1.

INTRODUCTION TO IS MODELS AND TYPES OF INFORMATION SYSTEMS

Introduction to Information System. An information system can be
defined as a set of interrelated components that collect, manipulate, store
data, distribute information to support decision making and provide a
feedback mechanism to monitor performance

What are the most common types of information system in an

organization?

While there are several different versions of the pyramid model, the most
common is probably a four level model based on the people who use the
systems. Basing the classification on the people who use the information
system means that many of the other characteristics such as the nature of
the task and informational requirements are taken into account more or less
automatically.

Four level pyramid model based on the different levels of hierarchy in the
organization

(I) A comparison of different kinds of Information Systems

Using the four level pyramid models above, we can now compare how the
information systems in our model differ from each other.

1. Transaction Processing Systems

What is a Transaction Processing System?

Transaction Processing System are operational-level systems at the

bottom of the pyramid. They are usually operated directly by shop
floor workers or front line staff, which provide the key data required to
support the management of operations. This data is usually obtained
through the automated or semi-automated tracking of low-level
activities and basic transactions.

a) Functions of a TPS

TPS are ultimately little more than simple data processing systems.
 Functions of a TPS in terms of data processing requirements

Inputs Processing Outputs

Validation
Sorting Lists
Transactions Listing Detail reports
Events Merging Action reports
Updating Summary reports?
Calculation

b) Some examples of TPS

o Payroll systems
o Order processing systems
o Reservation systems
o Stock control systems
o Systems for payments and funds transfers

c) The role of TPS

o Produce information for other systems

o Cross boundaries (internal and external)
o Used by operational personnel + supervisory levels
o Efficiency oriented

2. Management Information Systems

What is a Management Information System?

For historical reasons, many of the different types of Information

Systems found in commercial organizations are referred to as
"Management Information Systems". However, within our pyramid
model, Management Information Systems are management-level
systems that are used by middle managers to help ensure the smooth
running of the organization in the short to medium term. The highly
structured information provided by these systems allows managers to
evaluate an organization's performance by comparing current with
previous outputs.

a) Functions of a MIS

MIS are built on the data provided by the TPS

 Functions of a MIS in terms of data processing requirements

Inputs Processing Outputs

Internal Transactions Sorting Summary reports

Internal Files Merging Action reports
Structured data Summarizing Detailed reports

b) Some examples of MIS

o Sales management systems

o Inventory control systems
o Budgeting systems
o Management Reporting Systems (MRS)
o Personnel (HRM) systems

c) The role of MIS

o Based on internal information flows

o Support relatively structured decisions
o Inflexible and have little analytical capacity
o Used by lower and middle managerial levels
o Deals with the past and present rather than the future
o Efficiency oriented?

3. Decision Support Systems

What is a Decision Support System?

A Decision Support System can be seen as knowledge based system,

used by senior managers, which facilitates the creation of knowledge
and allow its integration into the organization. These systems are
often used to analyze existing structured information and allow
managers to project the potential effects of their decisions into the
future. Such systems are usually interactive and are used to solve ill
structured problems. They offer access to databases, analytical tools,
allow "what if" simulations, and may support the exchange of
information within the organization.

a) Functions of a DSS

DSS manipulate and build upon the information from a MIS and/or
TPS to generate insights and new information.
 Functions of a DSS in terms of data processing requirements

Inputs Processing Outputs

Modelling
Internal Transactions Summary reports
Simulation
Internal Files Forecasts
Analysis
External Information? Graphs / Plots
Summarizing

b) Some examples of DSS

o Group Decision Support Systems (GDSS)

o Computer Supported Co-operative work (CSCW)
o Logistics systems
o Financial Planning systems
o Spreadsheet Models?

c) The role of DSS

o Support ill- structured or semi-structured decisions

o Have analytical and/or modelling capacity
o Used by more senior managerial levels
o Are concerned with predicting the future
o Are effectiveness oriented?

