It essay

The IT department is implementing a new CRM solution in its corporate offices. The hardware currently in use is out of date and will not support the CRM application. The hardware must be replaced prior to deployment.

Resource: Ch. 11 of Essentials of Management Information Systems

Write a 1,050- to 1,750-word paper that addresses the following:

How do the five major variables of project management—scope, time, cost, quality, and risk—relate to this scenario?

· What considerations must be applied when selecting projects that deliver the best business value?

· What factors that influence project risk? What strategies would you recommend for minimizing this project’s risks?

Summarize your response by identifying best practices for managing this project.

Format your paper consistent with APA guidelines.

IVP A R TBuilding and ManagingSystems
11 Building Information Systems and

Managing Projects

12 Ethical and Social Issues
in Information Systems

Part IV shows how to use the knowledge acquired in earlier
chapters to analyze and design information system solutions to

business problems. This part answers questions such as these:

How can I develop a solution to an information system problem

that provides genuine business benefits? How can the firm adjust to

the changes introduced by the new system solution? What

alternative approaches are available for building system solutions?

What broader ethical and social issues should be addressed when

building and using information systems?

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S T U D E N T L E A R N I N G O B J E C T I V E S

After completing this chapter, you will be able to answer the
following questions:

1. What are the core problem-solving steps for developing new
information systems?

2. What are the alternative methods for building information
systems?

3. What are the principal methodologies for modeling and
designing systems?

4. How should information systems projects be selected and
evaluated?

5. How should information systems projects be managed?

Building Information
Systems and Managing

Projects11

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379

CHAPTER OUTLINE
Chapter-Opening Case: A New Ordering System for

Girl Scout Cookies

11.1 Problem Solving and Systems Development

11.2 Alternative Systems-Building Approaches

11.3 Modeling and Designing Systems

11.4 Project Management

11.5 Hands-On MIS Projects

Business Problem-Solving Case: The U.S. Census
Bureau Field Data Collection Project: Don’t
Count on It

A NEW ORDERING SYSTEM FOR GIRL SCOUT COOKIES

Peanut Butter Petites, Caramel DeLites, Thin Mints—Girl Scout Cookies have been
American favorites since the organization’s first cookie drive in 1917. The Girl Scouts
have been so successful selling cookies that cookie sales are a major source of funding
for this organization. The Girl Scouts sell so many cookies that collecting, counting, and
organizing the annual avalanche of orders has become a tremendous challenge.

The Girl Scouts’ traditional cookie-ordering process depended on mountains of
paperwork. During the peak sales period in January, each Girl Scout marked her sales
on an individual order card and turned the card in to the troop leader when she was
finished. The troop leader would transfer the information onto a five-part form and
give this form to a community volunteer who tabulated the orders. From there, the
orders data passed to a regional council headquarters, where they would be batched
into final orders for the manufacturer, ABC Cookies. In addition to ordering, Girl
Scout volunteers and troop members had to coordinate cookie deliveries, from the
manufacturer to regional warehouses, to local drop-off sites, to each scout, and to the
customers themselves.

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The Patriots’ Trail Girl Scout Council, representing 65 communities and 18,000 Girl
Scouts in the greater Boston area, sold more than 1.6 million boxes of eight different cookie
varieties in 2004 alone. According to its associate executive director Deborah Deacetis, the
paperwork had become “overwhelming.” “It changed hands too many times. There was a lot
of opportunity for error, because of all the added columns, multiple prices per box, and
calculations that had to be made by different people, all on deadline.”

The Patriots’ Trail Council first looked into building a computerized system using
Microsoft Access database management and application development tools. But this
alternative would have cost $25,000 to develop and would have taken at least three to four
months to get the system up and running. It was too time-consuming, complex, and
expensive for the Girl Scouts. In addition to Microsoft Access software, the Girl Scouts
would have to purchase a server to run the system, plus pay for networking and Web site
maintenance services so the system could be made available on the Web.

After consulting with management consultants Dovetail Associates, the council selected
Intuit’s QuickBase for Corporate Workgroups. QuickBase is a hosted Web-based software
service for small businesses and corporate workgroups. It is especially well suited for
building simple database applications very quickly and does not require a great deal of
training to use. QuickBase is customizable and designed to collect, organize, and share data
among teams in many different locations.

