Systems Analysis and

Design 11 Edition
th

Chapter 7
Development Strategies

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Chapter Objectives
• Describe the concept of Software as a Service
• Define Web 2.0 and cloud computing
• Explain software acquisition alternatives,
including traditional and Web-based software
development strategies
• Describe software outsourcing options, including
offshore outsourcing and the role of service
providers

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Chapter Objectives (Cont.)

• Explain advantages and disadvantages of in-

house software development
• Discuss cost-benefit analysis and financial
analysis tools
• Describe a request for proposal (RFP) and a
request for quotation (RFQ)
• Describe the system requirements document
• Explain the transition from systems analysis to
systems design
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Development Strategies Overview
• Earlier, certain work functions in the company
required:
– Development of software by in-house efforts
– Employing the services of external entities
• Today, organizations have following choices for
software acquisition
– Application service providers
– Web-hosted software options
– Firms that offer enterprise-wide software solutions
• Selecting the best development path is an important
decision
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The Impact of the Internet

• Software as a Service (SaaS)

– Software deployment model that hosts an
application as a service provided to
customers over the Internet
– Reduces the customer’s need for software
maintenance, operation, and support

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The Impact of the Internet (Cont.1)

• Traditional vs. Web-Based Systems

Development
– Service-oriented architecture (SOA)
• A way of engineering systems in which reusable
business functionality is provided by services
through well-defined interfaces
• Technically, not software architecture but an
architectural style

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The Impact of the Internet (Cont.2)

• Traditional vs. Web-Based Systems Development

– Traditional Development
• System design is influenced by compatibility issues
• Systems are designed to run on local and wide-area networks
• Systems often utilize Internet links and resources
• Development typically follows one of three main paths:
– In-house development
– Purchase of a software package with possible
modification
– Use of outside consultants
• Scalability is affected by network limitations and constraints

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The Impact of the Internet (Cont.3)

• Traditional vs. Web-Based Systems Development

(Cont.)

– Web-Based Development
• Systems are developed and delivered on an Internet-based
framework
• Treats the Web as the platform rather than just a communication
channel
• Web-based systems are easily scalable and can run on multiple
hardware environments
• Used for customer relationship management, order processing, and
materials management
• Treats software applications as services that are less dependent on
desktop computing power and resources

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The Impact of the Internet (Cont.4)

• Traditional vs. Web-Based Systems

Development (Cont.)
– Web-Based Development
• Requires additional layers, called middleware, to
communicate with existing software and legacy
systems
– Middleware: Connects dissimilar applications and
enables them to communicate and exchange data
• Open more complex security issues that should be
addressed

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The Impact of the Internet (Cont.5)

• Evolving Trends - Web 2.0, Cloud

Computing, and Mobile Devices
– Web 2.0: second generation of the web that
enables people to collaborate, interact, and share
information much more effectively
• Enhances interactive experiences
– Cloud computing: Online software in which
applications and services are accessed and used through an
Internet connection
– Mobile devices: Smartphones, tablets, and other
computing devices that are not permanently tethered to a
desk
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Outsourcing

• Transfer of information systems development,

operation, or maintenance to an outside firm
• The Growth of Outsourcing
– Service provider: Offers outsourcing solutions
Application service provider (ASP)
• Delivers a software application or access to an
application by charging a usage or subscription fee
– Internet business services (IBS)
• Also called managed hosting
• Provide web-based support for transactions
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Outsourcing (Cont.1)

• Outsourcing Fees
– Fixed fee model: Uses a set fee based on a
specified level of service and user support
– Subscription model: Has a variable fee
based on the number of users or workstations
that have access to the application
– Usage model or transaction model:
Charges a variable fee based on the volume
of transactions or operations performed by the
application

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Outsourcing (Cont.2)

• Outsourcing Issues and Concerns

– Mission-critical IT systems are outsourced if the
result is a cost-attractive and reliable business
solution
– Overseas outsourcing can raise issues with control,
culture communication, and security
– Reviewing the outsourcing firm’s history and
financial condition is vital
– Outsourcing clients can be affected by mergers and
acquisitions
– Employee job security is a major concern
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Outsourcing (Cont.3)

• Offshore Outsourcing
– Called global outsourcing
– Shifting IT development, support, and
operations to other countries
– Reason - Lower bottom-line costs
– Risks and concerns
• Impact on the economy
• Project control
• Security issues

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In-House Software Development Options

• Software development options

– Develop own systems
– Purchase, possibly customize, and implement a
software package
• Most important consideration is the total cost of
ownership (TCO)
• Companies can develop user applications based
on commercial software packages

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 In-House Software Development Options (Cont.1)

• Make or Buy Decision

– Refers to the choice between developing and
purchasing
– A company’s IT department makes, builds, and
develops in-house software
– A software
package is
obtained from
a vendor or
application
FIGURE 7-8 Instead of outsourcing, a company can choose to
service provider develop a system in-house, or purchase and possibly customize a
commercial package.
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In-House Software Development Options (Cont.2)

• Make or Buy Decision (cont.)

