Hiring an outside company to perform some or all of a systems development project is called

ALTERNATIVE SYSTEMS-BUILDING APPROACHES

Systems differ in terms of their size and technological complexity and in terms of the organizational problems they are meant to solve. A number of systems-building approaches have been developed to deal with these differences. This section describes these alternative methods: the traditional systems life cycle, prototyping, end-user development, application software packages, and outsourcing.

Traditional Systems Life Cycle

The systems life cycle is the oldest method for building information systems. The life cycle methodology is a phased approach to building a system, dividing systems development into formal stages. Systems development specialists have different opinions on how to partition the systems-building stages, but they roughly correspond to the stages of systems development that we have just described.

           The systems life cycle methodology maintains a very formal division of labor between end users and information systems specialists. Technical specialists, such as system analysts and programmers, are responsible for much of the systems analysis, design, and implementation work; end users are limited to providing information requirements and reviewing the technical staff �s work. The life cycle also emphasizes formal specifications and paperwork, so many documents are generated during the course of a systems project.

           The systems life cycle is still used for building large complex systems that require a rigorous and formal requirements analysis, predefined specifications, and tight controls over the systems-building process. However, the systems life cycle approach can be costly, time consuming, and inflexible. Although systems builders can go back and forth among stages in the life cycle, the systems life cycle is predominantly a �waterfall� approach in which tasks in one stage are completed before work for the next stage begins. Activities can be repeated, but volumes of new documents must be generated and steps retraced if requirements and specifications need to be revised. This encourages freezing of specifications relatively early in the development process. The life cycle approach is also not suitable for many small desktop systems, which tend to be less structured and more individualized.

Prototyping consists of building an experimental system rapidly and inexpensively for end users to evaluate. By interacting with the prototype, users can get a better idea of their information requirements. The prototype endorsed by the users can be used as a template to create the final system.

           The prototype is a working version of an information system or part of the system, but is meant to be only a preliminary model. Once operational, the prototype will be further refined until it conforms precisely to users� requirements. Once the design has been finalized, the prototype can be converted to a polished production system.

           The process of building a preliminary design, trying it out, refining it, and trying again has been called an iterative process of systems development because the steps required to build a system can be repeated over and over again. Prototyping is more explicitly iterative than the conventional life cycle, and it actively promotes system design changes. It has been said that prototyping replaces unplanned rework with planned iteration, with each version more accurately reflecting users� requirements.

STEPS IN PROTOTYPING

Figure 14-11 shows a four-step model of the prototyping process, which consists of the following:

1. Step 1: Identify the user�s basic requirements. The system designer (usually an information systems specialist) works with the user only long enough to capture the user�s basic information needs.

2. Step 2: Develop an initial prototype. The system designer creates a working prototype quickly, using tools for rapidly generating software.

3. Step 3: Use the prototype. The user is encouraged to work with the system to determine how well the prototype meets his or her needs and to make suggestions for improving the prototype.

4. Step 4: Revise and enhance the prototype. The system builder notes all changes the user requests and refines the prototype accordingly. After the prototype has been revised, the cycle returns to step 3. Steps 3 and 4 are repeated until the user is satisfied.

FIGURE 14-11 The prototyping process
The process of developing a prototype can be broken down into four steps. Because a prototype can be developed quickly and inexpensively, systems builders can go through several iterations, repeating steps 3 and 4, to refine and enhance the prototype before arriving at the final operational one.

ADVANTAGES AND DISADVANTAGES OF PROTOTYPING

Prototyping is most useful when there is some uncertainty about requirements or design solutions. Prototyping is especially useful in designing an information system�s end-user interface (the part of the system with which end users interact, such as online display and data-entry screens, reports, or Web pages). Because prototyping encourages intense enduser involvement throughout the systems development life cycle, it is more likely to produce systems that fulfill user requirements.

           However, rapid prototyping can gloss over essential steps in systems development. If the completed prototype works reasonably well, management may not see the need for reprogramming, redesign, or full documentation and testing to build a polished production system. Some of these hastily constructed systems may not easily accommodate large quantities of data or a large number of users in a production environment.

Some types of information systems can be developed by end users with little or no formal assistance from technical specialists. This phenomenon is called end-user development. A series of software tools categorized as fourth-generation languages makes this possible. Fourth-generation languages are software tools that enable end users to create reports or develop software applications with minimal or no technical assistance. Some of these fourth-generation tools also enhance professional programmers� productivity.

           Fourth-generation languages tend to be nonprocedural, or less procedural, than conventional programming languages. Procedural languages require specification of the sequence of steps, or procedures, that tell the computer what to do and how to do it. Nonprocedural languages need only specify what has to be accomplished rather than provide details about how to carry out the task.

           Table 14-5 shows that there are seven categories of fourth-generation languages: PC software tools, query languages, report generators, graphics languages, application generators, application software packages, and very high level programming languages. The table shows the tools ordered in terms of ease of use by nonprogramming end users. End users are most likely to work with PC software tools and query languages. Query languages are software tools that provide immediate online answers to requests for information that are not predefined, such as �Who are the highest-performing sales representatives?� Query languages are often tied to data management software and to database management systems (see Chapter 7).

