10.1

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CHAPTER 10CHAPTER 10

Alternative Alternative Approach:Approach:

Purchasing Purchasing SystemsSystems

10.2

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SYSTEMS DEVELOPMENT SYSTEMS DEVELOPMENT APPROACHESAPPROACHES

• SYSTEMS DEVELOPMENT LIFE SYSTEMS DEVELOPMENT LIFE CYCLE CYCLE (SDLC)(SDLC)

• PROTOTYPINGPROTOTYPING• PURCHASED SOFTWAREPURCHASED SOFTWARE• OUTSOURCING (SYSTEMS OUTSOURCING (SYSTEMS

INTEGRATOR)INTEGRATOR)• END USER DEVELOPMENTEND USER DEVELOPMENT

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10.3

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MAKE-OR -BUY DECISIONMAKE-OR -BUY DECISION

• ASSESS RISKS & BENEFITSASSESS RISKS & BENEFITS• MAKE: MAKE: UseUse SDLCSDLC , , prototyping,prototyping, RAD RAD if if

organization hasorganization has ISIS skills. Can save cost, skills. Can save cost, speed implementationspeed implementation

• BUY: BUY: If vendor offers acceptable product If vendor offers acceptable product and required support at lower cost, faster and required support at lower cost, faster time than in-house development could time than in-house development could provide. Usually system must be modified provide. Usually system must be modified to meet organization’s needsto meet organization’s needs

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10.4

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THE PURCHASING THE PURCHASING PROCESSPROCESS

DEFINITION PHASE:DEFINITION PHASE:• FEASIBILITY ANALYSISFEASIBILITY ANALYSIS• REQUIREMENTS DEFINITIONREQUIREMENTS DEFINITION• SHORT LIST OF PACKAGESSHORT LIST OF PACKAGES• ESTABLISH EVALUATION CRITERIAESTABLISH EVALUATION CRITERIA• DEVELOP AND DISTRIBUTE DEVELOP AND DISTRIBUTE RFPRFP• CHOOSE PACKAGECHOOSE PACKAGE• NEGOTIATE CONTRACTNEGOTIATE CONTRACT

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10.5

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THE PURCHASING THE PURCHASING PROCESSPROCESS

CONSTRUCTION PHASE:CONSTRUCTION PHASE:• SYSTEM DESIGN: Package modificationSYSTEM DESIGN: Package modification• SYSTEM BUILDING: Package modificationSYSTEM BUILDING: Package modification• SYSTEM TESTINGSYSTEM TESTING

IMPLEMENTATION PHASE:IMPLEMENTATION PHASE:• INSTALLATIONINSTALLATION• OPERATIONSOPERATIONS• MAINTENANCEMAINTENANCE

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10.6

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REQUEST FOR PROPOSAL REQUEST FOR PROPOSAL (RFP)(RFP)

• DOCUMENT SENT TO POTENTIAL DOCUMENT SENT TO POTENTIAL VENDORS INVITING THEM TO SUBMIT A VENDORS INVITING THEM TO SUBMIT A PROPOSAL TO FURNISH A SYSTEMPROPOSAL TO FURNISH A SYSTEM

• PROVIDES DETAILED INFORMATION PROVIDES DETAILED INFORMATION ABOUT THE DESIRED SYSTEM, ITS ABOUT THE DESIRED SYSTEM, ITS ENVIRONMENT, MATERIAL REQUIRED ENVIRONMENT, MATERIAL REQUIRED FROM VENDOR, AND GENERAL FROM VENDOR, AND GENERAL CRITERIA USED TO EVALUATE CRITERIA USED TO EVALUATE PROPOSALSPROPOSALS

