support. Opsware (opsware.com), data center automation software owned by HP, has used JotSpot to create in a few hours the applications that might have cost $50,000 to $100,000 to develop in Java. Opswares technical sales team uses one JotSpot wiki to manage information such as proposals and status reports associated with pilot projects for prospective customers. Its a very rich document management system, says Jason Rosenthal, vice president of client services at Opsware. Its so quick and easy that a new user can learn to use it in 10 to 15 minutes. The software also reduced the time it took the company to prepare for a proof-ofconcept from ve days to three, Rosenthal claims, adding that wikis will revolutionize how companies share information internally. Says Rosenthal, its easier for new users to do what it used to take a Webmaster to do.
Sources: Compiled from Dragoon (2005), and from jot.com (accessed August 2008).
For Further Exploration: One of the extraordinary stories of the Internet age is Wikipedia, a free online encyclopedia that anyone can edit. The Web 2.0 encyclopedia has added millions of articles in 200 languages since it was founded in 2001. Experts now suggest that the quality and accuracy of Wikipedia is as good as that of Britannica, a highly prestigious encyclopedia. Use Wikipedia as an example to discuss the power of end-user development.
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has some limitations. End users may not be skilled enough in computers, so quality and cost may be jeopardized unless proper controls are installed. Also, many end users do not take time to document their work and may neglect proper security measures. There are three categories of potential quality risks: 1. Substandard or inappropriate tools used in IT application development 2. Risks associated with the development process; e.g., the inability to develop workable systems or the development of systems that generate erroneous results 3. Data management risks; e.g., loss of data or use of stale, inappropriate, or incorrect data.
OTHER ACQUISITION OPTIONS
A number of other acquisition options are available to IT developers, and in particular for e-commerce applications. Join an E-Marketplace or an E-Exchange. With this option, the company plugs itself into an e-marketplace. For example, a company can place its catalogs in Yahoos marketplace. Join a Third-Party Auction or Reverse Auction. Similar to the previous option, a company can plug into a third-party auction or reverse auction site fairly quickly. Alternatively, a company can join a B2B exchange that offers auctions, as described in Chapter 6. Engage in Joint Ventures. There are several different partnership or joint venture arrangements that may facilitate EC application development. For example, four banks in Hong Kong have developed a joint e-banking system. Join a Public Exchange or a Consortium. Finally, a company can join a public exchange (Chapter 6) or join a consortium (a vertical exchange owned by a group of big players in an industry), which may have applications developed to t the needs of companies in the industry. Hybrid Approach. A hybrid approach combines the best of what the company does internally with an outsourced strategy. Hybrid models work best when the outsourced partner offers higher security levels, faster time-to-market, and superb service-level agreements. Criteria for selecting a development strategy are provided in Section 16.4.
Review Questions
1. 2. 3. 4. 5. 6.
List the major acquisition and development strategies. Compare the buy option against the lease option. List the in-house development approaches. Describe end-user development and cite its advantages and limitations. List other acquisition options. What are the major factors driving a switch to software-as-a-service?
16.4
Selecting an Acquisition Approach and Other Implementation Issues

This section is about selecting an acquisition approach, vendor and software selection, and implementation issues.
CRITERIA FOR SELECTING AN IT ACQUISITION APPROACH
A major issue faced by any company is which method(s) of acquisition to select. To do so, the company must consider many criteria, such as those provided in Table 16.2. Some criteria may conict with others, so managers must decide which criteria are
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TABLE 16.2

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Criteria for Determining Which Acquisition Approach to Use
The functionality and exibility of packages Information requirements User friendliness of the application Hardware and software resources Installation difculties; integration Maintenance services requirements Vendor quality and track record Estimated total costs of ownership Ability to measure tangible benets Personnel needed for development Forecasting and planning for technological evolution (what will come next) Scaling (ease, cost, limits) Sizing requirements Performance requirements Reliability requirements Security requirements
most important. For a discussion of the selection criteria in the table, see Online Brief 16.1. Using all of the previous criteria, an organization can select one or more methods for acquiring IT systems. A comparison of the buy/build/rent options is given in Table 16.3.
VENDOR AND SOFTWARE SELECTION
Externally acquired IT applications should be evaluated to ensure that they provide the following advantages: On time. Completion and implementation of the system by the scheduled target date. On budget. System cost is within budget. Full functionality. System has all features in the original specications. Several independent organizations and magazines conduct software comparisons. For smaller packages, users can use trialware (e.g., trialware.org) from the Internet before purchase. Most vendors offer demo software for a limited testing time.Also, vendors may demonstrate the software. Six steps in selecting a vendor and software package are the following: 1. Determine the evaluation criteria and weigh the importance of each. 2. Identify potential vendors. 3. Evaluate vendors and packages and interview current users.
TABLE 16.3
The Rent versus Buy versus Build Consideration