– Software package: Obtained from a vendor or application

service provider
– Software vendors: Develop software for sale
– Value-added reseller (VAR): Enhances a commercial
package by adding custom features and configuring it for a
particular industry
– Horizontal application: Can be used by many different
types of organizations
– Vertical application: Developed to handle information
requirements for a specific type of business

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In-House Software Development Options (Cont.3)

FIGURE 7-10 Companies consider various factors when comparing in-

house development with the purchase of a software package.

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In-House Software Development Options (Cont.4)

• Developing Software In-House

– Satisfies unique business requirements
• Not possible with standard commercial software
packages
• Minimizes changes in business procedures and
policies
• Installing a new software package almost always
requires some degree of change in how a
company does business
– Meets constraints of existing systems
• Any new software installed must work with existing
systems
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In-House Software Development Options (Cont.5)

• Developing Software In-House (Cont.)

– Meets constraints of existing technology

• The new system must work with existing hardware
and legacy systems
– Develops internal resources and capabilities
• Companies can develop and train IT staff who
understand the organization’s business functions
and information support needs

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In-House Software Development Options (Cont.6)

• Purchasing a Software Package

– Lower costs
• A software package is less expensive than the one
developed in-house
– Requires less time to implement
• Packages have already been designed,
programmed, tested, and documented
– Proven reliability and performance
benchmarks
• Major problems would have been detected and
corrected by the vendor
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In-House Software Development Options (Cont.7)

• Purchasing a Software Package (Cont.)

– Requires less technical development staff
• Companies can reduce the number of
programmers and systems analysts on the IT staff
– Future upgrades provided by the vendor
• Improvements and enhancements are included in
regular updates
– Input from other companies
• Users in other companies can be contacted to
obtain their input and opinions

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In-House Software Development Options (Cont.8)

• Customizing a Software Package

– Purchase a basic package that vendors will
customize to suit project requirements
– Negotiate directly with the software vendor to
make enhancements to meet project needs by
paying for the changes
– Purchase the package and make project-
specific modifications
• Ensure modifications are permissible under the
terms of the software license

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In-House Software Development Options (Cont.9)

• Creating User Applications

– User application: Utilizes standard business software
– User interface: Enables effective interaction with the
application
– Service desk or information center (IC): Provides user
support
– Screen generators and report generators: Allow users to
design their own data entry forms and reports
– Appropriate controls must be provided to ensure data security
and integrity

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In-House Software Development Options (Cont.10)

Figure 7-11 Microsoft Access

includes Form Wizard and a Report
Wizard tools that ask a series of
questions and then create the form or
report.
Source: Screenshots used with permission from Microsoft

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The Systems Analyst’s Role
• Based on decisions taken by the organization in the
systems development process
– Current and future needs are considered
• Evaluation and selection of alternatives is a
complicated process
– Forecasting actual costs is difficult
• Evaluation and selection team: Selects hardware
and software, includes systems analysts and users
– Ensures that critical factors are not overlooked and that a sound choice
is made

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Analyzing Cost and Benefits

• Financial Analysis Tools

– Payback analysis
• Determines the time taken for an information system to
pay for itself through reduced costs and increased
benefits
– Return on investment (ROI)
• Percentage rate that compares the total net benefits (the return)
received from a project to the total costs (the investment) of
the project
– Net present value (NPV)
• Total value of the benefits minus the total value of the
costs
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 Analyzing Cost and Benefits (Cont. 1)

Figure 7-12 In this example,

the HP interactive TCO
calculator is used to
determine the ROI of
migrating to an
Infrastructure-as-a-Service
(IaaS) environment in the
cloud from a traditional
server environment

Source: Hewlett-Packard Development Company, L.P.

