Transcript HALL, ACCOUNTING INFORMATION SYSTEMS

Chapter 13
Managing the Systems
Development Life Cycle
Accounting Information Systems, 5th edition
James A. Hall
COPYRIGHT © 2007 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star logo,
and South-Western are trademarks used herein under license
Objectives for Chapter 13
• Identify the key stages in the SDLC
• How a firm’s business strategy shapes its information
system
• The relationship between strategic systems planning
and legacy systems
• What transpires during systems analysis
• The TELOS model for assessing project feasibility
• Cost-benefit analysis issues related to information
systems projects
• The role of accountants in the SDLC
The Systems Development
Life Cycle (SDLC)
• A logical sequence of activities used to:
– identify new systems needs
– develop new systems to support those needs
• A model for reducing risk through planning,
execution, control, and documentation
• The SDLC model may be shown in five
stages.
– We’ll look at the first two in this chapter and the
remaining three in chapter 14.
Systems Development Life Cycle
Business Needs and
Strategy
Legacy Situation
Business Requirements
1. Systems Strategy
- Assessment
- Develop Strategic Plan
System Interfaces, Architecture
and User Requirements
Feedback:
User requests for New Systems
High Priority Proposals undergo
Additional Study and Development
2. Project Initiation
- Feasibility Study
- Analysis
- Conceptual Design
- Cost/Benefit Analysis
Selected System Proposals
go forward for Detailed
Design
3. In-house Development
Feedback:
User requests for System
Improvements and Support
4. Commercial Packages
- Construct
- Deliver
- Configure
- Test
- Roll-out
New and Revised
Systems Enter into
Production
5. Maintenance & Support
- User help desk
- Configuration Management
- Risk Management & Security
Overview of Phases 1 and 2
• Phase 1 - Systems Strategy
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understand the strategic needs of the organization
examine the organization’s mission statement
analyze competitive pressures on the firm
examine current and anticipated market conditions
consider the information systems’ implications
pertaining to legacy systems
– consider concerns registered through user feedback
– produce a strategic plan for meeting these various and
complex needs
– produce a timetable for implementation
Overview of Phases 1 and 2
• Phase 2 - Project Initiation
– assess systems proposals for consistency with the
strategic systems plan
– evaluate feasibility and cost-benefit characteristics of
proposals
– consider alternative conceptual designs
– select a design to enter the construct phase of the
SDLC
– examine whether the proposal will require in-house
development, a commercial package, or both
Systems Development Participants
• Systems Professionals: analyze problems in
current systems and formulate solutions
– systems analysts
– systems designers
– programmers
• End Users: primary users of the system
– addressing their needs is critical to success
• Stakeholders: individuals who have an
interest in the system but are not end users
Systems Steering Committee
• Usually includes the CEO, CFO, CIO, senior
management from user areas and computer services,
and internal auditors
• Typical responsibilities:
– provide guidance
– resolve conflicts
– review projects and assigning priorities
– budget and allocate funds
– review the status of projects
– determine whether projects should be continued
Phase 1
Systems Strategy
Assessing Strategic
Information Needs
• Strategic systems planning involves the
allocation of resources at the macro level.
– usually a time frame of three to five years
• Key inputs in developing a sound systems
strategy include:
– strategic business needs of the organization
– situations involving legacy systems
– end user feedback
Strategic Business Needs
• Vision and mission
– systems strategy requires an understanding of top
management’s vision, which has shaped the
organization’s business strategy
• Industry and competency analysis
– industry analysis: the driving forces that affect the
industry and their organization’s performance, such as
important trends, significant risks, and potential
opportunities
– competency analysis: a complete picture of the
organization’s effectiveness as seen via four strategic
filters: resources, infrastructure, products/services, and
customers
Legacy Systems
• Use legacy components to help develop an
architecture description.
