Question 6: Week 11, 7 Marks. [Words Limit: Up to 350 words.] a) Lecture 10 and Interactive Tutorial 11 discusses the acronym TELOS which provides guidance for accessing project feasibility. The term stands for technical, economic, legal, operational and schedules feasibility. Discuss these feasibilities briefly. And elaborate cost-benefit analysis under economic feasibility. [4 Marks] b) Accountants should be involved in the detailed design and implementation of the system development life cycle. Comment on the statement. (3 Marks) HCEMES INSTITUTE The Systems Development Life Cycle Some organization's needs that can only be met through internal development. Requires analyzing user needs, designing processes and databases, creating user views, programming, testing and implementation. Many organizations use a commercial software package. Lower initial cost, shorter implementation time, better controls and rigorous vendor testing but not without risks. Procedures needed to ensure software adequacy and compatibility. Maintenance and support includes implementing the latest software, in-house modifications, and establishing a user support infrastructure. . 10 HOLMES INSTITUTE Participants in Systems Development Systems professionals actually build the system. Systems analysts, systems designers, and programmers. . Gather and analyze facts to formulate a solution to solve problems. End users are those for whom the system is built. Many users exist at all levels in the organization. Obtaining a clear statement of user needs is critical to system development. Stakeholders are individuals who have an interest in the system but are not end users. 11 HOLMES INSTITUTE Systems Strategy Objective is to link individual system projects to the strategic objectives of the firm. 6:12 Blackboard 4G H15019_Lecture_10_AM HEIMES Systems Strategy Objective is to link individual system projects to the strategic objectives of the firm. Firms may establish a steering committee to provide guidance and oversight for systems projects. . Usually includes the CEO, CFO, CIO, senior management from user areas and computer services, and internal auditors. Task 1: Assess strategic information needs. Involves the allocation of resources at the macro level, which usually involves a time frame of three to five years. Key inputs in developing a sound systems strategy include: strategic business needs of the organization. the legacy systems situation . user feedback HCEMES The Systems Development Life Cycle HOLMES > PDF 6:12 Blackboard . 4G H15019_Lecture_10_AM ... Si HIMES INSTITUTE Systems Strategy Strategic business needs: All areas should support organization's business strategy. Vision and mission: Requires understanding of top management's vision, which has shaped the organization's business strategy. Organizations without a mission statement often lack a viable system strategy and make knee-jerk responses in out of crisis. Industry and competency analysis: Industry analysis analyzes driving forces that affect industry and organization performance, such as important trends, significant risks, and potential opportunities. . Competency analysis provides a complete picture of the organization's effectiveness as seen via four strategic filters: resources, infrastructure, products/services, and customers. HCIMES INSTITUTE Systems Strategy Legacy system mapped to current business processes to determine extent they support the company mission. Architecture description is a formal description of system. 11-1 Bence Decor HCIMES Systems Strategy PDF HOLMES INSTITUTE Systems Strategy User feedback at this point pertains to substantial perceived problems rather than minor systems modifications. Recognizing the problem: Need for improved information system is manifested through various symptoms that may initially seem vague. Reactive management responds to problems only when they reach a crisis state and can no longer be ignored. Proactive management stays alert to subtle signs of problems and aggressively looks for ways to improve organization's system. Defining the problem: Keep an open mind and avoid drawing conclusions. Interactive process between managers and systems professionals is necessary to arrive at an accurate problem definition HCIMES INSTITUTE Systems Strategy Specifying systems objectives: User information needs must be specified in terms of general operational objectives for the new information system. Preliminary project feasibility study (TELOS) is conducted to determine how best to proceed with the project. Technical feasibility: Is existing technology sufficient or is new technology needed? Economic feasibility: Are funds available to complete project? - Legal feasibility: Does the system allow the company to discharge its legal responsibilities? Operational feasibility: Can procedural changes, personnel retrained and skills obtained to make system feasible? Schedule feasibility: Can the project be implemented within an acceptable time period? HCEMES INSTITUTE Systems Strategy Systems project proposal provides management with a basis for deciding whether or not to proceed with project. Summarizes findings and makes a general recommendation. Outlines linkage between objectives of proposed system and business objectives of the firm. 6:12 Blackboard 4G HI5019_Lecture_10_AM ... HOLMES INSTITUTE Project Initiation Involves obtaining detailed understanding of user problem and proposing multiple alternative solutions. Each assessed for feasibility and cost-benefit characteristics. Option