4. Executive Information Systems

What is an EIS?

Executive Information Systems are strategic-level information systems

that are found at the top of the Pyramid. They help executives and
senior managers analyze the environment in which the organization
operates, to identify long-term trends, and to plan appropriate courses
of action. The information in such systems is often weakly structured
and comes from both internal and external sources. Executive
Information System are designed to be operated directly by executives
without the need for intermediaries and easily tailored to the
preferences of the individual using them.

a) Functions of an EIS

EIS organizes and presents data and information from both external
data sources and internal MIS or TPS in order to support and extend
the inherent capabilities of senior executives.
 Functions of a EIS in terms of data processing requirements

Inputs Processing Outputs

External Data Summarizing Summary reports

Internal Files Simulation Forecasts
Pre-defined models "Drilling Down" Graphs / Plots

b) Some examples of EIS

Executive Information Systems tend to be highly individualized and

are often custom made for a particular client group; however, a
number of off-the-shelf EIS packages do exist and many enterprise
level systems offer a customizable EIS module.

c) The role of EIS

o Are concerned with ease of use

o Are concerned with predicting the future
o Are effectiveness oriented
o Are highly flexible
o Support unstructured decisions
o Use internal and external data sources
o Used only at the most senior management levels

4. Elements of Information System Model

The elements of an information system are customers, business processes,

product services and communication technology. Design of an information
system is done based on elements of the model. Every information
system has end users or customers. An information system can have
internal as well as external.

What is the basic model information system?

Typical Components of Information Systems

a) Hardware: Computer-based information systems use computer
hardware, such as processors, monitors, keyboard and printers.
b) Software: These are the programs used to organize, process and
analyze data.
c) Databases: Information systems work with data, organized into tables
and files

2. What are the various types of information systems?

There are various types of information systems, for example:
transaction processing systems, decision support systems, knowledge
 management systems, learning management systems, database
management systems, and office information systems.

A. Nolan Stage Hypothesis:

Nolan's model concerns the general approach to IT in business. The model

proposes that evolution of IT in organizations begins slowly in Stage I, the
"initiation" stage. This stage is marked by "hands off" user awareness and an
emphasis on functional applications to reduce costs.

I. Nolan's Six-stage Model:

One of the stages of growth model, helping in the understanding of the role
of information systems, in an organization's strategy and its maturity.
Earlier, in a similar model called the four-stage growth model the maturity
of an organization was captured in terms of use of information systems. The
stages are,
1. Initiation-in which the primary focus is cost reduction and only specialized
applications are run with a specialized staff. Management in not very keen
on monitoring the information system.
2. Expansion-in which application increase rapidly. Specialization of staff and
applications is the order of the day. Management begins to take note of the
new way of doing things.
3. Formalization-in which emphasis is laid on control and specialization, is
built around control. Management controls information systems.
4. Maturity-in which database oriented applications proliferate. Information is
used as a resource.

Nolan's Stages of Growth Model

I II III IV V VI

INITIATIONS CONTAGION CONTROL INTEGRATION DATA ADMIN MATURITY

• Users are • • IT/IS is • Greater use • Data in • IT/IS dept
"hands off" Proliferation considered as of database administration becomes
in approach of an important • Greater • Applications partners of
• Extensive applications function IT/IS budget are in sync users in data
IT/IS • Little • Centralized the management
• IT/IS dept with
planning management controls are now works on organization •
Cost control applied for
• a professional • Shift from Applications
reduction • Huge IT/IS utility model IT/IS booking reflect real
information
primary allocation of • No • Formal after DP to needs
focus financial reduction in planning and holistic
• Functional resources IT/IS use control within information • Strategic
planning of
 application is • Rapid • Applications IT/IS dept management IT/IS
in focus growth of are often • becomes
Steering
MIS fundamental incompatible committees important
•
dept/IS dept use of IT • Unhappy are widely • Managers
is not under • IS/IT users used for of IT/IS dept
strict performance • Use of application considered
management below database but development. at par with
control importation with other dept
and several unsatisfactory
crisis occur outcome