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10.7

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SAMPLE CONTENTS OF SAMPLE CONTENTS OF RFPRFP

1. INTRODUCTION:1. INTRODUCTION:A. A. STRUCTURE & SCOPESTRUCTURE & SCOPE

B.B. OBJECTIVEOBJECTIVE

C.C. COMPANY BACKGROUND, COMPANY BACKGROUND, PHILOSOPHYPHILOSOPHY

D.D. HARDWARE/SOFTWARE HARDWARE/SOFTWARE ENVIRONMENTENVIRONMENT

E.E. CURRENT BUSINESS ENVIRONMENTCURRENT BUSINESS ENVIRONMENT

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10.8

© Prentice Hall 2002

SAMPLE CONTENTS OF SAMPLE CONTENTS OF RFPRFP

II. GUIDELINES FOR RESPONSE:II. GUIDELINES FOR RESPONSE:A.A. GUIDELINESGUIDELINES

B.B. VENDOR’S RESPONSEVENDOR’S RESPONSE

C.C. GENERAL EVALUATION PROCESSGENERAL EVALUATION PROCESS

D.D. HARDWARE/SOFTWARE HARDWARE/SOFTWARE ENVIRONMENTENVIRONMENT

E.E. CURRENT BUSINESS ENVIRONMENTCURRENT BUSINESS ENVIRONMENT

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10.9

© Prentice Hall 2002

SAMPLE CONTENTS OF SAMPLE CONTENTS OF RFPRFP

III. REQUIREMENTS:III. REQUIREMENTS:A.A. VENDOR INFORMATIONVENDOR INFORMATION

B. B. VENDOR SUPPORT/TRAININGVENDOR SUPPORT/TRAINING

C.C. DOCUMENTATIONDOCUMENTATION

D.D. PACKAGE HARDWARE & SYSTEM SOFTWARE PACKAGE HARDWARE & SYSTEM SOFTWARE ENVIRONMENTENVIRONMENT

E.E. APPLICATION & DATABASE ARCHITECTUREAPPLICATION & DATABASE ARCHITECTURE

F.F. TUNING & MEASUREMENTTUNING & MEASUREMENT

G.G. FUNCTIONAL REQUIREMENTSFUNCTIONAL REQUIREMENTS

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10.10

© Prentice Hall 2002

SAMPLE CONTENTS OF SAMPLE CONTENTS OF RFPRFP

IV. COSTS:IV. COSTS:A.A. SUMMARYSUMMARY

B.B. NON-RECURRINGNON-RECURRING

C.C. RECURRINGRECURRING

D.D. PRICE GUARANTEEPRICE GUARANTEE

E.E. MAINTENANCE AGREEMENTMAINTENANCE AGREEMENT

F.F. NEW RELEASESNEW RELEASES

V. SIGNATURE PAGEV. SIGNATURE PAGE

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10.11

© Prentice Hall 2002

MATCHING COMPANY NEEDS MATCHING COMPANY NEEDS WITH PACKAGE CAPABILITIESWITH PACKAGE CAPABILITIES

PACKAGE PACKAGE CAPABILITIESCAPABILITIES

COMPANY COMPANY NEEDSNEEDS

IDENTIFY IDENTIFY DISCREPANCIESDISCREPANCIES

CHOOSE CHOOSE ALTERNATIVESALTERNATIVES

MODIFY MODIFY PACKAGEPACKAGE

CHANGE CHANGE COMPANYCOMPANY

LIVE WITH LIVE WITH PROBLEMSPROBLEMS

10.12

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ROLES FOR PURCHASING ROLES FOR PURCHASING PACKAGED APPLICATIONSPACKAGED APPLICATIONS

• PROJECT MANAGER:PROJECT MANAGER: Manages process, Manages process, responsible for the success of the project, responsible for the success of the project, may be user but may be user but ISIS expertise required expertise required

• VENDOR:VENDOR: Must be responsive to customer’s Must be responsive to customer’s needsneeds

• PURCHASING SPECIALIST:PURCHASING SPECIALIST: Helps prepare Helps prepare RFPRFP, assist in entire process, assist in entire process

• ATTORNEYS:ATTORNEYS: Oversee writing, approval of Oversee writing, approval of contractcontract

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10.13

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PURCHASING SOFTWAREPURCHASING SOFTWAREADVANTAGES:ADVANTAGES:

• REDUCED TIME TO IMPLEMENTREDUCED TIME TO IMPLEMENT• LOWER OVERALL ACQUISITION LOWER OVERALL ACQUISITION

COSTSCOSTS• APPLICATION QUALITYAPPLICATION QUALITY• REDUCED NEED FOR INTERNAL IS REDUCED NEED FOR INTERNAL IS

RESOURCESRESOURCES• INFUSION OF EXTERNAL EXPERTISEINFUSION OF EXTERNAL EXPERTISE

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10.14

© Prentice Hall 2002

PURCHASING SOFTWAREPURCHASING SOFTWAREDISADVANTAGES:DISADVANTAGES:

• RISKS DUE TO LACK OF RISKS DUE TO LACK OF PACKAGE KNOWLEDGEPACKAGE KNOWLEDGE

• RISKS DUE TO EXTENT OF RISKS DUE TO EXTENT OF ORGANIZATIONAL CHANGES ORGANIZATIONAL CHANGES REQUIREDREQUIRED

• INITIAL & ONGOING INITIAL & ONGOING DEPENDENCE ON VENDORDEPENDENCE ON VENDOR

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10.15

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SPECIAL CASE: ENTERPRISE SPECIAL CASE: ENTERPRISE RESOURCE PLANNING RESOURCE PLANNING (ERP)(ERP)

• INTERFACES CROSS SEPARATE INTERFACES CROSS SEPARATE FUNCTIONAL SYSTEMSFUNCTIONAL SYSTEMS

• MUST SUPPORT CROSS-FUNCTIONAL MUST SUPPORT CROSS-FUNCTIONAL BUSINESS PROCESSESBUSINESS PROCESSES

• COMPLEX SYSTEMS TAKE YEARS TO COMPLEX SYSTEMS TAKE YEARS TO COMPLETECOMPLETE

• REQUIRES EXTENSIVE TRAININGREQUIRES EXTENSIVE TRAINING• HEAVY RELIANCE ON CONSULTANTSHEAVY RELIANCE ON CONSULTANTS

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10.16

© Prentice Hall 2002

CHAPTER 10CHAPTER 10

Alternative Alternative Approach:Approach:

Purchasing Purchasing SystemsSystems