selected proceeds to the construct phase. . Depending upon needs, system will require in-house development, commercial package, or both. System analysis: Business problem must be fully understood before a solution can be formulated . A defective analysis leads to a defective or incomplete solution System analysis is a two-step process: survey of current systems and analysis of users' needs. HOLMES Project Initiation: System Survey Disadvantages of a detailed system survey: A tar pit is a service on a computer system (usually a server) that purposely delays incoming connections. Advantages of a detailed system survey: Identifies aspects of the old system which should be kept. Thorough understanding of current system is required for conversion to the new system. . May allow conclusive determination of the cause of the reported problems which may not be the information system. PDF HOLMES INSTITUTE Project Initiation: Gathering Facts System facts fall into the following broad classes: Data sources include both external and internal sources Users include both managers and operations users. Data stores are filles, databases, accounts, and source documents. Processing tasks are manual or computer operations. Data flows are the movement of documents and reports. Accounting and manual controls may be manual or computerized. Analyst must obtain a measure of transaction volume for a specified period of time. An acceptable error rate must be determined for the system. Resource costs of new system considered as well as the escapable costs when current system is eliminated (new system benefit). Bottlenecks and redundant operations should be noted during the survey phase to avoid the same mistakes in system design HOLMES INSTITUTE Project Initiation: Fact-Gathering Technicles Observation involves watching physical system procedures. Task participation is an extension of observation. Analyst takes active role in performing user's work allowing first-hand experience of the current system problems. Personal interviews extract facts about current system and user perception of requirements for the new system. Open-ended questions and formal questionnaires may be used. Reviewing key documents are another source of facts and may include: Organization charts, job descriptions, accounting records, chart of accounts, policy and procedures, financial statements and performance reports, system flowcharts, source documents, transaction listings, budgets and forecasts and mission statements. HOLMES The Analysis Step Intellectual process that is commingled with fact gathering A systems analysis report contains survey findings current system problems, user needs and new system requirements. Details of what the system must do rather than how to do it. Formal contract that specifies system objectives and goals. Establishes i II S. VI users, data 1111111 Techniques Observation involves watching physical system procedures. Task participation is an extension of observation. Analyst takes active role in performing user's work allowing first-hand experience of the current system problems. Personal interviews extract facts about current system and user perception of requirements for the new system. Open-ended questions and formal questionnaires may be used. Reviewing key documents are another source of facts and may include: Organization charts, job descriptions, accounting records, chart of accounts, policy and procedures, financial statements and performance reports, system flowcharts. source documents, transaction listings, budgets and forecasts and mission statements. HOLMES INSTITUTE The Analysis Step Intellectual process that is commingled with fact gathering. A systems analysis report contains survey findings, current system problems, user needs and new system requirements. Details of what the system must do rather than how to do it. Formal contract that specifies system objectives and goals. . Establishes in clear terms data sources, users, data files, processes, data flows, controls and transaction volume capacity. Does not specify detailed design of the proposed system Purpose of the conceptualization phase is to produce several alternative conceptual solutions that satisfy requirements. Should hinhlinht differennns hetween critical features HOLMES 6:13 Blackboard 4G H15019_Lecture_10_AM ... HOLMES INSTITUTE Systems Evaluation and Selection Formal mechanism for selecting one system. Optimization process that seeks to identify the best system. Detailed feasibility study reexamines factors that were evaluated on a preliminary basis for each conceptual design. Technical feasibility scores are higher for system designs that use established technology than for more risky options. Legal feasibility focuses on critical control, security and audit trail issues and privacy and information laws. Operational feasibility considers the training, motivation and experience of users. Schedule feasibility assesses the likelihood that the system will be completed on schedule. - Economic feasibility precisely looks at the cost of each alternative and includes cost-benefit analysis. HOLMES INSTITUTE Systems Evaluation and Selection Cost-benefit analysis helps determine if the benefits received from a proposed system will outweigh its costs. Step 1: Identify costs. . Consider both one-time and recurring costs. Step 2: Identify benefits. . Consider both tangible and intangible benefits. When measuring cost savings, only include escapable costs. Step 3: Compare costs and benefits. . Most common methods