Nolan (1979) indicated that there are six stages in the information system
evolutionary process. It is an improvement over the four-stage model. The
stages are:
1. Initiation- in which the organization has an operational focus and tries to
get operational efficiency and thereby limited value from the information
systems.
2. Contagion-in which the organization moves towards online systems after
having tasted success in the initiation stage. More users are added.
3. Control-in which the management exercises control and makes a cost-
benefit type of assessment.
4. Integration-in which the organization moves away from an ad hoc isolated
solutions based on information system to a service based information
system. This is the stage when the organization transitions from a data
processing outlook about information systems to more holistic information-
based decision-making approach towards information systems. A more
comprehensive approach towards information systems results in changes in
the organization's behavior towards information systems and initiates a new
appreciation for data and information.
5. Data administration-in which the organization begins to appreciate the
value of information and makes efforts to centralize the data management to
take advantage of the benefits of information based decision-making.
6. Maturity-in which the organization creates synergies in its corporate
objectives and information systems planning so that the two can work in a
synchronized manner.
These are the stages as Nolan has described in this research. However, no
empirical proof exists of this stage growth model of information system
maturity.
 B. Information System Strategic Grid:

Business managers must be involved in the strategic planning and

management of information systems because IT is so crucial to many
businesses’ day-to-day operations. To make the relationship between IT
and other aspects of business management easier for managers to grasp,
author and Harvard Business School professor F. Warren McFarlan
introduced the strategic grid concept in 1984. It illustrates the
relationship between business strategy, IT strategy and business
operations. Specifically, the McFarlan model illustrates how projects
involving IT investments will fare due to the investments.

Business managers must be involved in the strategic planning and

management of information systems because IT is so crucial to many
businesses’ day-to-day operations. To make the relationship between IT
and other aspects of business management easier for managers to grasp,
author and Harvard Business School professor F. Warren McFarlan
introduced the strategic grid concept in 1984. It illustrates the relationship
between business strategy, IT strategy and business operations.
Specifically, the McFarlan model illustrates how projects involving IT
investments will fare due to the investments.

I. TL; DR (Too Long; Didn't Read)

A strategic grid is a tool businesses can use to assess the impact IT

investments will have on their current and future projects.

Constructing a Strategic Grid

The McFarlan strategic grid is constructed as follows. Four quadrants,

labeled from top left to bottom left in a clockwise motion labeled support,
 turnaround, strategic and factory represent the four possible roles an IT
enterprise can fill within an organization. The grid’s X axis shows projects’
impact on IT strategy, and its Y axis plots projects’ current impact on IT
operations.

Using the X axis, a manager can determine how a potential project will
impact the company’s operations and whether it will make it possible for
the company to capture new market share. With the Y axis, a manager can
work out how a project will make existing systems more efficient or more
productive.

 Support: IT investments that can improve the company’s operations but

are not necessary for its continued operation.
 Turnaround: IT investments that provide strategic opportunities.
 Strategic: IT investments that are necessary for the company’s future
success.
 Factory: IT investments the company needs to maintain its continued
operation

Understanding the McFarlan Model

The strategic grid shows how a company is using its IT investments and its
need for both new and reliable IT support. As a framework, the strategic
grid is meant as a tool businesses can use to assess their current and
continuing IT needs rather than to simply state the company’s IT use
status.

The need for IT support in business was first recognized in the 1970s, and
today, it is more critical to daily operations than ever before in nearly every
type of enterprise. Understanding this, business managers must be
involved in the strategic planning and management of information systems.

In 2005, McFarlan and Richard Nolan updated the McFarlan model to

reflect the IT realities that 21st-century businesses face. Now, the strategic
grid’s X axis is labeled “New IT,” and its Y axis is labeled “Need for Reliable
IT.” This did not change the core purpose of the grid or how companies can
use it. It simply updated the terms used to match modern business needs.

