Chapter 13

Managing
the Systems
Development
Life Cycle
 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 and to develop new systems
to support those needs.
• A model for reducing risk through planning,
execution, control, and documentation of key
activities
• The SDLC model may be understood as
comprising 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
Assessment Feedback:
Feedback:
-- Develop
Develop Strategic
Strategic Plan
Plan User requests for New Systems
System Interfaces, Architecture
and User
User Requirements
High Priority Proposals undergo
Additional Study and Development

2. Project Initiation
-- Feasibility
Feasibility Study
Study
-- Analysis
Analysis
-- Conceptual
Conceptual Design
Design
-- Cost/Benefit
Cost/Benefit Analysis
Analysis Feedback:
Feedback:
User requests for System
Selected System Proposals Improvements and Support
go forward for Detailed
Design

3. In-house Development 4. Commercial Packages

-- Construct
Construct -- Configure
Configure
-- Deliver
Deliver -- Test
Test
-- Roll-out
Roll-out

New and Revised

Systems Enter into
Production

5. Maintenance & Support

-- User
User help
help desk
desk
-- Configuration
Configuration Management
Management
-- Risk
Risk Management
Management && Security
Security
 Overview of Phases 1 and 2
• Phase 1 - systems strategy
– understand the strategic business needs of the
organization
– examine the organization’s mission statement
– analyze competitive pressures on the firm
– examine the nature of 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 of selected
systems
 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.
 Participants in Systems
Development
• Systems Professionals - gather and analyze
facts about problems with the current system
and formulate a solution
– systems analysts
– systems designers
– programmers
• End Users - the primary users’ needs are
solicited
• Stakeholders - individuals who have an
interest in the system but are not end users.
 Systems Steering Committee
• The steering committee provides guidance and reviews
the status of systems projects and typically includes the
CEO, CFO, CIO, senior management from user areas
and computer services, and an internal auditor.
• Typical responsibilities are:
– resolving conflicts
– reviewing projects and assigning priorities
– budgeting funds
– reviewing the status of projects
– determining whether projects should be continued
Phase 1

Systems
Strategy
 Assessing Strategic
Information Needs
• Strategic systems planning involves the
allocation of systems resources at the macro
level.
– usually a time frame of three to five years
• Key inputs in developing a sound systems
strategy include:
– the strategic business needs of the organization
– the legacy system situation
– 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.
 User Feedback…
• involves identifying areas of user needs, preparing
written proposals, evaluating each proposal’s
feasibility and contribution, and prioritizing
individual projects.
• at this point pertains to substantial perceived
problems rather than minor systems modifications
• has five key phases at this point in the SDLC:
– recognizing the problem
– defining the problem
– specifying system objectives
– determining project feasibility
– preparing a formal project proposal
 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 may 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
 User Feedback:
Defining the Problem
• Managers and users should…
– avoid leaping to quickly to a single definition of the problem
– keep an open mind and gather as many facts as feasible
– learn enough to intelligently interact with systems
professionals
• An interactive process between managers/users and
systems professionals is necessary to arrive at an
accurate problem definition.
– The next three stages of the user feedback process involve
this interactive process.
 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.
 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?
 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 that show
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
– the learning and growth perspective
– the internal business process perspective
– the customer perspective
– the financial perspective
 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
BSC for On-Line Banking
Phase 2

Project
Initiation
 Project Initiation
• The second phase in the SDLC, project
initiation, involves:
– a detailed understanding of the user problem
– proposing multiple alternative solutions
– assessing alternatives in terms of feasibility
and cost-benefit characteristics
– selecting the best option and proceed 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 the current system
– an analysis of the users’ needs
Survey of Current System
• 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
• Facts must be gathered regarding:
– data sources and data stores; users;
processes; data flows; controls; transaction
volumes; error rates; resource costs;
bottlenecks and redundant operations
• Fact-gathering techniques:
– observation; task; participation; personal
interviews; reviewing key documents
 The Analysis Step
• The 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:
– 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 the risk
 The Role of Accountants in
Evaluation and Selection
• The accountant should ensure that:
– 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 common methods are used for evaluating
the costs and benefits of information systems:
– The Net Present Value Method: deduct the present
value of the costs from the present value of the benefits
over the life of the system. The optimal choice is the
project with the greatest net present value.
– The Payback Method: break-even analysis. Total costs
consist of the one-time costs plus the present value of
the recurring costs over the life of the project. Total
benefits are the present value of the tangible benefits.
The intersection of these values represents the number
of years into the future when the project breaks even.
Afterward, the system earns future profits. The optimal
choice is the project with the greatest future profits.
 How Do We Build It?
• Once the optimal system is selected, decide
how to construct the system:
– 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
– more on these in chapter 14
 Announcing the New
System Project…
• can be the most delicate aspect of the
SDLC.
• All users need to be made to understand
the objectives of the new system.
• End user 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 the SDLC?
• Accountants are users and must provide a
clear picture of their problems and needs.
• Accountants are members of the
development team.
• Accountants are involved in systems
development as auditors to ensure the
system is designed with appropriate
computer audit techniques.
 The Accountant’s Role in
Systems Strategy
• Auditors should routinely review the
organization’s systems strategy.
• Careful systems planning is a cost-effective
activity in reducing 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
• The economic feasibility of proposed systems is of
primary concern to accountants. Specifically, the
accountant should ensure that:
– 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