are net present value and payback Net present value method deducts the present value of the costs from the present value of benefits over the life of the system. Payback method is a variation of break-even analysis. The breskovenDointerachadon total coste total PDF 6:13 Blackboard 4G H15019_Lecture_10_AM HOLMES Systems Evaluation and Selection Formal mechanism for selecting one system. Optimization process that seeks to identify the best system. Detailed feasibility study reexamines factors that were evaluated on a preliminary basis for each conceptual design. Technical feasibility scores are higher for system designs that use established technology than for more risky options. - Legal feasibility focuses on critical control, security and audit trail issues and privacy and information laws. Operational feasibility considers the training, motivation and experience of users. Schedule feasibility assesses the likelihood that the system will be completed on schedule. Economic feasibility precisely looks at the cost of each alternative and includes cost-benefit analysis. HOLMES INSTITUTE Systems Evaluation and Selection Cost-benefit analysis helps determine if the benefits received from a proposed system will outweigh its costs. Step 1: Identify costs. . Consider both one-time and recurring costs. Step 2: Identify benefits. . Consider both tangible and intangible benefits. When measuring cost savings, only include escapable costs. Step 3: Compare costs and benefits. . Most common methods are net present value and payback. Net present value method deducts the present value of the costs from the present value of benefits over the life of the system. Payback method is a variation of break-even analysis. The breakeven point is reached when total costs = total benefits. HOLMES INSTITUTE Cost-Benefit Analysis: Identify Costs PDF 6:13 Blackboard 4G H15019_Lecture_10_AM ... HOLMES INSTITUTE Systems Evaluation and Selection Formal mechanism for selecting one system. Optimization process that seeks to identify the best system. Detailed feasibility study reexamines factors that were evaluated on a preliminary basis for each conceptual design. Technical feasibility scores are higher for system designs that use established technology than for more risky options. Legal feasibility focuses on critical control, security and audit trail issues and privacy and information laws. Operational feasibility considers the training, motivation and experience of users. Schedule feasibility assesses the likelihood that the system will be completed on schedule. - Economic feasibility precisely looks at the cost of each alternative and includes cost-benefit analysis. HOLMES INSTITUTE Systems Evaluation and Selection Cost-benefit analysis helps determine if the benefits received from a proposed system will outweigh its costs. Step 1: Identify costs. . Consider both one-time and recurring costs. Step 2: Identify benefits. . Consider both tangible and intangible benefits. When measuring cost savings, only include escapable costs. Step 3: Compare costs and benefits. . Most common methods are net present value and payback Net present value method deducts the present value of the costs from the present value of benefits over the life of the system. Payback method is a variation of break-even analysis. The breskovenDointerachadon total coste total PDF HOLMES INSTITUTE The Systems Development Life Cycle Some organization's needs that can only be met through internal development. Requires analyzing user needs, designing processes and databases, creating user views, programming, testing and implementation. Many organizations use a commercial software package. Lower initial cost, shorter implementation time, better controls and rigorous vendor testing but not without risks. Procedures needed to ensure software adequacy and compatibility. Maintenance and support includes implementing the latest software, in-house modifications, and establishing a user support infrastructure. . 10 HOLMES INSTITUTE Participants in Systems Development Systems professionals actually build the system. Systems analysts, systems designers, and programmers. . Gather and analyze facts to formulate a solution to solve problems. End users are those for whom the system is built. Many users exist at all levels in the organization. Obtaining a clear statement of user needs is critical to system development. Stakeholders are individuals who have an interest in the system but are not end users. 11 HOLMES INSTITUTE Systems Strategy Objective is to link individual system projects to the strategic objectives of the firm. 6:13 Blackboard 4G H15019_Lecture_10_AM . 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 and computer audit techniques. HOLMES INSTITUT The Accountant's Role in Managing the SDLC Auditors routinely review organization's systems strategy. . Careful planning is a cost-effective way to reduce risk of creating unneeded, unwanted, inefficient, and ineffective systems. Internal and external auditors have vested interests in outcome. Accountant's role in conceptual design is to recognize control implications and ensure accounting conventions and legal requirements are understood. System auditability depends in part on its design characteristics. Accountants should ensure economic feasibility analysis: Only includes escapable costs in the cost-savings benefit analysis. HOLMES THE END PDF 6:13 Blackboard 4G H15019_Lecture_10_AM HOLMES Systems Evaluation and Selection Formal mechanism for selecting one system. Optimization