Consider a traditional license (buy) if . . . the application requires a lot of customization or integration you have an available team of experienced IT personnel your needs for computing resources are relatively stable Consider an in-house development (build) if . . . the application is unique you have very expensive investment in legacy systems you need a xed amount of computing resources
Consider software as a service (rent) if your company . . . needs to free IT resources to focus on critical business operations has limited IT support has rapidly changing computing needs and requirements
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Step One: Identify Potential Vendors Step Two: Determine the Evaluation Criteria
Responses to RFP
Evaluation Criteria
Step Three: Evaluate Vendors and Packages
Step Four: Choose the Vendor and Package
Step Five: Negotiate a Contract
Figure 16.3 The process of a vendor and software package.
Step Six: Establish a Service-Level Agreement
4. Choose the vendor and package based on criteria, weights, and feedback. 5. Negotiate a contract and get legal advice. 6. Establish a service-level agreement (SLA). These six steps are illustrated in Figure 16.3 and explained in Online Brief 16.2.
OTHER IMPLEMENTATION ISSUES
The following implementation issues are related to IT resource acquisition. Insource or outsource Web site? Many large enterprises are capable of running their own publicly accessible Web sites for advertising purposes. However, Web sites for online selling may involve complex integration, security, and performance issues. For those companies venturing into such Web-based selling, a key issue is whether the site should be built in-house, thus providing more direct control, or outsourced to a more experienced provider. Outsourcing services, which allow companies to start small and evolve to full-featured functions, are available through many ISPs, telecommunications companies, and software vendors. Consider an ASP. The use of ASPs is recommended for SMEs and should be considered by many large companies as well. Evaluate the alternatives to in-house systems development. In-house systems development requires highly skilled employees to undertake a complex project. Organizations may sometimes nd it preferable to acquire IT resources rather than build in-house. Methods for acquiring IT resources outside the information systems department include purchase, lease, outsourcing, use of ASPs, and end-user development. Do a detailed IT architecture study. Some companies rush this process, which can be a big mistake. If the high-level conceptual planning is wrong, the entire project is at great risk. Security and ethics. During the IT acquisition process, pay close attention to security risks. It is likely that vendors and business partners will be involved. Protecting customers privacy is a must, and consideration of how to use clickstream and other data legally is essential.
1. List ve criteria for selecting a development option. 2. List the major steps of selection of a vendor and a software package. 3. List three major implementation issues.
Review Questions
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16.5
Connecting to Databases, Enterprise Systems, and Business Partners: Integration (Step 4)

IT applications, especially large ones, need to be connected to other systems (e.g., ERP) and infrastructure (including databases). They also must be connected to such items as partners systems or public exchanges. Such connections are referred to as integration and are the subject of this section.
CONNECTING TO DATABASES
Most IT applications need to be connected to a database. For example, when you receive a customers order, you must check if the item is in stock.To check availability, the ordering system needs to be connected to the inventory system. Several possibilities exist. Customers with a Web browser can access catalogs in the sellers database, request specic data, and receive an instant response. Here the application server manages the clients requests. The application server also acts as the front end to complex databases. In addition to connecting to back-end databases, many IT applications also require integration with a variety of other systemsERP, CRM, KM, SCM, EDI, data warehouses, and other applications both inside and outside the company. The integration can also be handled with enterprise application integration (EAI).These products integrate large systems. TIBCO (tibco.com), WebMethods (Webmethods.com), and WebSphere InterChange Server from ibm.com are examples of companies that offer EAI. A common integration results from the need to integrate an ordering system with the back ofce (order fulllment, inventory, accounting, and payment). Integration requires the study and redesign of existing processes. Connecting to business partners is critical, especially for B2B e-commerce. Such connection is done via EDI, EDI/Internet, XML, and extranets. Connection to business partners along the supply chain involves connecting a companys front- and back-ofce e-commerce applications, as shown in Figure 16.4. In addition to the networking problem, one must deal with issues of connectivity, compatibility, security, scalability, and more. Companies connect to business partners for many reasons. One reason is content visualization from a partners Web site; see IT at Work 16.3. Both internal and external integration can be improved by using Web Services. Web Services are self-contained, self-describing business and consumer applications delivered over the Internet that users can select and combine through almost any device, ranging from personal computers to mobile phones. In a service-oriented style of architecture (SOA), software components such as Web Services can be invoked by other programs that act as clients or consumers of those services.
CONNECTING TO BACK-END SYSTEMS
CONNECTING TO BUSINESS PARTNERS
WEB SERVICES AND SERVICE-ORIENTED ARCHITECTURE (SOA) FOR INTEGRATION
Business Partners Supplies and Suppliers Manufacturing Assembly
My Company
Distribution, Marketing Channels
Business Partners
Sales, Customer Service
Customers
e-Commerce
Production, HRM, Finance, Accounting, Engineering
CRM
Figure 16.4 Connecting to