A Dovetail consultant created a working QuickBase prototype with some basic
functions for the Girl Scouts within a few hours. It only took two months to build, test, and
implement the entire system using this software. The cost for developing the entire system
was a fraction of the Microsoft Access solution. The Girl Scouts do not have to pay for any
hardware, software, or networking services because QuickBase runs everything for them on
its servers. QuickBase costs $500 per month for organizations with 100 users and $1,500 per
month for organizations with up to 500 users. It is very easy to use.

The QuickBase solution eliminates paperwork and calculation errors by providing a clear
central source of data for the entire council and easy online entry of cookie orders over the Web.
Troop leaders collect the Girl Scouts’ order cards and enter them directly into the QuickBase
system using their home computers linked to the Web. With a few mouse clicks, the council
office consolidates the unit totals and transmits the orders electronically to ABC Cookies.

In the past, the council relied on volunteers to handle their paperwork, dropping it off at the
council office or mailing it in. “Now we have a way to actually watch the orders coming in,”
Deacetis notes. As local orders come in, local section leaders can track the data in real time.

The Patriots’ Trail Girl Scout Council also uses the QuickBase system to manage the
Cookie Cupboard warehouse, where volunteers pick up their cookie orders. Volunteers use
the system to make reservations so that the warehouse can prepare the orders in advance,
saving time and inventory management costs. The trucking companies that deliver cookie
shipments now receive their instructions electronically through QuickBase so that they can
create efficient delivery schedules.

Since its implementation, the QuickBase system has cut paperwork by more than 90
percent, reduced errors to 1 percent, and reduced the time spent by volunteers by 50 percent.
The old system used to take two months to tally the orders and determine which Scouts
should be rewarded for selling the most cookies. Now that time has been cut to 48 hours.

Sources: www.girlscoutseasternmass.org/cookies, accessed October 29, 2009 and “Girl Scouts Unite Behind Order
Tracking,” Customer Relationship Management, May 2005.

The experience of the Patriots’ Trail Girl Scout Council illustrates some of the steps
required to design and build new information systems. It also illustrates some of the benefits
of a new system solution. The Girl Scouts had an outdated manual paper-based system for
processing cookie orders that was excessively time-consuming and error ridden. The Girl
Scouts tried several alternative solutions before opting for a new ordering system based on
the QuickBase software service. In this chapter, we will examine the Girl Scouts’ search for
a system solution as we describe each step of building a new information system using the
problem-solving process.

380 Part IV: Building and Managing Systems
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Chapter 11: Building Information Systems and Managing Projects 381

11.1 Problem Solving and Systems Development

We have already described the problem-solving process and how it helps us analyze and
understand the role of information systems in business. This problem-solving process is
especially valuable when we need to build new systems. A new information system is built
as a solution to a problem or set of problems the organization perceives it is facing.
The problem may be one in which managers and employees believe that the business is not
performing as well as expected, or it may come from the realization that the organization
should take advantage of new opportunities to perform more effectively.

Let’s apply this problem-solving process to system building. Figure 11-1 illustrates the
four steps we would need to take: (1) define and understand the problem, (2) develop
alternative solutions, (3) choose the best solution, and (4) implement the solution.

Figure 11-1
Developing an
Information System
Solution
Developing an informa-
tion system solution is
based on the problem-
solving process.

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382 Part IV: Building and Managing Systems

Before a problem can be solved, it first must be properly defined. Members of the
organization must agree that a problem actually exists and that it is serious. The problem must
be investigated so that it can be better understood. Next comes a period of devising alternative
solutions, then one of evaluating each alternative and selecting the best solution. The final
stage is one of implementing the solution, in which a detailed design for the solution is
specified, translated into a physical system, tested, introduced to the organization, and further
refined as it is used over time.

In the information systems world, we have a special name for these activities.
Figure 11-1 shows that the first three problem-solving steps, where we identify the problem,
gather information, devise alternative solutions, and make a decision about the best solution,
are called systems analysis.

DEFINING AND UNDERSTANDING THE PROBLEM

Defining the problem may take some work because various members of the company may
have different ideas about the nature of the problem and its severity. What caused the
problem? Why is it still around? Why wasn’t it solved long ago? Systems analysts typically
gather facts about existing systems and problems by examining documents, work papers,
procedures, and system operations and by interviewing key users of the system.

Information systems problems in the business world typically result from a combination of
people, organization, and technology factors. When identifying a key issue or problem, ask
what kind of problem it is: Is it a people problem, an organizational problem, a technology
problem, or a combination of these? What people, organizational, and technological factors
contributed to the problem?