process that seeks to identify the best system. Detailed feasibility study reexamines factors that were evaluated on a preliminary basis for each conceptual design. Technical feasibility scores are higher for system designs that use established technology than for more risky options. - Legal feasibility focuses on critical control, security and audit trail issues and privacy and information laws. Operational feasibility considers the training, motivation and experience of users. Schedule feasibility assesses the likelihood that the system will be completed on schedule. Economic feasibility precisely looks at the cost of each alternative and includes cost-benefit analysis. HOLMES INSTITUTE Systems Evaluation and Selection Cost-benefit analysis helps determine if the benefits received from a proposed system will outweigh its costs. Step 1: Identify costs. . Consider both one-time and recurring costs. Step 2: Identify benefits. . Consider both tangible and intangible benefits. When measuring cost savings, only include escapable costs. Step 3: Compare costs and benefits. . Most common methods are net present value and payback. Net present value method deducts the present value of the costs from the present value of benefits over the life of the system. Payback method is a variation of break-even analysis. The breakeven point is reached when total costs = total benefits. HOLMES INSTITUTE Cost-Benefit Analysis: Identify Costs PDF 1111111 Techniques Observation involves watching physical system procedures. Task participation is an extension of observation. Analyst takes active role in performing user's work allowing first-hand experience of the current system problems. Personal interviews extract facts about current system and user perception of requirements for the new system. Open-ended questions and formal questionnaires may be used. Reviewing key documents are another source of facts and may include: Organization charts, job descriptions, accounting records, chart of accounts, policy and procedures, financial statements and performance reports, system flowcharts. source documents, transaction listings, budgets and forecasts and mission statements. HOLMES INSTITUTE The Analysis Step Intellectual process that is commingled with fact gathering. A systems analysis report contains survey findings, current system problems, user needs and new system requirements. Details of what the system must do rather than how to do it. Formal contract that specifies system objectives and goals. . Establishes in clear terms data sources, users, data files, processes, data flows, controls and transaction volume capacity. Does not specify detailed design of the proposed system Purpose of the conceptualization phase is to produce several alternative conceptual solutions that satisfy requirements. Should hinhlinht differennns hetween critical features HOLMES 6:13 Blackboard 4G H15019_Lecture_10_AM ... HOLMES INSTITUTE Systems Evaluation and Selection Formal mechanism for selecting one system. Optimization process that seeks to identify the best system. Detailed feasibility study reexamines factors that were evaluated on a preliminary basis for each conceptual design. Technical feasibility scores are higher for system designs that use established technology than for more risky options. Legal feasibility focuses on critical control, security and audit trail issues and privacy and information laws. Operational feasibility considers the training, motivation and experience of users. Schedule feasibility assesses the likelihood that the system will be completed on schedule. - Economic feasibility precisely looks at the cost of each alternative and includes cost-benefit analysis. HOLMES INSTITUTE Systems Evaluation and Selection Cost-benefit analysis helps determine if the benefits received from a proposed system will outweigh its costs. Step 1: Identify costs. . Consider both one-time and recurring costs. Step 2: Identify benefits. . Consider both tangible and intangible benefits. When measuring cost savings, only include escapable costs. Step 3: Compare costs and benefits. . Most common methods are net present value and payback Net present value method deducts the present value of the costs from the present value of benefits over the life of the system. Payback method is a variation of break-even analysis. The breskovenDointerachadon total coste total PDF 6:12 Blackboard 4G HI5019_Lecture_10_AM ... HOLMES INSTITUTE Project Initiation Involves obtaining detailed understanding of user problem and proposing multiple alternative solutions. Each assessed for feasibility and cost-benefit characteristics. Option selected proceeds to the construct phase. . Depending upon needs, system will require in-house development, commercial package, or both. System analysis: Business problem must be fully understood before a solution can be formulated . A defective analysis leads to a defective or incomplete solution System analysis is a two-step process: survey of current systems and analysis of users' needs. HOLMES Project Initiation: System Survey Disadvantages of a detailed system survey: A tar pit is a service on a computer system (usually a server) that purposely delays incoming connections. Advantages of a detailed system survey: Identifies aspects of the old system which should be kept. Thorough understanding of current system is required for conversion to the new system. . May allow conclusive determination of the cause of the reported problems which may not be the information system. PDF