business partners.
Back Office
Integration
Front Office
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IT at Work 16.3
Lincoln Financial Excels by Using Web Services
Lincoln Financial is a $5 billion provider of life insurance, retirement products, and wealth management services. It distributes its offerings through financial advisors, banks, and independent brokers. In most of the insurance industry, if consumers want to access their accounts or download a form from a broker site, they click on a link that takes them to the insurance providers site, where they input a separate password or user ID. To become a partner of choice on such sites, Lincoln Financial wanted tighter integration with brokers Web sites. But Lincoln also wanted to go a step further, providing content and account access within its partners Web sites, as well as single sign-on for consumers. This was not simple. Outlining the Lincoln content in an HTML frame would not provide the partners look and feel. A pure Web Services approach was also out; most of Lincolns clients could not support that kind of system, since the partner then had to process the XML/SOAP messages. For a short time, Lincoln maintained subsites for its partners that wanted them, and those sites linked to requested content. However, maintenance of the subsites was burdensome. The ultimate answer was Service Broker. It took three developers four months to build the pilot of Service Broker, which is a Web Services-based application with a front end that the company calls a servlet. When the servlet is installed on a partners server, it provides a wrapper that can accept Lincolns content and applications and still maintain the partners look and feel. The servlet manages in a Web Services application many of the functions the partner would have to manage, such as authentication, digital signature, passwords, and page rendering. When the partner wants to include Lincoln content or an application, it needs to add just one line of code. In Spring 2004, Lincoln was the only insurer that did not require customers to leave a partners Web site to access information. This capability provided Lincoln with competitive advantage.
Source: Compiled from Brandel (2004) and lfg.com (accessed August 2008).
For Further Exploration: What systems were connected between the business partners? Why was it important to maintain the partners look and feel?
With Web Services and SOA, functions within existing programs and within ERP, CRM, SCM, and other packages can be automatically invoked and executed anywhere in the world based on business rules. As illustrated in the Merrill Lynch case (Minicase at end of the chapter), Web Services and SOA provide inexpensive and rapid solutions for integration across different hardware, operating systems, new applications, and legacy systems. Furthermore, business processes that are managed via Web Services and SOA adapt faster to changing customer needs and business climates than home-grown or purchased applications.
Review Questions
1. 2. 3. 4. 5. List some internal systems that usually need to be connected to new applications. Why is it especially important to connect to databases? Dene Web Services and service-oriented architecture. What is mainly connected between business partners? Why is integration critical to the success of IT systems acquisition?
16.6
Business Process Redesign