The Strategic Grid in Action

Because business managers must be involved in the strategic planning and

management of information systems, putting strategic grids to work is a
crucial part of managing a profitable business.

The strategic grid can be used to prioritize IT purchases by putting

proposed actions into a clear diagram. It forces the manager using it to
accurately assess how important IT projects are to his company’s current
operations and how important they are to its future operations. For
example, a company that currently issues each employee a tablet might
score fairly high on the Y axis, putting it in the factory quadrant. If that
same company has no plans to increase its reliance on technology, it would
fall close to the left-hand side of the X axis, putting it in
the support quadrant as well.

Using this example, the manager might anticipate that in five years’ time,
the company will increase its workforce by a third and thus will need
additional IT support. In his projection for the next five years, he would
plot the company higher on the Y axis, acknowledging that for the company
to continue its current operations smoothly at a larger scale, it will need to
invest in more of the same IT support it is already using.

Wards Model:

A computerized ward information-management system was developed and

implemented at the Johns Hopkins Hospital on one medical floor. To
determine its effectiveness, a rigorous evaluation effort was conducted. The
evaluation was designed to monitor the effects of the system on patient care
by hospital nursing personnel. Likewise, the costs and cost benefits of the
incremental expenditures of the system were measured. The results of this
evaluation effort showed that the system caused significant changes in
personnel work patterns, in that direct patient-care activities increased
materially. Errors in carrying out physicians' orders were significantly
decreased. Further the evaluation efforts indicated that the costs of the
system should be effectively offset by improved staff effectiveness. The
system seems to have the potential to help identify those personnel cost
savings available if reduced hospital expenses becomes the objective. If the
decision is to increase the efficacy of treatment given in the hospital, the
ward information-management system seems to provide the ability to
improve care on a constant basis without personnel increases.

WARD & PEPPARD FRAMEWORK

Focus on technology or business aspects are not enough to bring success to

overall strategic plan. The right way to achieve strategic advantage from
information systems/technology is concentrating or rethinking business
Processes by analyzing current business issues, analyzing the environment
changing and make information technology as a solution
Ward and Peppard Framework for IS/IT strategy formulation and planning
process on Figure 1 covers several phases as follows:
a. Internal Business Environment: mapping the current business
strategy, the purpose (objective), resources, processes, and culture of the
organization. Analysis of internal business environment used to determine
the organization's business strategy, vision, mission and the goals of the
organization, activities and business processes of the organization, its
resources, and information needed by the organization.
b. External Business Environment: mapping the economic conditions,
industry environment, and competitive environment where the organization
operates. External business environment can boost the organization to go
ahead and compete, also can provide barriers and even a threat to
organization survival.
c. Internal IS/IT Environment: the perspective of the IS/IT at the
business process, it’s maturity, the scope and contributions of business,
skills, resources and technology infrastructure, current portfolio application
and the system that is being developed or already budgeted but not yet
completed are also part of the internally IS/IT environment.
d. The external IS/IT Environment: technology trends and
opportunities usability/utilization generated by the IS/IT of other parties,
especially customers, competitors, and suppliers. This analysis is used to
gain an understanding of the development of the IS/IT outside the
organization that may have an impact on the organization's survival.
e. Current Application Portfolio: an information system applications
that have been or are being used by the organization. Identify the advantages
and strength given by the application to confront the competition climate
faced by organizations.

The process output of Ward and Peppard Framework describe as follow:

a. Business IS Strategic: the mechanics of each unit or function that
will develop IS/IT in achieving a business objective, application portfolio,
and overview of information architecture.
b. Information Technology Strategy: policies and strategies for
technology management and human resources experts.
c. IS/IT Management Strategy: include that common element of the
strategy that used by organization overall to ensure consistency of IS/IT
policy required. Final output of Ward and Peppard framework is Future
Application Portfolio, an application proposals that will be developed by the
organization in the future with the aim to integrate each organizational unit
and adjust the rhythm of technological development with organizations
business development.

