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Chapter 8 Systems Procurement
• To discuss the overall system procurement process and issues which are significant in that process for computerbased systems • To explain the differences between the procurement of bespoke systems and commercial systems products • To present an overview of legal issues which are of importance in the procurement process • To be able to evaluate the advantages and disadvantages of alternative sources for computer software and computer hardware • To describe the process of choosing computer software and hardware
What is systems procurement?
• System Procurement is a term used to describe all the activities involved in deciding what system should be purchased, who should supply the system and the purchasing process itself or • System procurement is the set of activities involved in deciding what system should be purchased, choosing a supplier for the system and letting a contract for the supply of the system. • It can be as simple as looking up a catalogue to choose a PC or may be an exercise which lasts months or years to choose and procure a large, complex computer-based system.
5 Procurement rights.
• At the right price • Delivery at the right time • Are of the right quality • Of the right quantity • From the right source
Why is procurement important?
• For complex systems, the majority of components are bought-in small bits-parts and are not designed and manufactured by a single organization. • Systems engineers should understand how legal and contractual issues affect their work • Procurement is important because an increasing number of systems are created by integrating components which are bought from other suppliers.
Types of procurement
• Direct procurement occurs in manufacturing settings only. • It encompasses all items that are part of finished products, such as raw material, components and parts. Direct procurement, which is the focus in Chain Management, directly affects the production process of manufacturing firms. • Indirect procurement activities concern “operating resources” that a company purchases to enable its operations. For instance, lubricants, stationery as well as services like heavy equipment and consulting services. 4/24/2012
• Organizations must establish a business case(any document that captures the reasoning for initiating a project or task) for the system - there is no point in buying a system which does not support the key objectives of an organization • Some system specification and architectural design is usually necessary before procurement – You need a specification to let a contract for system development – The specification may allow you to buy a commercial off-theshelf (COTS) system. Almost always cheaper than developing a system from scratch
Types of systems that can be procured
• There are 2 types of systems that can be procured; – Commercial off The Shelf Systems(COTS). software packages developed for the mass market, or existing free software. – Bespoke systems(Custom software)- software that is specially developed for some specific organization or other user.
• Bespoke systems are procured where an organization has a specific problem and needs special-purpose system to address that problem • Examples – Ticketing system for privatized rail companies – Mobile communications system • Bespoke systems may include COTS sub-systems (e.g. a commercial database management system)
• Advantages – System is designed specifically to meet a set of identified requirements – Procuring organization has control over the evolution of the system – Better performance (in principle) than COTS system • Disadvantages – Generally, the cost of developing a bespoke system is very much higher than a COTS system – The time required from initial specification to system operation is usually (but not always) greater than the time required to make COTS systems operational – Specific staff skills may be needed to oversee the system development
Bespoke systems procurement process
Requirements analysis Issue request for tenders Choose supplier
Tenders from suppliers
• From the outline requirements, a detailed description of required system facilities is developed • The system requirements define the services the system must provide. • system properties such as performance and reliability, and constraints on the system and the development process • In some cases, the contract is based on outline requirements with the first phase of the work to develop more detailed requirements.
Requests for tender (RFP)
• A formal, structured invitation to suppliers for the supply of products or services. • Subject to national / International legislation. • It is critical that all bidders receive exactly the same information. If not, there could be a legal challenge made by unsuccessful bidders
Request for Proposal cont’d
• Request sent to vendors • Contains project scope and description • System description includes logical and physical specifications – Inputs and outputs – Data storage processes – Controls
Request for Proposal cont’d
• Hardware performance objectives – Storage capacity and access – Input/output speed and volumes – Data communications requirements – Computational demands • Software performance objectives – Inputs and outputs – File sizes and access requirements
• There are different steps one should take as they choose a supplier for the bespoke systems. • These are: – Evaluate Vendor Proposals – Evaluating Vendors’ Systems – External interviews – Completing the Configuration Plan
Evaluate Vendor Proposals
• Validate vendor proposals – Specifications and performance (testing) • Consider other data and criteria – external interviews, ratings, user surveys – economic analysis of proposals • Recommend proposals that fulfill requirements, list their Advantages and Disadvantages
Evaluating Vendors’ Systems
• An evaluation team can test a system by: – Varying input (workload) parameters, such as quantity, timing, and type of input. – Varying system characteristics (parameters), such as quantity and size of data storage devices. – Varying the factors being measured, such as CPU cycle time (a system parameter) or execution time (a performance measure). – Testing an actual workload, such as a weekly payroll, or testing a workload model that is representative of the workload.
– Testing the actual system or a model of the system.
• Interviews with personnel outside the organization can provide valuable insights into performance. – Were there delays in obtaining the software or hardware? – Did the system have bugs? – How responsive is the vendor to requests for service? – Was the training the vendor provided adequate?