Of the organizational responses to environmental pressures (Chapter 1), business process redesign and its variants have received a lot of management attention.A variant and predecessor of business process redesign is business process reengineering. In this section, we will explore business process redesign. Lets begin by looking at some of its drivers.
THE DRIVERS OF PROCESS REDESIGN
A business process is a collection of activities that convert inputs into outputs. Some reasons why business process redesign may be needed are listed below: Adding commercial software Restructuring or eliminating old processes prior to automation Need for information integration
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METHODOLOGIES FOR RESTRUCTURING
605
Reducing cycle time Need for customization Streamlining the supply chain Improving customer service and implementing CRM Participating in private or public e-marketplaces Conducting e-procurement Enabling direct online marketing Transforming to e-business
Business process reengineering (BPR) is a methodology in which an organization fundamentally and radically changes its business processes to achieve dramatic improvement. Initially, BPR referred to complete restructuring of organizations. The concept later changed to include only one of a few processes (rather than an entire organization) due to numerous failures of BPR projects and the emergence of Webbased applications that solved many of the problems that BPR was supposed to solve. Today, the concept of BPR has been rened to business process redesign, which can focus on anything from the redesign of an individual process to redesign of a group of processes (e.g., processes involved in e-procurement), to redesign of the entire enterprise. Another extension of BPR is business process management. Business process management (BPM) is a new method for restructuring that combines workow systems (Chapter 13) and redesign methods. This emerging methodology covers three process categories: people-to-people, systems-to-systems, and systems-to-people interactions, all from a process-centered perspective. In other words, BPM is a blending of workow, process management, and applications integration. Business process redesign, or even the redesign of only one process, depends on IT, which we address in the next section. IT has been used to improve productivity and quality by automating existing processes. However, when it comes to restructuring or redesign, the traditional process of looking at problems rst and then seeking technology solutions for them may need to be reversed.A new approach is rst to recognize powerful solutions that make redesign and BPR possible, and then to seek the processes that can be helped by such solutions. Process redesign can break old rules that limit the manner in which work is performed. IT-supported redesign and BPR examples can be found in any industry, private or public. The role of IT in redesigning business processes can be very critical and is increasing due to the Internet and intranets. One objective of redesign is to overcome problems by integrating fragmented information systems. Besides creating inefcient redundancies, information systems have developed along departmental or functional boundaries, making it difcult to generate the information required for effective decision making. Integration may cross not only departmental boundaries, but also organizational ones, reaching suppliers and customers. Namely, it should work along the extended supply chain. This is especially important in B2B e-marketplaces and exchanges. The integration of an organizations information systems can offer new capabilities such as the introduction of a single point of contact for customers (e.g., a case manager or a deal structurer). We can see how this single point of contact works by looking at a credit-approval process at IBM. The old process took seven days and eight steps. It involved creation of a paper folder that was routed sequentially through four departments (sales, credit check, business practices, nance, and back to sales). In the redesigned process, one person, the deal structurer, conducts all of the necessary tasks. This one generalist replaces four specialists. An expert system provides the deal structurer with the guidance needed to find information in the databases, plugging numbers into an evaluation model, and pulling standardized clauses
THE ROLE OF IT IN BUSINESS PROCESS REDESIGN
BPR AND INFORMATION INTEGRATION
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(boilerplates) from a le. For difcult situations, the generalist can get help from a specialist. As a result, the turnaround time has been slashed from seven days to four hours.
BPR FAILURES AND SUCCESSES
There are many success stories of BPR and at least as many failures. BPR failures. The PROSCI (prosci.com) organization conducted a survey of several hundred companies to learn the best BPR practices and the reasons for BPR failures. Some of the reasons for failure are high risk, inappropriate change management, failure to plan, internal politics, lack of participation and leadership, insufcient stakeholder involvement, poor analyses of business processes, inexible software, lack of motivation, and lack of top management support. BPR successes. Despite the high failure rate of business process redesign, there are many cases of success, especially when less than the entire organization is restructured. While BPR failures tend to get more widespread publicity, success stories are published mostly by vendors and in academic and trade journals. For example, there is evidence of the success of BPR in the public sector. Khong and Richardson (2003) report on extensive BPR activities and successes in banking and nance companies in Malaysia; Hughes et al. (2005) describe the critical role of business process redesign in successfully creating e-government in Ireland. Organizations should consider restructuring their business processes or sometimes the entire business. When successful, redesign has great potential to improve an organizations competitive position.
Review Questions
1. 2. 3. 4. 5.
Dene business processes and BPR. List the drivers of process redesign. Dene BPM. Describe the enabling role of IT in BPR. Why do so many BPR projects fail?
16.7
Managerial Issues
1. Global and cultural issues. Developing systems across organizations and countries could result in problems in any phase of system development. For example, in developing the Nagano Olympics system in 1998, IBM found at the last minute that pro-North Korea groups in Japan took offense at a reference to the Korean War written on the Web site. Although the material was taken from the World Book Encyclopedia, it offended some people. IBM had to delete the reference and provide an apology. IBM commented, Next time were going to do a ton of research rst versus just do it and nd out the hard way. A special difculty exists with Internet-related projects, where legislation is still evolving. Offshore outsourcing is increasingly a proper option for IT systems acquisition. Yet many offshore outsourcing relationships get into trouble due to cultural differences where both the client and vendor organizations believe they are fullling their obligations, yet both sides end up being disappointed with the results and frustrated with the relationship. The client organization must take the time to understand the vendors cultural milieu and educate the internal organization on these differences. This may entail developing teambuilding workshops with the vendor organization to help identify and bridge the cultural differences. 2. Ethical and legal issues. In designing systems, one should consider the people in the system. Redesigning IT systems means that some employees will have to completely reengineer their work. Some may feel too old to do so. Conducting supply chain or business process reorganization may result in the need to lay off, retrain, or transfer employees. Should management notify the employees in advance regarding such possibilities? What about those older employees who may be difcult to retrain?
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Other ethical issues may involve sharing computing resources or personal information, which may be part of the new organizational culture. Finally, individuals may have to share computer programs that they designed for their departmental use, and may resist doing so because they consider such programs their intellectual property. Conducting interviews to nd managers needs and requirements must be done with full cooperation. Measures to protect privacy must be taken. Appropriate planning must take these and other issues into consideration. 3. User involvement. The direct and indirect users of a system are likely to be the most knowledgeable individuals concerning requirements and alternatives that will be the most effective. Users are also the most affected by a new information system. IS analysts and designers, on the other hand, are likely to be the most knowledgeable individuals concerning technical and data-management issues as well as the most experienced in arriving at viable systems solutions. Functional managers must participate in the development process and should understand all of the phases. They must also participate in the make-or-buy decisions and software selection decisions. The right mixture of user involvement and information systems expertise is crucial. 4. Change management. People use information systems and get used to how existing systems work.They may react to new systems in unexpected ways, making even the best technically designed systems useless. Changes brought about by information systems need to be managed effectively. Of special interest is the issue of motivating programmers to increase their productivity by learning new tools and reusing preprogrammed modules. Technology transfer is a transfer of knowledge rather than physical devices. It is now increasingly recognized that changes in technology and work processes are fundamentally culture changes, and preparing organizational members for such culture changes is an important undertaking that cannot be ignored. 5. Risk management. Building information systems involves risk. Systems may not be completed, completed too late, or require more resources than planned. The risk is large in enterprise systems. It is helpful to think of IT system acquisition as a process of embodying technical knowledge and knowledge of customer needs into a coherent solution. Under this view, those who want to understand and manage the risks associated with IT systems acquisition must rst focus on the translation of customer needs into project requirements and specications. See Tiwana and Keil (2004) for a risk assessment tool that can be used to perform intuitive what-if analyses to guide managers in determining how they can proactively reduce IT project risk.
How IT Benets You