Earl’s Multiple Methodology

The final stretch of the course talked about Earl’s Multiple Methodology
(1980) and how it can be applied in the real world in determining the Critical
Success Factors (CSF).

The goal of Earl’s Methodology is to be able to align the business goals to the
IT/IS needs or plans. This will be able to maximize the technologies’
functionalities, and be able to choose the right innovations to implement
and avoid unnecessary costs.

I was really amazed at the realization that previously, the role of IT is only a
support service is in the value chain. After applying Earl’s Multiple
Methodology, it is now very evident the IT has a very crucial role in the CSF
of the business.

For example in the company, the role of technology now is very essential in
expanding its marketing and sales strategy. The advertisement campaigns
and promotions are now in mobile and web applications because more and
more customers are using the social media and smart phones to
communicate and interact.

According the Earl, the methodology is three-pronged, consisting of the

following:

1. Business Plans and Goals (Top down)

2. Current Systems (Bottom up)
3. IT Opportunities (Inside out)
The business plans and goals are strategic, high-level and generic. It is
applied in the organization as a whole. For the current systems, it contains
the specific technologies that are already implemented in the organization.
The IT opportunities are the “proposed” innovations that will help the
organization achieve the business plans and goals.

Critical success factor (CSF) is a management term for an element that is

necessary for an organization or project to achieve its mission. To achieve
their goals they need to be aware about each key success factor (KSF) and
the variations between the keys and the different roles key result area (KRA).
Soft Systems Methodology (SSM) is a method to structure complex
problems and to develop desirable and feasible changes within a
differentiated group of people. Such a heterogeneous group can consist of
employees, developers, users and customers, whereby everyone sheds a
different light on a problem.

Benefits of SSM

Soft Systems Methodology helps structure a complex organizational and

political situations. It can allow the user to deal with them in an organized
manner and forces them to look for solution that can be more than just
technical (Weeks).
Limitations of SSM

While the importance of this methodology has been realized, it also has a
few limitations. The fourth stage in the system has no modelling tool, along
with a definite technique to compare solutions in the real world. It also
needs to factor in the effectiveness of system thinking. If participants have
little knowledge and experience with the so-called problem, it will be harder
to come up with a solution (Hanafizadeh, 326). When working with SSM, it
requires the user to adapt to a new approach that some may find difficult to
do. The user must also be careful not to narrow the scope of the
investigation too early, this could cause issues later on. It can also be
difficult to assemble the richest picture without giving it a particular
structure and solution on the problem situation. The user can face
difficulties interpreting the world in a loose way (Weeks). Another limitation
of this methodology is the revising process. For example, when changes are
implemented simultaneously, it may cause conflicting results. This may
result in adding other methodologies, such as Soft System Dynamics
Methodology (SSDM). Combining these methodologies together will create a
synergetic tool for solving soft problems (Hanafizadeh, 325).

System Develop Life Cycle:

The system-development life cycle enables users to transform a newly-

developed project into an operational one. The System Development Life
Cycle, "SDLC" for short, is a multistep, iterative process, structured in a
methodical way. ... The SDLC highlights different stages (phrases or steps) of
the development process.
1- System Planning

The Planning phase is the most crucial step in creating a successful system,
during this phase you decide exactly what you want to do and the problems
you’re trying to solve, by:

 Defining the problems, the objectives and the resources such as

personnel and costs.
 Studying the ability of proposing alternative solutions after meeting
with clients, suppliers, consultants and employees.
 Studying how to make your product better than your competitors’.

After analyzing this data you will have three choices: develop a new system,
improve the current system or leave the system as it is.