TABLE 14-5 Categories of Fourth-Generation Languages

           End-user computing also poses organizational risks because it occurs outside of traditional mechanisms for information systems management and control. When systems are created rapidly, without a formal development methodology, testing and documentation may be inadequate. Control over data can be lost in systems outside the traditional information systems department (see Chapter 7).

           To help organizations maximize the benefits of end-user applications development, management should control the development of end-user applications by requiring cost justification of end-user information system projects and by establishing hardware, software, and quality standards for user-developed applications.

Chapter 6 points out that the software for most systems today is not developed in-house but is purchased from external sources. Firms can rent the software from an application service provider, they can purchase a software package from a commercial vendor, or they can have a custom application developed by an outside outsourcing firm.

           The Window on Technology illustrates a company that is using multiple approaches to obtain better systems. Elie Tahari Limited is using software packages for business transaction systems and for end-user computing tools. The company outsourced the cleansing of its retail point-of-sale data to another company that could do the work more efficiently than Tahari�s in-house staff. By combining all of these approaches, Tahari came up with a powerful set of systems and tools that increased operational efficiency and the ability to take advantage of market trends while allowing the firm to concentrate on its core competency�fashion design.

APPLICATION SOFTWARE PACKAGES

During the past several decades, many systems have been built on an application software package foundation. Many applications are common to all business organizations�for example, payroll, accounts receivable, general ledger, or inventory control. For such universal functions with standard processes that do not change a great deal over time, a generalized system will fulfill the requirements of many organizations.

           If a software package can fulfill most of an organization�s requirements, the company does not have to write its own software. The company can save time and money by using the prewritten, predesigned, pretested software programs from the package. Package vendors supply much of the ongoing maintenance and support for the system, including enhancements to keep the system in line with ongoing technical and business developments.

           If an organization has unique requirements that the package does not address, many packages include capabilities for customization. Customization features allow a software package to be modified to meet an organization�s unique requirements without destroying the integrity of the package software. If a great deal of customization is required, additional programming and customization work may become so expensive and time consuming that they negate many of the advantages of software packages.

           Figure 14-12 shows how package costs in relation to total implementation costs rise with the degree of customization. The initial purchase price of the package can be deceptive because of these hidden implementation costs. If the vendor releases new versions of the package, the overall costs of customization will be magnified because these changes will need to be synchronized with future versions of the software.

FIGURE 14-12 The effects on total implementation costs of customizing a software package
As the number of modifications to a software package rise, so does the cost of implementing the package. Savings promised by the package can be whittled away by excessive changes.

           When a software package solution is selected, the organization no longer has total control over the system design process. Instead of tailoring the system design specifications directly to user requirements, the design effort will consist of trying to mold user requirements to conform to the features of the package. If the organization�s requirements conflict with the way the package works and the package cannot be customized, the organization will have to adapt to the package and change its procedures. Even if the organization�s business processes seem compatible with those supported by a software package, the package may be too constraining if these business processes are continually changing (Prahalad and Krishnan, 2002).

OUTSOURCING

If a firm does not want to use its internal resources to build or operate information systems, it can outsource the work to an external organization that specializes in providing these services. Application service providers (ASPs), which we describe in Chapter 6, are one form of outsourcing. Subscribing companies would use the software and computer hardware provided by the ASP as the technical platform for their systems. In another form of outsourcing, a company could hire an external vendor to design and create the software for its system, but that company would operate the system on its own computers. The outsourcing vendor might be domestic or in another country, and we discuss the special issues raised by offshore outsourcing in Chapter 16.

           Outsourcing has become popular because some organizations perceive it as providing more value than an in-house computer center or information systems staff. The provider of outsourcing services benefits from economies of scale and complementary core competencies that would be difficult for a firm that does not specialize in information technology services to replicate (Levina and Ross, 2003). The vendor�s specialized knowledge and skills can be shared with many different customers, and the experience of working with so many information systems projects further enhances the vendor�s expertise. Outsourcing enables a company with fluctuating needs for computer processing to pay for only what it uses rather than build its own computer center, which would be underutilized when there is no peak load. Some firms outsource because their internal information systems staff cannot keep pace with technological change or innovative business practices or because they want to free up scarce and costly talent for activities with higher paybacks.

           Not all organizations benefit from outsourcing, and the disadvantages of outsourcing can create serious problems for organizations if they are not well understood and managed (Lacity and Willocks, 1998; Earl, 1996). Many firms underestimate costs for identifying and evaluating vendors of information technology services, for transitioning to a new vendor, and for monitoring vendors to make sure they are fulfilling their contractual obligations. These hidden costs can easily undercut anticipated benefits from outsourcing (Barthelemy, 2001). When a firm allocates the responsibility for developing and operating its information systems to another organization, it can lose control over its information systems function. If the organization lacks the expertise to negotiate a sound contract, the firm�s dependency on the vendor could result in high costs or loss of control over technological direction (Lacity,Willcocks, and Feeny, 1996).