For the Accounting Major
Accounting professionals are often required to work closely with those in information technology on the design of IT systems specications and acquisition of enterprise systems applications such as electronic commerce and data warehouses. Accountants play important managerial, advisory, and evaluative roles in connection with the acquisition of various information technologies by organizations of all types and sizes. To maintain the accountancy professions credibility and capability in supporting new, strategic information technology initiatives, the competence of accountants in IT resources acquisition must be preserved and enhanced. build) today is a major managerial as well as nancial decision. The choice of systems acquisition is heavily determined by nancial considerations such as the total cost of ownership (TCO) and return on investment (ROI). Multiple sets of assumptions and implementation plans look into every facet of an IT projects costs and expected benets. IT project evaluation thus requires valuable advice and input from nancial professionals.
For the Human Resources Management Major

IT systems acquisition is not an acquisition of hardware and software, but a knowledge acquisition. People do not pay for technology; they pay for what they can get from technology. The importance of training on the use of a new IT-based system cannot be overemphasized. Training includes the transmission of technical expertise to fundamental change of work activities and attitudes. Thus,
For the Finance Major

Since the bursting of the dot-com bubble, information systems projects require signicant nancial justication. The strategy to acquire IT resources (to buy or to rent or to
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and increase orders and revenue, the marketing staff can redevelop the content of the Web site so that it speaks to the audience in clear, action-oriented language. Then the IT staff can explore ways to capture the trafc that comes in and organize it in ways that marketing can use. Marketing professionals should always consider what they can achieve if a particular IT infrastructure and system is acquired.
the role of the human resources professional in providing adequate and proper training to end users is critical in IT systems acquisition.
For the IS Major

The subject of information systems grew out of computer science to ll a gap created by the failure of computer programmers to understand and solve business problems. An information systems professional, by virtue of background and training, plays a key role in IT acquisition. The processes of systems acquisitionfrom project planning to the creation of IT architecture, to the acquisition (buying, leasing or building) of technology, testing, integration, and implementation of IT systemsall require extensive skills and knowledge from IS professionals.
For the Production/Operations Management Major

An organization acquires IT capability not just to automate, but also to redesign its existing business processes. The implementation of enterprise systems is a technological change that leads to organizational and cultural changes. Production and operations management (POM) traditionally focuses on managing processes to produce and distribute products and services. A great deal of POM focus is on efciency and effectiveness of processes. Therefore, the expertise and services from POM professionals are needed to stabilize and fully utilize an acquired IT infrastructure and system.
For the Marketing Major

An organization should leverage the power of technology and the strategic vision of marketing during the process of IT systems acquisition. To improve Web trafc
Key Terms
Application development 2.0 591 Business process 604 Business process management (BPM) 605 Business process reengineering (BPR) 605 End-user computing 599 End-user development 599 IT architecture 592 Milestone 596 Software-as-a-service (SaaS) Web Services 603 598
Chapter Highlights
Information systems acquisition includes all approaches to obtaining systems: buying, leasing, or building. The objective of IT application acquisition is to create, buy, or rent applications and implement them. The process of acquiring IT applications can be divided into ve steps: planning and justication; IT architecture creation; selecting development options; testing, installing, and integrating new applications; and conducting operations and maintenance. This process needs to be managed. There are several sources for identifying new projects (applications) such as the need to solve a business problem. The justication process is basically a comparison of the expected costs versus the benets of each application. The planning of projects involves schedules, milestones, and resource allocation. The major options for acquiring applications are buy, lease, or build (develop in-house). Other options are joint ventures and use of e-marketplaces or exchanges (private or public). Building in-house can be done by using the SDLC, or by using prototyping or other methodologies, and it can be done by outsourcers, the IS department employees, or end users (individually or together). In deciding how to acquire applications, companies must consider multiple criteria.These criteria may conict (e.g., qual-
(Numbers Refer to Learning Objectives) ity and price). Companies need to make sure that all criteria are considered and to evaluate the importance of each criterion for the company. The process of vendor and software selection is composed of six steps: identify potential vendors, determine evaluation criteria, evaluate vendors and packages, choose the vendor and package, negotiate a contract, and establish service-level agreements. Most of the implementation issues are related to decisions regarding selection of development options and vendor and software selection. Also, security and ethics need to be considered. New applications need to be connected to databases, other enterprise systems, and so on inside the organization. They may also be connected to partners information systems. Web Services and service-oriented architecture (SOA) provide inexpensive and rapid solution for application integration. Introducing new technology may require restructure or redesign of processes. Also, processes may need to be redesigned to t standard software. Several methodologies exist for redesigning processes, notably BPR and BPM. IT can help in analyzing, combining, improving, and simplifying business processes.
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Group Assignments and Projects
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Virtual Company Assignment