End User Feedback
• Identifying user needs is fundamental to everything
else
• During phase 1, pertains to substantial perceived
problems rather than minor systems modifications
• Has five key phases at this point in the SDLC:
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recognize problems
define problems
specify systems objectives
determine feasibility and contributions of projects
• may entail prioritizing individual projects
– preparing a formal project proposal
End User Feedback:
Recognizing the Problem
• The need for a new, improved information system
is manifested through various symptoms.
– Symptoms may seem vague and innocuous or go
unrecognized initially.
• The point at which the problem is recognized is
often a function of management’s philosophy.
– reactive management - responds to problems only
when they reach a crisis state
– proactive management - alert to subtle signs of
problems and aggressively looks for ways to improve
End User Feedback:
Defining the Problem
• Managers and end users should…
– avoid leaping to a single definition of a problem
– keep an open mind and gather facts before deciding
– learn to intelligently interact with systems professionals
• An interactive process between managers/end
users and systems professionals is necessary to
arrive at an accurate problem definition.
– The next three stages of the end user feedback process
involve this interactive process.
End User Feedback:
Specifying System Objectives
• The strategic objectives of the firm and the
operational objectives of the information
systems must be compatible.
• At this point, the objectives only need to be
defined in general terms.
End User Feedback:
Preliminary Project Feasibility-TELOS
• Technical feasibility - is the technology necessary
available?
• Economic feasibility - are the funds available and
appropriate for the system?
• Legal feasibility - does the system fall within legal
boundaries?
• Operational feasibility - can procedural changes be
made to make the system work?
• Schedule feasibility - can the project be completed
by an acceptable time period?
End User Feedback:
Preparing a Formal Project Proposal
• A systems project proposal provides
management with a basis for deciding
whether or not to proceed with the project.
• It summarizes the findings of the study and
makes a general recommendation.
• It outlines the linkage between the objectives
of the proposed system and the business
objectives of the firm.
Strategic Systems Plan
• After collecting input, the steering committee and
systems professionals evaluate the pros and cons
of each proposal.
• Assessing each potential project’s:
– benefits
– costs
– strategic impact
• Development will proceed on proposals with the
greatest potential for supporting the organization’s
business objectives at the lowest cost.
Relationship between Benefits,
Costs, and Strategic Impact
Create an Action Plan:
the Balanced Scorecard
• The next step is to translate strategy into action
• Many companies have found the balanced
scorecard (BSC) a useful tool for this step.
• The BSC recommends viewing an organization
using four perspectives:
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learning and growth
internal business process
customer
financial
The Balanced Scorecard
Primary objective: capture information on orthogonal
dimensions that are important to every organization
financial: how do we look to our shareholders?
customer: how do we look to our customers?
internal business process: what must we excel at?
learning and growth: can we continue to improve?
Second objective: prevent the proliferation of reports and
information. Concentrate only on critical success factors to
which everyone in the organization will pay attention.
BSC for On-Line Banking
Phase 2
Project Initiation
Project Initiation
• The second phase in SDLC involves:
– understanding of users’ needs and problems
– proposing multiple alternative solutions
– assessing alternatives in terms of feasibility
and cost-benefit characteristics
– selecting the best option and proceeding to
the construct phase
– examining whether the selected option will
require in-house development, a commercial
package, or both
Systems Analysis
• A business problem must be fully
understood before a solution can be
formulated.
– A defective analysis will lead to a defective
solution.
• System analysis is a two-step process
– survey of current systems
– analysis of users’ needs
Survey of Current Systems
• Advantages:
– allows aspects of the old system which
should be kept to be identified
– aids in planning the implementation of the
new system
– may allow conclusive determination of the
cause of the reported problem symptoms
• Disadvantages:
– the current physical tar pit
– can stifle new ideas
The Survey Step
• Fact-gathering techniques include observing,
participating, interviewing, and reviewing
documents.
• Facts must be gathered regarding:
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data sources and data stores
users
processes
data flows
controls, especially audit trails
transaction volumes
error rates
resource costs
bottlenecks and redundant operations
The Analysis Step
• Systems analysis is an intellectual process that is
commingled with fact gathering.
