Download - James hall ch 13
Accounting Information Systems, 6th edition
James A. Hall
COPYRIGHT © 2009 South-Western, a division of Cengage Learning. Cengage Learning and South-Western
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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 develop new systems to support those needs
A model for reducing risk through planning, execution, control, and documentation
The SDLC model may be shown in five stages.We’ll look at the first two in this chapter and the
remaining three in chapter 14.
Systems Development Life Cycle
1. Systems Strategy - Assessment - Develop Strategic Plan
1. Systems Strategy - Assessment - Develop Strategic Plan
2. Project Initiation - Feasibility Study - Analysis - Conceptual Design - Cost/Benefit Analysis
2. Project Initiation - Feasibility Study - Analysis - Conceptual Design - Cost/Benefit Analysis
3. In-house Development - Construct - Deliver
3. In-house Development - Construct - Deliver
4. Commercial Packages - Configure - Test - Roll-out
4. Commercial Packages - Configure - Test - Roll-out
5. Maintenance & Support - User help desk - Configuration Management - Risk Management & Security
5. Maintenance & Support - User help desk - Configuration Management - Risk Management & Security
SSystemystem Interfaces, Architecture Interfaces, Architecture and Uand User ser RRequirementsequirements
BBusiness usiness RRequirementsequirements
High Priority Proposals undergo High Priority Proposals undergo Additional Study and DevelopmentAdditional Study and Development
FeedbackFeedback::User requests for New SystemsUser requests for New Systems
Selected System Proposals Selected System Proposals go forward for Detailed go forward for Detailed
DesignDesign
New and Revised New and Revised Systems Enter into Systems Enter into
ProductionProduction
Business Needs and Strategy
Legacy Situation
FeedbackFeedback::User requests for System User requests for System Improvements and SupportImprovements and Support
Overview of Phases 1 and 2Phase 1 - Systems Strategy
understand the strategic needs of the organization examine the organization’s mission statementanalyze competitive pressures on the firmexamine current and anticipated market conditionsconsider the information systems’ implications
pertaining to legacy systems consider concerns registered through user feedback produce a strategic plan for meeting these various
and complex needsproduce a timetable for implementation
Overview of Phases 1 and 2Phase 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
Systems Development ParticipantsSystems Professionals: analyze problems in
current systems and formulate solutionssystems analystssystems designersprogrammers
End Users: primary users of the systemaddressing their needs is critical to success
Stakeholders: individuals who have an interest in the system but are not end users
Systems Steering CommitteeUsually includes the CEO, CFO, CIO, senior
management from user areas and computer services, and internal auditors
Typical responsibilities:provide guidanceresolve conflictsreview projects and assigning prioritiesbudget and allocate fundsreview the status of projectsdetermine whether projects should be
continued
Assessing Strategic Information Needs
Strategic systems planning involves the allocation of resources at the macro level. usually a time frame of three to five years
Key inputs in developing a sound systems strategy include: strategic business needs of the organizationsituations involving legacy systemsend user feedback
Strategic Business NeedsVision and mission
systems strategy requires an understanding of top management’s vision, which has shaped the organization’s business strategy
Industry and competency analysisindustry 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.
End User FeedbackIdentifying user needs is fundamental to
everything elseDuring phase 1, pertains to substantial
perceived problems rather than minor systems modifications
Has five key phases at this point in the SDLC:recognize problemsdefine problems specify systems objectives determine feasibility and contributions of projects
may entail prioritizing individual projects preparing a formal project proposal
End 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 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 stateproactive management - alert to subtle signs of
problems and aggressively looks for ways to improve
End User Feedback: Defining the Problem
Managers and end users should… avoid leaping to a single definition of a problemkeep an open mind and gather facts before decidinglearn to intelligently interact with systems
professionals An interactive process between managers/end
users and systems professionals is necessary to arrive at an accurate problem definition. The next three stages of the end user feedback
process involve this interactive process.
End 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.
End User Feedback:Preliminary Project Feasibility-TELOSTechnical 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?
End User Feedback:Preparing a Formal Project ProposalA 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 PlanAfter 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 with 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 ScorecardThe next step is to translate strategy into
actionMany companies have found the balanced
scorecard (BSC) a useful tool for this step.The BSC recommends viewing an
organization using four perspectives:learning and growthinternal business processcustomerfinancial
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 reports and information. Concentrate only on critical success factors to which everyone in the organization will pay attention.
BSC for On-Line Banking
Project InitiationThe second phase in SDLC involves:
understanding of users’ needs and problemsproposing multiple alternative solutionsassessing alternatives in terms of feasibility
and cost-benefit characteristicsselecting the best option and proceeding to
the construct phaseexamining whether the selected option will
require in-house development, a commercial package, or both
Systems AnalysisA 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 current systems analysis of users’ needs
Survey of Current SystemsAdvantages:
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 pitcan stifle new ideas
The Survey StepFact-gathering techniques include
observing, participating, interviewing, and reviewing documents.
Facts must be gathered regarding: data sources and data storesusersprocessesdata flowscontrols, especially audit trailstransaction volumeserror ratesresource costsbottlenecks and redundant operations
The Analysis StepSystems 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 analysisscope of studyproblem identified with current systemstatement of user requirementsresource implicationsrecommendations
The Conceptualization PhasePurpose: 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 SDLCa 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 risk
The Role of AccountantsAccountants ensure that the following are
considered during evaluation and selection:only escapable costs are used in calculations of
cost savings benefitsreasonable interest rates are used in measuring
present values of cash flowsone-time and recurring costs are completely and
accurately reportedrealistic useful lives are used in comparing
competing projectsintangible benefits are assigned reasonable
financial values
Detailed Feasibility StudySimilar to the preliminary project
feasibility analysis (TELOS), but now more detailed and oriented to deciding on a specific system design. Examine:technical feasibility economic feasibilitylegal feasibility operational feasibilityschedule feasibility
Cost-Benefit Analysis: Identify Costs
Cost-Benefit Analysis: Identify Benefits—Tangible
Cost-Benefit Analysis: Identify Benefits—Intangible
Comparing Costs and BenefitsTwo methods commonly used for evaluating
the costs and benefits of information systems:Net Present Value Method: deduct the present value
of costs from the present value of benefits over the life of the project. The optimal choice is the project with the greatest net
present value.Payback Method: do break-even analysis of total costs
(one-time costs plus present value of recurring costs) and total benefits (present value of benefits). After the break-even point, the system earns future profits. The optimal choice is the project with the greatest future
profits.
How Should We Get the System?Once the optimal system is selected,
decide how to acquire it: 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
Announcing the New System Project…can be the most delicate aspect of the SDLC.End user support is critical to success.All end users need to be made to understand
the objectives of the new system.End users and 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 SDLC?
As end users who must provide a clear picture of their problems and needs
As members of the development teamAs auditors who must ensure that the
system is designed with appropriate internal controls and computer audit techniques.
The Accountant’s Role in Systems StrategyAuditors should routinely review the
organization’s systems strategy. Careful systems planning is a cost-
effective way to reduce 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
Economic feasibility is a primary concern to accountants. Accountants should ensure that:use only escapable costs in calculations of cost-savings
benefitsuse reasonable interest rates in measuring present
values of cash flowsone-time v. recurring costs are accurately reporteduse realistic useful lives in comparing competing
projectsintangible benefits are assigned reasonable financial
values