Acquiring Information Systems for The Wireless Caf
Go to The Wireless Cafs link on the Student Web Site. There you will be asked to plan and recommend how to proceed in upgrading and adding information systems for the restaurant.
Instructions for accessing The Wireless Caf on the Student Web Site:
1. 2. 3. 4. 5. Go to wiley.com/college/turban. Select Turban/Voloninos Information Technology for Management, Seventh Edition. Click on Student Resources site, in the toolbar on the left. Click on the link for Virtual Company Web site. Click on Wireless Caf.
Questions for Discussion

1. Discuss the advantages of using the application 2.0 methodology instead of the SDLC methodology. 2. Why is it important for all business managers to understand the issues of IT resource acquisition? 3. Review the opening case. Why was the development approach appropriate? 4. Discuss the similarities between building a wiki and using the application 2.0 methodology. 5. You have decided to use a third-party application to develop and deploy a Web-based EC system. Create a checklist for determining which third-party EC application products will best meet your application requirements. 6. A rm decides to make its EC system more dynamic by tying its application to a back-end data warehouse. What 7. are some of the ways in which the rm could accomplish this task? Discuss the reasons why end-user-developed IT systems can be of poor quality. What can be done to improve the situation? End-user systems developers usually work for managers whose IT knowledge is limited. Discuss the types of problems to which this situation could lead, and suggest possible ways of dealing with these problems. Discuss the role of ASPs. Why is their attractiveness increasing? (Hint: Consider utility computing.) Explain why IT is an important enabler of business process redesign.
8.
9. 10.
Exercises and Projects

1. Enter ecommerce-guide.com/. Find the product review area. Read reviews of three software payment solutions. Assess them as possible components. 2. Examine some business processes in your university or company. Identify two processes that need to be redesigned. Employ some of the discussed BPR drivers to plan the redesign. Be innovative. 3. Explore project management software on vendors Web sites. Select a single project management package, download the demo, and try it. Make a list of the important features of the package. Be sure to investigate its Web, repository, and collaboration features. Report your ndings to the class.
Group Assignments and Projects

