MANAGING THE SYSTEMS DEVELOPMENT LIFE CYCLE

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.

System Development Life Cycle

Overview of Phases 1 and 2Phase 1 - Systems Strategy

understand the strategic needs of the organization examine the organization’s mission statement analyze competitive pressures on the firm examine current and anticipated market conditions consider the information systems’ implications

pertaining to legacy systems consider concerns registered through user feedback produce a strategic plan for meeting these various

and complex needs produce a timetable for implementation

Phase 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 bothSystems Development Participants

Systems Professionals: analyze problems in current systems and formulate solutions

systems analysts systems designers programmers

End Users: primary users of the system addressing their needs is critical to successStakeholders: 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 auditorsTypical responsibilities:

provide guidance resolve conflicts review projects and assigning priorities budget and allocate funds review the status of projects determine whether projects should be continued

PHASE 1: SYSTEMS STRATEGYAssessing 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 organization situations involving legacy systems end 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 Feedback Identifying user needs is fundamental to everything

else During phase 1, pertains to substantial perceived

problems rather than minor systems modifications Has five key phases at this point in the SDLC:

recognize problems define 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 ProblemThe 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 state

proactive management - alert to subtle signs of problems and aggressively looks for ways to improve

End User Feedback: Defining the ProblemManagers and end users should…

avoid leaping to a single definition of a problem keep an open mind and gather facts before deciding learn 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 Proposal A 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 Plan After 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 Priority, Cost, and Strategic Impact

Create an Action Plan: the Balanced Scorecard The next step is to translate strategy into action Many companies have found the balanced scorecard

(BSC) a useful tool for this step.

The BSC recommends viewing an organization using four perspectives:

learning and growth internal business process customer financial

The Balanced ScorecardPrimary 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.

Balanced Scorecard for Online Banking

PHASE 2: PROJECT INITIATIONProject InitiationThe second phase in SDLC involves:

understanding users’ needs and problems proposing multiple alternative solutions assessing alternatives in terms of feasibility and cost-

benefit characteristics selecting the best option and proceeding to the

construct phase examining whether the selected option will require

in-house development, a commercial package, or both

Systems Analysis A 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 Systems Advantages:

identifies aspects of the old system which should be retained in the new system

aids in planning the implementation of the new system

may allow conclusive determination of the cause of the reported problems

Disadvantages: the current physical tar pit can stifle new ideas

The Survey Step Fact-gathering techniques include observing,

participating, interviewing, and reviewing documents.

Facts must be gathered regarding: data sources and data stores users processes data flows controls, especially audit trails transaction volumes error rates resource costs bottlenecks and redundant operations

The Analysis Step Systems 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 analysis scope of study problem identified with current system statement of user requirements resource implications recommendations

The Conceptualization PhasePurpose: produce alternative conceptual solutions that satisfy the requirements identified during systems analysisHow 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 SDLC a 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 (relevant) costs are used in calculations of cost savings benefits

reasonable interest rates are used in measuring present values of cash flows

one-time and recurring costs are completely and accurately reported

realistic useful lives are used in comparing competing projects

intangible 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 feasibility legal feasibility operational feasibility schedule 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 team As auditors who must ensure that the system is

designed with appropriate internal controls and computer audit techniques.

The Accountant’s Role in Systems Strategy Auditors 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 benefits use reasonable interest rates in measuring

present values of cash flows one-time v. recurring costs are accurately

reported use realistic useful lives in comparing competing

projects intangible benefits are assigned reasonable

financial values