Completing the Configuration Plan
• Software plan – Documents how the logical specification will be implemented, using in-house development, vendor purchase or lease, or a combination of these. • Hardware plan – Summarizes how the recommended vendor proposal will fulfill the physical requirements specified in structured systems analysis. • Prepare configuration plan (combine plans) • Obtain approvals
Approve Configuration Plan
• Choose software package and expected performance specifications. • Chose hardware type, manufacturer, model, and expected performance specifications. • Items for software and hardware contracts. • Results of testing alternative software and hardware. • Assessment of financing and outsourcing alternatives.
Suppliers should be selected on the basis of – The price tendered for the job – Previous track record in developing/providing the type of system required – Ability to respond well to problems and service requests – Stability of the company – Quality procedures and processes used – Existing relationships with customer • It is unwise to select suppliers on price alone, By law, however, some public bodies must accept the lowest tender for a procurement proposal
• Supplier choice is rarely entirely rational. Organizational and political factors have an important influence – The choice of supplier may affect the power structure in an organization - e.g. choosing a computer manufacturer as the supplier of a CBS may increase the influence of the IT department – People in the organization may already have relationships with suppliers which they wish to maintain – For very large systems, direct political pressure may be applied (e.g. pressure from members of parliament for local suppliers)
• The contract is a legal document which defines: – Delivery schedule and project plan – Payment arrangement – Project monitoring – Change management – Dispute resolution – Acceptance procedures – Warranties and maintenance
Monitor systems development
• Appoint a project manager to oversee the development of the project. • Monitoring takes place through the submission of progress reports and through regular progress meetings. • When problems arise, changes in the delivery schedule or the requirements may have to be negotiated.
• When a system has been completed, it should be subjected to a set of trials to establish that it meets the system specification. • The acceptance trial plan should be developed from the system requirements while development is underway. • Generally, problems are discovered and system changes must be made during the acceptance trials
• System implementation • User training
• The essential characteristic of COTS software is that it may be used without change by integrating it into a system. • Therefore, packages in some application area which are tailored and adopted for different customers would not be considered as COTS software.
Examples of COTS software
• Generic PC systems such as word processors, spreadsheets, etc. • Specific PC systems which are targeted at a particular application area such as financial systems • Server systems such as databases, web servers, etc. • Component ware - specific components sold by specialist manufacturers
COTS software procurement
• As the availability of powerful software products increases, it is increasingly cost-effective to buy software packages rather than develop special-purpose bespoke software. This is particularly true for information systems • To use COTS systems, requirements may have to be adapted to fit the capabilities of the product. This means that they may not be an ideal fit to the identified needs of the organization
• Advantages – cheaper to buy and to maintain. – Usually based on current technology. – Lower risk. • Disadvantages – No control over system evolution – May be difficult/impossible to customize – Short lifetime - can cause problems when integrated into longlifetime systems – Excessive and unwanted functionality. Size and testing problems
COTS procurement process
Feasibility study Product selection System tailoring System installation
• What are the key requirements which MUST be supported by a COTS software product? • Are there products available which seem to be able to satisfy the identified requirements? • What are the likely costs of tailoring the software product to suit organizational needs? What are the costs of other system modifications which may be required. • What procedures and practices may need to be changed if a generic product rather than a bespoke system is installed?
• May be constrained by existing organizational policies • Based on a set of questions – What products are available? – What platform do they run on? – Who supplies the products and what support is available? – How well do these products satisfy the requirements which have been identified? – What implications are there for hardware procurement e.g. will hardware upgrades be necessary? – How adaptable are the products and can they be adapted to local requirements at reasonable cost?
• Although products may be bought off-the-shelf, they are rarely used out-of-the-box. Some tailoring and adaptation is necessary for almost all COTS systems • This tailoring may involve – Parameterization or definition of structures and templates. Writing of configuration files or scripts – Documentation of how the product can be used to support existing organizational procedures. – Definition of new procedures required by the product
Installation and training
• Once a system has been procured, it must be installed in the end-user environment. • In many cases, end-user training must be organized to show people how to use the system in their work. • The system supplier is often involved in the installation and training processes.
Legal issues associated with procurement
• Systems engineering and systems procurement takes place within a broad legal framework. The most relevant laws are those concerned with: • Contractual issues – Data protection – Intellectual property and copyright – Health and safety • Systems engineers may not need to know details of these but must be aware of their significance and should bring in experts when required
• Data protection – The procurement of a system may mean that an organization has to consider the data protection implications of maintaining system data • Intellectual property – The development of a system often results in the creation and use of intellectual property. It is important that the parties involved in the process understand who owns this IPR and what the rights of other partners to it are. • Health and safety – It is the procurer’s responsibility to ensure that systems do not pose a threat to their users
• Why is system procurement important? • What are some of the activities you need to carry out before you engage in procurement? • Explain the major components to draft in a request for proposal when procuring hardware or software.