Ocean Sound College

Ocean Sound College is a liberal arts college located on the West Coast. You are the systems analyst assigned from the college IT department to conduct the systems analysis phase of the development of a new listing system for the schools housing office.

Background

Based on your earlier recommendations, the housing office decided to continue the systems development process for a new listing system.

Now, at the end of the systems analysis phase, you are ready to prepare a system requirements document and give a presentation to the housing office.

You must examine tangible costs and benefits to determine the economic feasibility of several alternatives. If the housing office decides to go ahead with the development process, the system can either be developed in-house or purchased as a vertical package and configured to meet the needs of the office.

Currently, housing listings are created by an employee at the housing office. While the demands on her time vary throughout the year, based on previous work logs kept by employees in the office you determine that the time spent maintaining the manual system (creating listing sheets for the various binders, copying, and filing listings in binders) by this employee works out to an average of 30 hours of overtime per month. The overtime cost of this employee is $25 per hour, including overhead.

Housing listings are pulled throughout the month, and all listings are reviewed once a month to delete those more than two months old. Currently, the once a month reviews are done by a student worker who spends 25 hours a month going through the 15 binders at the housing office, and pulling all old listings for review by a housing office staff member. This student is paid $12.50 per hour, including overhead. A new system would conduct this review automatically, and generate a list for review.

Your estimates indicate that the housing office can expect to have staff spend 4 hours a week performing maintenance, file backups, and updating of the new system, at $25 per hour.

The university has lost revenue on some of its rental properties, having them lie idle for a month because of listings pulled either erroneously by staff, or deliberately by people using the housing listing service. Estimates put the amount of lost revenue due to listing problems such as these at two percent of anticipated yearly rental receipts. In the current year, the anticipated rental receipts total $680,000. Annual increases of rent vary from year to year depending on market rates but the average increase is three percent per year.

Based on your research, you originally estimated that an in-house development project could be completed in about three weeks. This time estimate is based on 55 hours a week split between you and another analyst from the IT department. The IT department uses a charge-back rate of $40 per hour for work for other university departments. Three training sessions of four hours each will be required to train all staff in the new system. The charge-back cost of a training specialist from the IT department is $25 per hour. Training and technical support for the first year for the vertical software package is included in the initial price.

As an alternative to in-house development, a vertical software package is available for about $6,000, including an on-site day of training and technical support for the first year. If the department buys the package, it would take you about two weeks to install, configure, and test it, working full-time. The vendor provides free support during the first year of operation, but then the housing office must sign a technical support agreement at an annual cost of $750.

For both the in-house development and the vertical software package, the necessary hardware will cost about $3,500. Network upgrading, necessary for either option, has been estimated at $4,000 by the network operations team.

In your view, the useful life of the system will be about five years, including the year in which the system becomes operational.

Tasks

You scheduled a presentation to the housing office next week and you must submit a system requirements document during the presentation. Before you begin, review the facts presented in the Ocean Sound College case study in Chapter 5. Prepare both the written documentation and the presentation. (Note: To give a successful presentation, you will need to learn the skills described in Part A of the Systems Analysts Toolkit.) Your oral and written presentation must include the following tasks:

1. What options for a development strategy does Ocean Sound College have for developing a new system? Provide a brief explanation of specific alternatives that should be considered if development continues including in-house development and other strategies that would be a good fit. Justify your suggestions by analyzing the advantages and disadvantages of the chosen methods.
2. You have been asked to prepare a system requirements document and deliver a presentation to the housing office management. What should be the main elements of the system requirements document?
3. What financial analysis tools are available to calculate total cost of ownership for the system? What are the advantages (and possible disadvantages) of each tool?
4. Develop a cost-benefit analysis, using payback analysis, ROI, and present value (assume a discount rate of six percent). Part C of the Systems Analysts Toolkit describes popular financial analysis tools.