Information Systems Acquisition/Development & implementation

1. INF2004F Information Systems Acquisition/Development & implementation

2. The Video shop case • You are responsible for computerising a video shop currently using a manual card system • Identify the potential problems in this shop • Identify the potential opportunities this shop could enjoy if it computerised it operations • State the objectives of such project • Identify what is in scope and what is out of scope • Suggest potential solutions and evaluate them to identify the best choice

3. Potential Problems in a Video Shop still using Manual Systems • Identify six potential problems with the Card system

4. Opportunities for a Video Shop still using Manual Systems • Identify 6 potential opportunities of computerisation

5. Video Shop - Project Objectives • State at least 4 project objectives

6. 2. Defining the Problem Scope • Secondly, identify the scope of new system • Important that all stakeholders are clear on the extent of the project – what is “in” and what is “out” • Project scope versus Systems scope • Need to highlight subsystems and their dependencies • Need to clarify “in scope” and “out of scope” functionality • The process of reviewing scope can best be achieved graphically using Package and Context diagrams • The final scoping decisions are best described in text

7. Defining the Problem Scope & Process modelling • Can use: • Data Flow Diagrams (DFD), Context Diagm • Rich Picture • Package Diagrams • Relevance of these tools • help focus attention on important issues • Used to define parts to be covered • E.g., elements of structure, processes, relationships • How can you evaluate the accuracy & quality of a DFD?

8. Typical Description of Systems Scope In Scope: • Process Member application including: • Generate Quotation • Capture Member Application • Member Credit Check • Notification of Acceptance • Transfer new member details to Accounts Management System • Transfer loan amount to Bank Out of Scope: • Generate Customer Statements • Process Customer Payments

9. Context diagram • How a Context diagram depicts scope: • Shows the system as a single process box • Identifies people, systems and organisations that interact with the system (external agents) • Defines all key business events to which the system must react • Defines key systems outputs • Identifies key functions (subsystems) required to handle each business event • Defines scope, boundaries and system interfaces

10. Video Hire Shop- Context Diagram Contract Application Invoice VideoSupplier Customer Rental Details Return Details Purchase Order Video Catalogue Receipt Video Shop Admin System Payment Expiry Notice Pay Slip Transfer to branch Employee Time Sheet Branch Transfer from branch Correct this diagram using DFD symbols provided in Gelinas et al., Chpt 4

11. Customer Account Management System Membership Application New accounts Notification of acceptance Credit check Quotations Credit institution Loan amount transfer Bank Credit Reference Context Diagram – Common Mistakes Loan Application system External Agent Source or Sink of data Data Flow Description of data package – not a process – no verbs Correct this diagram using DFD symbols provided in Gelinas et al., chpt 4.

12. Typical Description of Systems Scope In Scope: • Process Member application including: • Generate Quotation • Capture Member Application • Member Credit Check • Notification of Acceptance • Transfer new member details to Accounts Management System • Transfer loan amount to Bank Out of Scope: • Generate Customer Statements • Process Customer Payments

13. DFD • DFDs – level 0, 1, 2 (pp. 110-113) • Physical DFD (p. 110) • Logical DFD (p. 111)

14. Data Flow Diagrams • We will adapt symbols used by Gelinas et al., chpt 4: • Source/destination or sink • Data store • Data flow • Data process • Necessary amendments are outlined below

15. Data Flow Diagrams - Rules • Rather than having data flow arrows criss-crossing all over the place, it is often simpler to show a symbol more than once on the diagram, wherever it is needed. When this is done an additional line is input within the symbol. E.g. 1. Customer data Duplicated entity

16. Data Flow Diagrams • Duplicated Data store: 4 Purchase Ledger

17. 3. Identifying Alternative Solutions • Very early to be identifying solutions but management need to “visualize” where their money is going! • Solution need not be detailed but should consider issues such as: • Multiple possible solutions • Solution should identify: • Acquisition approach - Make versus Buy • Who – in-house, outsourced • When – phased approach • What – functionality to be included • Acid test for each alternative – is this a total solution encompassing all the above dimensions (if required)

18. Video Shop Example • Candidate Solution 1: • Phase 1: Use a software house to develop the customer facing subsystems including the following functionality: • Contract Applications (with customer maintenance) • Video Maintenance • Video Rentals and Returns • Video Reservations • Late Videos Reports and Points Expiry Notices • Phase 2: Install a standard payroll package to handle staff wages • Phase 3: Use a software house to develop: • Branch Transfer Functionality • Internet Enquiries and Reservations • Video catalogue and purchases remains a manual system

19. 4. Investigating Solution Feasibility • Economic • Cost/benefit analysis (development and operating costs) • Financial • Organizational and cultural • Technological • Schedule • Resource

20. Investigating Solution Feasibility • Economic • Cost/benefit analysis (development and operating costs) • Financial • Organizational and cultural • Technological • Schedule • Resource

21. Investigating Solution Feasibility • Economic • Cost/benefit analysis (development and operating costs) • Organizational and cultural • Technological • Schedule • Resource

22. Investigating Solution Feasibility • Economic • Cost/benefit analysis (development and operating costs) • Organizational and cultural • Technological • Schedule • Resource

23. Investigating Solution Feasibility • Economic • Cost/benefit analysis (development and operating costs) • Financial • Organizational and cultural • Technological • Schedule • Resource

24. More Economic FeasibilityTypical benefits from automation • Mostly as a result of increased revenue or reduced costs • Benefits cannot always be measured (intangible) • Examples • Increased levels of service • Better decision making • Survival • Lost customers or sales

25. Development Costs (one off) Personnel Computer Usage Hardware installation Software installation Consumables Initial training System Construction Data conversion Roll-out Operational Costs(annual) Personnel Licensing Maintenance Consumables Computer usage Overheads Security Typical costs of a new system

26. Why should we categorize the costs of a new system? • Categorisation of costs – Capital costs (non current assets), revenue costs (expenses) • Stakeholders concerned about charges against retained profits • Cost/benefit analysis (based on cash flows not profits)

27. Exercise • Categorise the costs of a new computer system (see the slide above) using the following headings: • Capital items • One-off revenue cost items • Regular annual costs

28. Cost-Benefit Analysis (CBA) • Identifies the benefits and their monetary value • Identifies the costs and their monetary value • Estimates the Nett Value of a proposed solution and perhaps: • Takes into account the time value of money (discounted cash flow) • Calculates an overall ‘net present value’, ROI of a project or payback period

29. Typical Cost Justifications • Cost Benefit Analysis with time value of money (NPV) • Compares project costs against quantifiable benefits, taking into account discounted cash flow • Return on Investment (ROI) • Calculates the percentage by which returns (operational benefits) exceed cost over life of system • Payback Period • Calculates how soon (in months or years) the system will pay for itself

30. Cost Benefit Analysis Payback period(4.5 years) ROI = 13483 / 308177 = 4.375% Net present value of project(R13483))

31. NPV vs IRR • Two Projects A & B • Capital investment in Year 0 is R20,000 (for each) • Project A cash flows for year 0 to 3 • Yr 0 = - 20000, yr 1 = 6000, yr2 = 8000, yr3 = 15,000 • Project B cash flows for year 0 to 3 • Yr0 = -20000, yr1 = 12000, yr2= 9000, yr3 = 6000 • If the cost of capital is 12% per annum, which project should be chosen (use both NPV & IRR)