Once the problem has been defined and analyzed, it is possible to make some decisions
about what should and can be done. What are the objectives of a solution to the problem?
Is the firm’s objective to reduce costs, increase sales, or improve relationships with
customers, suppliers, or employees? Do managers have sufficient information for decision
making? What information is required to achieve these objectives?

At the most basic level, the information requirements of a new system identify who
needs what information, where, when, and how. Requirements analysis carefully defines the
objectives of the new or modified system and develops a detailed description of the
functions that the new system must perform. A system designed around the wrong set of
requirements will either have to be discarded because of poor performance or will need to
undergo major modifications. Section 11.2 describes alternative approaches to eliciting
requirements that help minimize this problem.

Let’s return to our opening case about the Girl Scouts. The problem here is that the Girl
Scout ordering process is heavily manual and cannot support the large number of volunteers
and cookie orders that must be coordinated. As a result, cookie ordering is extremely
inefficient with high error rates and volunteers spending excessive time organizing orders
and deliveries.

Organizationally, the Girl Scouts are a voluntary organization distributed across a
large area, with cookie sales as the primary source of revenue. The Scouts rely on
volunteers with little or no business or computer experience for sales and management of
orders and deliveries. They have almost no financial resources and volunteers are strapped
for time. The Girl Scout cookie-ordering process requires many steps and coordination of
multiple groups and organizations—individual Girl Scouts, volunteers, the council office,
the cookie manufacturing factory, trucking companies, and the Cookie Cupboard
warehouse.

The objectives of a solution for the Girl Scouts would be to reduce the amount of time,
effort, and errors in the cookie-ordering process. Information requirements for the solution
include the ability to rapidly total and organize order transactions for transmittal to ABC
Cookies; the ability to track orders by type of cookie, troop, and individual Girl Scout; the
ability to schedule deliveries to the Cookie Cupboard; and the ability to schedule order
pickups from the Cookie Cupboard.

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Chapter 11: Building Information Systems and Managing Projects 383

DEVELOPING ALTERNATIVE SOLUTIONS

What alternative solutions are possible for achieving these objectives and meeting these
information requirements? The systems analysis lays out the most likely paths to follow
given the nature of the problem. Some possible solutions do not require an information
system solution but instead call for an adjustment in management, additional training, or
refinement of existing organizational procedures. Some, however, do require modifications
to the firm’s existing information systems or an entirely new information system.

EVALUATING AND CHOOSING SOLUTIONS

The systems analysis includes a feasibility study to determine whether each proposed
solution is feasible, or achievable, from a financial, technical, and organizational standpoint.
The feasibility study establishes whether each alternative solution is a good investment,
whether the technology needed for the system is available and can be handled by the firm’s
information systems staff, and whether the organization is capable of accommodating the
changes introduced by the system.

A written systems proposal report describes the costs and benefits, and advantages
and disadvantages of each alternative solution. Which solution is best in a financial
sense? Which works best for the organization? The systems analysis will detail the
costs and benefits of each alternative and the changes that the organization will have to
make to use the solution effectively. We provide a detailed discussion of how to
determine the business value of systems and manage change in the following section. On
the basis of this report, management will select what it believes is the best solution for
the company.

The Patriots’ Trail Girl Scouts had three alternative solutions. One was to streamline
existing processes, continuing to rely on manual procedures. However, given the large
number of Girl Scouts and cookie orders, as well as relationships with manufacturers and
shippers, redesigning and streamlining a manual ordering and delivery process would not
have provided many benefits. The Girl Scouts needed an automated solution that accurately
tracked thousands of order and delivery transactions, reduced paperwork, and created a
central real-time source of sales data that could be accessed by council headquarters and
individual volunteers.

A second alternative was to custom-build a cookie-ordering system using Microsoft
Access. This alternative was considered too time-consuming, expensive, and technically
challenging for the Girl Scouts. It required $25,000 in initial programming costs, plus the
purchase of hardware and networking equipment to run the system and link it to the Internet,
as well as trained staff to run and maintain the system.

The third alternative was to rapidly create a system using an application service
provider. QuickBase provides templates and tools for creating simple database systems in
very short periods, provides the hardware for running the application and Web site, and can
be accessed by many different users over the Web. This solution does not require the Girl
Scouts to purchase any hardware, software, or networking technology or to maintain any
information system staff to support the system. This last alternative was the most feasible for
the Girl Scouts.