1. Assessment of the functionality of an application is a part of the planning process (step 1). Select three to ve Web sites catering to the same type of buyer (e.g., several sites that offer CDs or computer hardware), and divide the sites among the teams. Each team will assess the functionality of its assigned Web site by preparing an analysis of the different sorts of functions provided by the site. In addition, the team should assess the strong and weak points of its site from the buyers perspective. 2. Divide into groups, with each group visiting a local company (include your university). At each rm, study the systems acquisition process. Find out the methodology or methodologies used by each organization and the types of application to which each methodology applies. Prepare a report and present it to the class. 3. As a group, design an information system for a startup business of your choice. Describe your chosen IT resource acquisition strategy, and justify your choices of hardware, software, telecommunications support, and other aspects of a proposed system. 4. Have teams from the class visit IT acquisition efforts at local companies. Team members should interview members of the project team to ascertain the following information. a. How does the project contribute to the goals and objectives of the company? b. Is there any information architecture in place? If so, how does this project t into that architecture? c. How was the project justied? d. What project planning approach, if any, was used? e. How is the project being managed?
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Internet Exercises
1. DMReview.coms Software Demo Lab allows visitors to preview the latest software from industry vendors. Try some of the Software Demos on EC applications. 2. Enter the Web sites of the GartnerGroup (gartnergroup. com), the Yankee Group (yankeegroup.com), and CIO (cio.com). Search for recent material about ASPs and outsourcing, and prepare a report on your ndings. 3. Enter the Web site of IDC (idc.com) and nd out how the company evaluates ROI on portals, supply chain, and other IT projects. 4. Enter teradatastudentnetwork.com and take the Webbased course, What Do Business & IT Have in Common? (teradata.com/t/page/145089/index.htm). Learn how to create a data warehouse that meets your needs and expectations. 5. Visit the Web site of Resource Management Systems (rms.net) and take the IT Investment Management Approach Assessment Self-Test (rms.net/self_test.htm). Compare your organizations IT decision-making process with those of best-practices organizations. 6. StoreFront (storefront.net) is the leading vendor of e-business software. At its site, the company provides demonstrations illustrating the types of storefronts that it can create for shoppers. The site also provides demonstrations of how the companys software is used to create a store. a. Run the StoreFront demonstration to see how this is done. b. What sorts of features does StoreFront provide? c. Does StoreFront support larger or smaller stores? d. What other products does StoreFront offer for creating online stores? What types of stores do these products support? 7. Surf the Internet to nd some recent material on the role IT plays in support of business process redesign or business process reegineering. Search for products and vendors and download an available demo.
Minicase
Web Services Give Merrills Legacy Systems New Life in the Web World
The Problem
Merrill Lynch (ml.com) is one of the worlds leading nancial management and advisory companies, with ofces in 36 countries and territories. Founded in 1914, Merrill has a huge IBM mainframe installationone of the largest in the worldwith 1,200 programmers supporting some 23,000 mainframe programs that process 80 million transactions per day. There are limitations to Merrills mainframe infrastructure. As new Internet-based applications, such as self-help credit card balance checks, were being developed, programmers needed to access data locked in the mainframe vaults. It is difcult to tap directly into those vaults using nonmainframebased software. Merrill tried copying the data into Oracle, Sybase, or Microsoft SQL databases, which could more easily integrate with server-based applications. But the copying of the data created two problems: Copying tends to be unreliable because of disk errors, read errors, and running-out-of-space errors. Second, the data could be out-of-date as soon as it was copied. For example, a client making several trades would have to wait until the following day to see an accurate balance in his account. As a result, a client might make a trade believing there were adequate funds, but that trade would have to be rejected because, in fact, the funds were not available. It was estimated that 90 percent of all new development costs would involve the plumbing to integrate mainframe applications with newer platforms. It was possible to open up Merrills mainframe vault to modern applications. In a simple scenario, a client using an online application to look up his credit card balance submits a request via a Web browser. The mainframe runs the requested operation (obtain credit card balance) and sends the information back to the client via SOAP. X4ML makes it easier for the mainframe to interpret the online application, and in turn assists in allowing the online program to understand the response delivered by the mainframe. There was a centralized directory for listing Web Services at Merrill so that programmers could reuse and combine services that had been developed. Creating new applications from the Web Services then became a matter of accessing and combining operations in the directory. The value of Web Services was demonstrated over the last three years when Merrill launched a $1 billion effort to create a new suite of applications for wealth management that are available for use by Merrills 14,000 desktop nancial advisers.
The Results
Since 2001, the in-house development team of Merrill has generated more than 420 Web Services by reusing existing legacy applications. There was no need to purchase additional hardware or to change application codes on the mainframe systems. The company managed to use Web Services technology to cut as much as (US$42 million) 90 percent of the cost of developing new applications. As a result, the prot margin of Merrill increased from 17 percent in 2001 to 28.5 percent in 2005. In December 2005, Merrill sold the X4ML technology for an undisclosed sum to SOA Software, a Los Angeles-based vendor of service-oriented architecture systems. X4ML has since been renamed Service-Oriented Legacy Architecture (SOLA). By building a service-oriented architecture, Merrill easily integrated its decades-old legacy applications with new Web-
The Solution
Web Services seemed the ideal solution to the challenge. In 2001, Merrill Lynch created a service-oriented architecture platform (SOAP) that it named X4ML (ML for Modernizing Legacy) to leverage its heavy investment in mainframe applications and hardware. X4ML enables mainframe legacy programs and the functions contained within them to be exposed as Web Services.
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References
based software and has preserved the rms multibillion-dollar investment in mainframe technology.
Sources: Compiled from Duvall (2006), Joshi and Namjoshi (2006), and ml.com (accessed August 2008).
611
2. What IT acquisition option was selected by Merrill Lynch? Why? 3. Relate the case to the issue of integration. 4. What is the role of Web Services in integrating Merrills legacy applications with new software? 5. What problems were solved by the use of SOA and Web Services in modernizing Merrills mainframe technology?
Questions for Minicase

1. What are the limitations of Merrills mainframe infrastructure?
Problem-Solving Activity
Determining an Effective and Efcient Approach to Managing an IT Acquisition
Managing a project with Microsoft Project is often the approach to IT project management. But many users prefer to use Microsoft Excel instead. The main reasons are that MSProject is too expensive, wastes too much time to set up and keep updated, and is tough to use. The debate between Excel and Project has valid arguments for either approach. In this activity, you will evaluate using Excel for managing a large IT project. for Project Management. You can also go to ehow. com and then search for this title. 2. Then visit ehow.com/video_2324033_plan-large-project. html and read How to Plan a Large Project and watch the video. 3. Review the capabilities of MS-Project for managing large projects. 4. Prepare a report comparing the advantages and disadvantages of using Excel and MS-Project to manage a large IT project. In your comparison, assume that the IT project management team will consist of ten users, each user has Excel 2007 and Internet access, and no one has MS-Project.
Problem-Solving Activities and Questions

1. Visit ehow.com/how_4460942_use-excel-project-management.html and read the four steps on How to Use Excel
Online Resources
More resources and study tools are located on the Student Web Site and on WileyPLUS. Youll nd additional chapter materials and useful Web links. In addition, self-quizzes that provide individualized feedback are available for each chapter.
Online Briefs for Chapter 16 are available at wiley.com/college/turban:

16.1 Criteria for Determining Which Acquisition Approach to Use 16.2 The Process of Vendor and Software Selection
Online Minicase for Chapter 16 is available at wiley.com/college/turban:

16.1 How Sterngold Acquired an E-Commerce System
References
Brandel, M., Lincoln Financial Syndicates Content with Web Services, ComputerWorld, March 15, 2004. Dragoon, A., End-User Development: Something Wiki This Way Comes, CIO Magazine, April 2005. DAgostino, Rent or Buy, CIO Insight, May, 2005. Duvall, M., Supercharged, Baseline, October, 2005. Framingham, H. H., Five Web 2.0 Development Lessons for Enterprise IT, ComputerWorld, July 28, 2008, computerworld.co.nz/news.nsf/mgmt/ 9135CB06BA6A2C5CCC25749100081195 (accessed August 2008). Hughes, M., M. Scott, and W. Golden, The Role of Business Process Redesign in Creating E-Government in Ireland, Business Process Management Journal, May 2005. Joshi, M., and J. Namjoshi, Evolving an Agile Enterprise: A Business Case for SOA Adoption, Patni white paper, Patni Computer Systems Ltd., India, February 2006. Plummer, D. C., and D. W. McCoy, Achieving Agility: The View through a Conceptual Framework, Gartner Research, ID Number: G00137820, April 2006. Potter, K. S., and R. H. Brown, The Future of Outsourcing: What the Numbers Tell Us, Gartner Research, ID Number: G00139007, May 2006. Schroeder, S., Why Less Is More and How to Unlock the Web, Mashable Social Networking News, June 29, 2008, mashable.com/2008/06/29/less-ismore-unlock-the-web (accessed August 2008). Tiwana, A., and M. Keil, The One-Minute Risk Assessment Tool, Communications of the ACM, 47(11), November 2004.

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Acquiring and Developing Business Applications and Infrastructure

Flickrs Application Development 2.0 Method

16.5 Connecting to Databases, Enterprise Systems,

16.6 Business Process Redesign 16.7 Managerial Issues

Problem-Solving Activity: Online Minicases:

Determining an Effective and Efcient Approach to Managing an IT Acquisition

Where Do We Want to Go? Mission, Goals, Objectives

Innovative IT applications Integration of data and enterprise systems Scalable infrastructure

Web 2.0 tools Programming languages Project management tools SaaS

How Can We Improve Performance? Solutions, Critical Responses

Information Technology (IT)

How Shall We Get There? Strategy, Plans

How Well Are We Doing? Monitoring, Performance, Comparing

Project management techniques Cost/benefit of applications

The business performance management cycle and IT model.

FLICKRS APPLICATION DEVELOPMENT 2.0 MODEL

Developing Web 2.0 Applications

Rapid vs Traditional Systems Development Methods

Benets of Agile Application Development Processes

Lessons Learned from This Case

The Framework of IT Application Acquisition

16.1 The Framework of IT Application Acquisition

Management Vendor management Project management Evaluation

Chapter 16 Acquiring and Developing Business Applications and Infrastructure

Figure 16.2 Triple constraints

Deviations from original estimate

16.2 Identifying, Justifying, and Planning IT Systems Applications (Step 1)

Identifying, Justifying, and Planning IT Systems Applications (Step 1)

IDENTIFYING HIGHPAYOFF PROJECTS

Chapter 16 Acquiring and Developing Business Applications and Infrastructure

PLANNING FOR THE SPECIFIC IT APPLICATION

16.3 Acquiring IT Applications: Available Options (Step 3)

Acquiring IT Applications: Available Options (Step 3)

BUY THE APPLICATIONS (OFF-THE-SHELF APPROACH)

LEASE THE APPLICATIONS

Advantages and Limitations of the Buy Option

Chapter 16 Acquiring and Developing Business Applications and Infrastructure

IN-HOUSE DEVELOPMENT: INSOURCING

16.3 Acquiring IT Applications: Available Options (Step 3)

Chapter 16 Acquiring and Developing Business Applications and Infrastructure

OTHER ACQUISITION OPTIONS

Selecting an Acquisition Approach and Other Implementation Issues

CRITERIA FOR SELECTING AN IT ACQUISITION APPROACH

16.4 Selecting an Acquisition Approach and Other Implementation Issues

Criteria for Determining Which Acquisition Approach to Use

The Rent versus Buy versus Build Consideration

Chapter 16 Acquiring and Developing Business Applications and Infrastructure

Step Three: Evaluate Vendors and Packages

Step Four: Choose the Vendor and Package

Step Five: Negotiate a Contract

Figure 16.3 The process of a vendor and software package.

Step Six: Establish a Service-Level Agreement

Connecting to Databases, Enterprise Systems, and Business Partners: Integration (Step 4)

CONNECTING TO BACK-END SYSTEMS

CONNECTING TO BUSINESS PARTNERS

WEB SERVICES AND SERVICE-ORIENTED ARCHITECTURE (SOA) FOR INTEGRATION

Business Partners Supplies and Suppliers Manufacturing Assembly

Sales, Customer Service

Figure 16.4 Connecting to

Chapter 16 Acquiring and Developing Business Applications and Infrastructure

Business Process Redesign

THE DRIVERS OF PROCESS REDESIGN