           Firms should be especially cautious when using an outsourcer to develop or to operate applications that give it some type of competitive advantage. A firm is most likely to benefit from outsourcing if it understands exactly how the outsourcing vendor will provide value and can manage the vendor relationship using an appropriate outsourcing strategy (Lee,Miranda, and Kim, 2004). Table 14-6 compares the advantages and disadvantages of each of the systems-building alternatives.

TABLE 14-6 Comparison of Systems-Development Approaches

NEW SYSTEMS KEEP ELIE TAHARI A TOP FASHION INNOVATOR

Elie Tahari Limited is a fashion pacesetter represented in all major upscale department stores. This company pioneered the �shop-in-shop� concept for presenting designer fashions. High-fashion department stores such as Neiman Marcus, Bloomingdales, and Saks Fifth Avenue each set aside a dedicated space within their stores to display the Elie Tahari Collection.

           The Elie Tahari company tries to be equally innovative with its information systems. Tahari counts on information systems to help maintain operational efficiency, spot trends, and take advantage of new business opportunities.

           New systems enable Tahari�s managers to know exactly what�s happening in its the company warehouses, factories, and in each store that sells its fashions�and to take action on that information. If, for instance, a reversible tweed jacket with contrasting trim starts being snapped up at the stores, the company can immediately recut that style and move it onto the sales floor within four to six weeks to keep the sales momentum going. Most clothing manufacturers can�t react that quickly.

           Until a few years ago, Tahari couldn�t either. Mickey Klein, Tahari�s vice president in charge of business processes and expansion, had little more than shipping notices to track goods from the company�s manufacturers to its distribution centers and to its retailers. The quality of sales data Tahari received from retailers was �misleading.� Sales reports from the retail chains selling Tahari clothing were compiled and transmitted to Tahari as Excel spreadsheets or Electronic Data Interchange (EDI) documents. The information transmitted was often incomplete, redundant, or inconsistent. Some retailers provided data showing the percentage of decrease or increase in sales; whereas others supplied actual dollar amounts. Two fulltime Tahari staffers spent two full days at the beginning of each work week checking the retailers� sales reports for completeness and accuracy. As a result, Tahari managers could not see the sales reports until midweek, which left them very little time to use the information to improve that week�s sales.

           Klein developed a system that would collect sales data from retailers and deliver on-demand reports showing orders in the pipeline, sales by styles and stores, and the movement of merchandise into and out of its distribution center. Tahari contracted with Edifice and Kliger-Weiss Infosystems (KWI) to collect and cleanse weekly retail data from the stores before they enter Tahari�s corporate data warehouse.

           Tahari followed with a reporting and analysis system called InSeam based on a software package called WebFOCUS from Information Builders. InSeam enables authorized users to obtain self-service reports on orders, inventory, sales, and finance using the cleansed weekly retail data and shipment and inventory data from an industry-standard operations package called Apparel Computer Systems supplied by Computer Generated Solutions. Apparel Computer Systems runs on an IBM AS/400 midrange computer, and WebFOCUS runs on an HP ProLiant DL380 G3 server that accesses a data warehouse running on an AS/400 machine.

           Sales executives can see their accounts, which merchandise is selling, and what customers have on order. They can also request specific pieces of information for ad-hoc reports. Many of the reports include pictures of the pertinent merchandise, and all are accessible using standard Web browsers. Users can further customize these reports by drilling down to more detail. A WebFOCUS tool called ReportCaster enables every report produced by InSeam to be sent by e-mail on a scheduled or ad hoc basis. Every day Klein automatically gets an e-mail message summarizing that day�s financial and order status, and every sales executive receives weekly reports highlighting orders requiring immediate attention.

           These WebFOCUS applications make information retrieval much less labor-intensive for end users. Users can export tables from InSeam to Microsoft Excel worksheets with a simple mouse click. For more complex financial and sales reports, Elie Tahari has WebFOCUS specialist Susannah Jones on staff to work with the software tools in the package. For example, Jones uses WebFOCUS to create a revenue versus cost report showing gross margins, year-to-date growth, and other relevant information.

           The WebFOCUS reporting environment includes security features so that each user can access only the information needed for his or her job. For example, sales reports are segmented by division and only authorized accounting personnel can view financial reports.

           Immediate access to such information has enabled Elie Tahari to reduce inventory in its warehouse and quickly deliver the sizes and styles that are selling to the appropriate stores. Costs at one key shipping-delivery process were reduced by 15 percent.

Sources: John McCormick, �Elie Tahari: Ready to Wear,� Baseline Magazine, September 2004; and Information Builders, �Elie Tahari Ltd. Unveils New End-User Reporting Framework,� www.informationbuilders.com, accessed September 21, 2004.

To Think About: How did Elie Tahari benefit from using software packages and end-user development tools? What management, organization, and technology issues had to be addressed to use these tools effectively?

Who work directly with information systems to get results?

Which information system is used to manage manufacturing resources?

Is computer equipment used to perform input processing storage and output activities?

What is considered to be the most important element in computer based information systems?