IMPLEMENTING THE SOLUTION

The first step in implementing a system solution is to create detailed design specifications.
Systems design shows how the chosen solution should be realized. The system design is the
model or blueprint for an information system solution and consists of all the specifications
that will deliver the functions identified during systems analysis. These specifications
should address all of the technical, organization, and people components of the system solu-
tion. Table 11.1 lists the types of specifications that would be produced during system
design.

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384 Part IV: Building and Managing Systems

A Dovetail Associates consultant elicited information requirements and created a design
for the new Girl Scout cookie system. Table 11.2 shows some of the design specifications
for the new system.

Completing Implementation
In the final steps of implementing a system solution, the following activities would be
performed:

• Hardware selection and acquisition. System builders select appropriate hardware for the
application. They would either purchase the necessary computers and networking
hardware or lease them from a technology provider.

• Software development and programming. Software is custom programmed in-house or
purchased from an external source, such as an outsourcing vendor, an application
software package vendor, or an application service provider.

The Girl Scouts did not have to purchase additional hardware or software. QuickBase
offers templates for generating simple database applications. Dovetail consultants used the
QuickBase tools to rapidly create the software for the system. The system runs on
QuickBase servers.

• Testing. The system is thoroughly tested to ensure it produces the right results. The
testing process requires detailed testing of individual computer programs, called
unit testing, as well as system testing, which tests the performance of the
information system as a whole. Acceptance testing provides the final certification
that the system is ready to be used in a production setting. Information systems tests
are evaluated by users and reviewed by management. When all parties are satisfied
that the new system meets their standards, the system is formally accepted for
installation.

The systems development team works with users to devise a systematic test plan.
The test plan includes all of the preparations for the series of tests we have just described.

Output

Input

User interface

Database

Processing

Manual procedures

Security and controls

Conversion

Training and documentation

Organizational changes

Medium and content
Timing

Flow
Data entry

Feedback and error handling

Logical data model
Volume and speed requirements
File and record specifications

Program logic and computations

What activities, who, when, how, and where

Access controls
Input, processing, and output controls

Testing method
Conversion strategy

Training modules and platforms
Systems, user, and operations documentation

Process design
Organizational structure changes

TABLE 11.1

System Design
Specifications

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Chapter 11: Building Information Systems and Managing Projects 385

Figure 11-2 shows a sample from a test plan that might have been used for the Girl Scout
cookie system. The condition being tested is online access of an existing record for a
specific Girl Scout troop.

• Training and documentation. End users and information system specialists require
training so that they will be able to use the new system. Detailed documentation
showing how the system works from both a technical and end-user standpoint must be
prepared.

Output Online reports

Hard copy reports

Online queries

Order transactions for ABC Cookies

Delivery tickets for the trucking firm

Input Order data entry form

Troop data entry form

Girl Scout data entry form

Shipping/delivery data entry form

User interface Graphical Web interface

Database Database with cookie order file, delivery file,

troop contact file

Processing Calculate order totals by type of cookie and number of
boxes

Track orders by troop and individual Girl Scout

Schedule pickups at the Cookie Cupboard

Update Girl Scout and troop data for address and member
changes

Manual procedures Girl Scouts take orders with paper forms

Troop leaders collect order cards from Scouts and enter the
order data online

Security and controls Online passwords

Control totals

Conversion Input Girl Scout and troop data

Transfer factory and delivery data

Test system

Training and documentation System guide for users

Online practice demonstration

Online training sessions

Training for ABC Cookies and trucking companies to accept
data and instructions automatically from the Girl Scout
system

Organizational changes Job design: Volunteers no longer have to tabulate orders

Process design: Take orders on manual cards but enter them
online into the system

Schedule order pickups from the Cookie Cupboard online

TABLE 11.2

Design Specifications
for the Girl Scout
Cookie System

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The Girl Scout cookie system provides an online practice area for users to practice
entering data into the system by following step-by-step instructions. Also available on the
Web is a step-by-step instruction guide for the system that can be downloaded and printed as
a hard-copy manual.

• Conversion is the process of changing from the old system to the new system. There are
three main conversion strategies: the parallel strategy, the direct cutover strategy, and the
phased approach strategy.