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Analyzing Cost and Benefits(Cont. 2)

• Cost-Benefit Analysis Checklist

– List each development strategy being considered
– Identify all costs and benefits for each alternative
– Consider future growth and the need for scalability
– Include support costs for hardware and software
– Analyze various software licensing options
– Apply the financial analysis tools to each
alternative
– Study the results and prepare a report

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The Software Acquisition Process
• Step 1 - Evaluate the Information System
Requirements
– Identify key features
– Consider network and Web-related issues
– Estimate volume and future growth
– Specify hardware, software, or personnel constraints
– Prepare a request for proposal or quotation
• Request for proposal (RFP): Describes the company, lists
the IT services or products needed, and specifies the features
required
• Request for quotation (RFQ): more specific than an RFP
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The Software Acquisition Process (Cont.1)

FIGURE 7-13 Volume estimates for an order processing system showing current activity
levels and two forecasts: one based on the existing order processing procedures and
another that assumes a new Web site is operational.

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 The Software Acquisition Process (Cont.2)

FIGURE 7-15 The three

vendors have the same
initial ratings, but the two
evaluation models
produce different results.
In the unweighted model
at the top of the figure,
vendor A has the highest
total points. However,
after applying weight
factors, vendor C is the
winner, as shown in the
model at the bottom of
the figure.

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The Software Acquisition Process (Cont.3)

• Step 2 - Identify Potential Vendors or

Outsourcing Options
– The Internet contains information on all major
products and acquisition services
– The organization can avail the services of a
consulting firm that help companies select
software packages
– Online forums or newsgroups provide
opinions and ideas
• Google Groups
• Yahoo Groups
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The Software Acquisition Process (Cont.4)

• Step 3 - Evaluate the Alternatives

– Existing users
• Provide feedback about their experiences
– Application testing
• Users in the organization may be able to test the
product
– Benchmarking
• Benchmark: Measures the time a package takes
to process a certain number of transactions
• Each package is matched against RFP features
and the choices are ranked
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The Software Acquisition Process (Cont.5)

• Step 4 - Perform Cost-Benefit Analysis

– Identify and calculate total cost of ownership
(TCO) for each option being considered
– Study the conditions of use that come along
with the software license
– If a software package is purchased, consider
a supplemental maintenance agreement

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The Software Acquisition Process (Cont.6)

• Step 5 - Prepare a Recommendation

– Evaluate and describe alternatives along with:
• Costs
• Benefits
• Advantages
• Disadvantages
– Submit a formal system requirements
document and deliver a presentation

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The Software Acquisition Process (Cont.7)

• Step 6 - Implement the Solution

– Implementation tasks will depend on the
solution selected
– Before the new software becomes
operational, complete all implementation
steps
• Loading
• Configuring and testing the software
• Training users
• Converting data files to the new system’s format

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Completion of Systems Analysis Tasks
• System Requirements Document
– Called software requirements specification
– Contains the requirements for the new system
– Describes the alternatives considered
– Makes a specific recommendation to management
– Similar to a contract
• Identifies items that system developers must deliver to
users
– Format and organize the systems document
• Easy to read and use

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Completion of Systems Analysis Tasks (Cont.1)

• Presentation to Management
– Helps take key decisions that affect the future
development of the system
– Suggestions for effective presentations
• Start with a brief overview
• Summarize the primary viable alternatives
• Explain why the evaluation and selection team
chose the recommended alternative
• Allow time for discussion
• Obtain a final decision from management or agree
on a timetable for the next step in the process
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Completion of Systems Analysis Tasks (Cont.2)

• Presentation to Management (Cont.)

– Depending on management’s decision, a
systems analyst will do one of the following
• Implement an outsourcing alternative
• Develop an in-house system
• Purchase or customize a software package
• Perform additional systems analysis work
• Stop all further work
– Post presentation and management decision,
the project begins a transition to the systems
phase of the SDLC
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Transition to System Design

• Preparing for Systems Design

– Systems design requires accurate
documentation
• Provide detailed specifications for output, input,
data, processes, and other requirements
• Logical and Physical Design
o Logical design: Defines what must take place
o Physical design: Describes the actual process of
entering, verifying, and storing data
o Logical and physical designs are closely related
• Accurate systems analysis is required
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Chapter Summary
• A new trend views Software as a Service (SaaS),
rather than a product
• Traditional systems must:
– Function in various hardware and software environments
– Be compatible with legacy systems
– Operate within the constraints of company networks and
desktop computing capability
• Companies that choose to handle their own software
development needs can:
– Create in-house systems
– Commercially purchase software packages

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Chapter Summary (Cont. 1)

• The systems analyst’s role in the software

development process depends on the
specific development strategy
• The most important factor in choosing a
development strategy is total cost of
ownership (TCO)
• Financial analysis tools include:
– Payback analysis
– Return on investment (ROI)
– Net present value (NPV)
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Chapter Summary (Cont.2)

• Acquiring software involves a series of

specific steps
• The system requirements document is the
deliverable, or end product, of the systems
analysis phase

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