• A formal systems analysis report, prepared and
presented to the steering committee, contains:
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reasons for system analysis
scope of study
problem identified with current system
statement of user requirements
resource implications
recommendations
The Conceptualization Phase
• Purpose: produce alternative conceptual
solutions that satisfy the requirements
identified during systems analysis
• How much detail?
– enough to highlight the differences between
critical features of competing systems rather
than their similarities
Alternative Conceptual Designs for
a Purchasing System
Systems Evaluation and Selection
• A critical juncture in the SDLC
– a formal mechanism for selecting the one
system from the set of alternative
conceptual designs that will go forward for
construction
– an optimization process that seeks to
identify the best system
– a structured decision-making process that
reduces uncertainty and risk
The Role of Accountants
• Accountants ensure that the following are
considered during evaluation and selection:
– only escapable costs are used in calculations of cost
savings benefits
– reasonable interest rates are used in measuring
present values of cash flows
– one-time and recurring costs are completely and
accurately reported
– realistic useful lives are used in comparing competing
projects
– intangible benefits are assigned reasonable financial
values
Detailed Feasibility Study
• Similar to the preliminary project
feasibility analysis (TELOS), but now
more detailed and oriented to deciding
on a specific system design. Examine:
– technical feasibility
– economic feasibility
– legal feasibility
– operational feasibility
– schedule feasibility
Cost-Benefit Analysis:
Identify Costs
Cost-Benefit Analysis:
Identify Benefits—Tangible
Cost-Benefit Analysis:
Identify Benefits—Intangible
Comparing Costs and Benefits
• Two methods commonly used for evaluating the
costs and benefits of information systems:
– Net Present Value Method: deduct the present value of
costs from the present value of benefits over the life of the
project.
• The optimal choice is the project with the greatest net
present value.
– Payback Method: do break-even analysis of total costs
(one-time costs plus present value of recurring costs) and
total benefits (present value of benefits). After the breakeven point, the system earns future profits.
• The optimal choice is the project with the greatest future
profits.
How Should We Get the System?
• Once the optimal system is selected, decide
how to acquire it:
– develop the system in-house: best for systems that
need to meet unique and proprietary business
needs
– purchase commercial software: best for systems
that are expected to support “best industry
practices”
– a mix of the first two approaches: make in-house
modifications, to varying degrees, of a commercial
system to meet the organization’s unique needs
Announcing the New System
Project…
• can be the most delicate aspect of the SDLC.
• End user support is critical to success.
• All end users need to be made to understand
the objectives of the new system.
• End users and managers who view the new
system as a potential benefit to their jobs,
rather than a threat, are more likely to
cooperate with the project.
Why are Accountants Involved
with SDLC?
• The creation of an information system
consumes significant resources and has
financial resource implications.
• The quality of accounting information
systems and their output rests directly on
the SDLC activities that produce them.
How are Accountants Involved
with SDLC?
• As end users who must provide a clear
picture of their problems and needs
• As members of the development team
• As auditors who must ensure that the
system is designed with appropriate internal
controls and computer audit techniques.
The Accountant’s Role in
Systems Strategy
• Auditors should routinely review the
organization’s systems strategy.
• Careful systems planning is a costeffective way to reduce the risk of creating
unneeded, unwanted, inefficient, and
ineffective systems.
• Both internal and external auditors have
vested interests in this outcome.
The Accountant’s Role in
Conceptual Design
• Accountants should be responsible for the
conceptual system…
– and the systems professionals for the physical
system.
• If important accounting considerations are not
conceptualized at this point, they may be
overlooked, exposing the organization to
potential financial loss.
• The auditability of a system depends in part on
its design characteristics.
The Accountant’s Role in
Systems Selection
• Economic feasibility is a primary concern to
accountants. Accountants should ensure that:
– use only escapable costs in calculations of cost-savings
benefits
– use reasonable interest rates in measuring present
values of cash flows
– one-time v. recurring costs are accurately reported
– use realistic useful lives in comparing competing projects
– intangible benefits are assigned reasonable financial
values