2- System Analysis

The end-user’s requirements should be determined and documented, what

their expectations are for the system, and how it will perform. A feasibility
study will be made for the project as well, involving determining whether it’s
organizationally, economically, socially, technologically feasible. it’s very
important to maintain strong communication level with the clients to make
sure you have a clear vision of the finished product and its function.

3- System Design

The design phase comes after a good understanding of customer’s

requirements; this phase defines the elements of a system, the components,
the security level, modules, architecture and the different interfaces and
type of data that goes through the system.

A general system design can be done with a pen and a piece of paper to
determine how the system will look like and how it will function, and then a
detailed and expanded system design is produced, and it will meet all
functional and technical requirements, logically and physically.

4- Implementation and Deployment

This phase comes after a complete understanding of system requirements

and specifications; it’s the actual construction process after having a
complete and illustrated design for the requested system.

In the Software Development Life Cycle, the actual code is written here, and
if the system contains hardware, then the implementation phase will contain
configuration and fine-tuning for the hardware to meet certain requirements
and functions.
In this phase, the system is ready to be deployed and installed in customer’s
premises, ready to become running, live and productive, training may be
required for end users to make sure they know how to use the system and
to get familiar with it, the implementation phase may take a long time and
that depends on the complexity of the system and the solution it presents.

5- System Testing and Integration

Bringing different components and subsystems together to create the whole

integrated system, and then introducing the system to different inputs to
obtain and analyze its outputs and behaviour and the way it functions.
Testing is becoming more and more important to ensure customer’s
satisfaction, and it requires no knowledge in coding, hardware configuration
or design.

Testing can be performed by real users, or by a team of specialized

personnel, it can also be systematic and automated to ensure that the
actual outcomes are compared and equal to the predicted and desired
outcomes.

6- System Maintenance

In this phase, periodic maintenance for the system will be carried out to
make sure that the system won’t become obsolete, this will include replacing
the old hardware and continuously evaluating system’s performance, it also
includes providing latest updates for certain components to make sure it
meets the right standards and the latest technologies to face current
security threats.

These are the main six phases of the System Development Life Cycle, and
it’s an iterative process for each project. It’s important to mention that
excellent communication level should be maintained with the customer, and
Prototypes are very important and helpful when it comes to meeting the
requirements. By building the system in short iterations; we can guarantee
meeting the customer’s requirements before we build the whole system.

Many models of system development life cycle came up from the idea of
saving effort, money and time, in addition to minimizing the risk of not
meeting the customer’s requirement at the end of project, some of theses
models are SDLC Iterative Model, and SDLC Agile Model.

Prototyping

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.

When no more iteration are required, the approved prototype then

becomes an operational prototype that furnishes the final specifications for
the application. Sometimes the prototype is adopted as the production
version of the system.

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.

Return to Top End-User Development

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 non programming 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

On the whole, end-user-developed systems can be completed more

rapidly than those developed through the conventional systems life cycle.
Allowing users to specify their own business needs improves requirements
gathering and often leads to a higher level of user involvement and
satisfaction with the system. However, fourth-generation tools still cannot
replace conventional tools for some business applications because they
cannot easily handle the processing of large numbers of transactions or
applications with extensive procedural logic and updating requirements.

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.
Return to Top

Application Software Packages and Outsourcing

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 system is developed using an application software package,

systems analysis will include a package evaluation effort. The most
important evaluation criteria are the functions provided by the package,
flexibility, user friendliness, hardware and software resources, database
requirements, installation and maintenance efforts, documentation, vendor
quality, and cost. The package evaluation process often is based on a
Request for Proposal (RFP), which is a detailed list of questions submitted to
packaged-software vendors.

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, 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.
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

 The Window on Organizations describes how some financial services
firms deal with the issue of selecting systems-building alternatives. Some
firms opt to purchase the technology for new wealth management systems
from outside vendors because they believe their strategic advantage lays in
their knowledge of clients and investment selection. Other firms believe that
the technology is a source of competitive differentiation as well and choose
to build their systems in-house.