In a parallel strategy, both the old system and its potential replacement are run
together for a time until everyone is assured that the new one functions correctly. The old
system remains available as a backup in case of problems. The direct cutover strategy
replaces the old system entirely with the new system on an appointed day, carrying the
risk that there is no system to fall back on if problems arise. A phased approach
introduces the system in stages (such as first introducing the modules for ordering Girl
Scout cookies and then introducing the modules for transmitting orders and instructions
to the cookie factory and shipper).
• Production and maintenance. After the new system is installed and conversion is

complete, the system is said to be in production. During this stage, users and technical
specialists review the solution to determine how well it has met its original objectives
and to decide whether any revisions or modifications are in order. Changes in hardware,
software, documentation, or procedures to a production system to correct errors, meet
new requirements, or improve processing efficiency are termed maintenance.

The Girl Scouts continued to improve and refine their QuickBase cookie system.
The system was made more efficient for users with slow Internet connections. Other recent
enhancements include capabilities for paying for orders more rapidly, entering troop
information and initial orders without waiting for a specified starting date, and receiving
online confirmation for reservations to pick up orders from the Cookie Cupboard.

Managing the Change
Developing a new information systems solution is not merely a matter of installing hardware
and software. The business must also deal with the organizational changes that the new
solution will bring about—new information, new business processes, and perhaps new
reporting relationships and decision-making power. A very well-designed solution may not
work unless it is introduced to the organization very carefully. The process of planning

386 Part IV: Building and Managing Systems

Figure 11-2
A Sample Test Plan
for the Girl Scout
Cookie System
When developing a test
plan, it is imperative to
include the various
conditions to be tested,
the requirements for
each condition tested,
and the expected results.
Test plans require input
from both end users and
information systems
specialists.

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change in an organization so that it is implemented in an orderly and effective manner is so
critical to the success or failure of information system solutions that we devote the next
section to a detailed discussion of this topic.

To manage the transition from the old manual cookie-ordering processes to the new
system, the Girl Scouts would have to inform troop leaders and volunteers about changes in
cookie-ordering procedures, provide training, and provide resources for answering any
questions that arose as parents and volunteers started using the system. They would need to
work with ABC Cookies and their shippers on new procedures for transmitting and
delivering orders.

11.2 Alternative Systems-Building Approaches

There are alternative methods for building systems using the basic problem-solving model
we have just described. These alternative methods include the traditional systems lifecycle,
prototyping, end-user development, application software packages, and outsourcing.

TRADITIONAL SYSTEMS DEVELOPMENT LIFECYCLE

The systems development lifecycle (SDLC) is the oldest method for building information
systems. The lifecycle methodology is a phased approach to building a system, dividing
systems development into a series of formal stages, as illustrated in Figure 11-3. Although
systems builders can go back and forth among stages in the lifecycle, the systems lifecycle
is predominantly a “waterfall” approach in which tasks in one stage are completed before
work for the next stage begins.

This approach maintains a very formal division of labor between end users and informa-
tion systems specialists. Technical specialists, such as system analysts and programmers, are
responsible for much of the systems analysis, design, and implementation work; end users
are limited to providing information requirements and reviewing the technical staff’s work.
The lifecycle also emphasizes formal specifications and paperwork, so many documents are
generated during the course of a systems project.

The systems lifecycle is still used for building large complex systems that require
rigorous and formal requirements analysis, predefined specifications, and tight controls over
the systems-building process. However, this approach is also time-consuming and expensive
to use. Tasks in one stage are supposed to be completed before work for the next stage

Chapter 11: Building Information Systems and Managing Projects 387

Figure 11-3
The Traditional
Systems
Development
Lifecycle
The systems develop-
ment lifecycle partitions
systems development
into formal stages, with
each stage requiring
completion before the
next stage can begin.

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begins. Activities can be repeated, but volumes of new documents must be generated and
steps retraced if requirements and specifications need to be revised. This encourages
freezing of specifications relatively early in the development process. The lifecycle
approach is also not suitable for many small desktop systems, which tend to be less
structured and more individualized.

PROTOTYPING

Prototyping consists of building an experimental system rapidly and inexpensively for end
users to evaluate. The prototype is a working version of an information system or part of the
system, but it is intended as only a preliminary model. Users interact with the prototype to
get a better idea of their information requirements, refining the prototype multiple times.
(The chapter-opening case describes how Dovetail Associates used QuickBase to create a
prototype that helped the Patriots’ Trail Girl Scout Council refine their specifications for
their cookie-ordering system.) When the design is finalized, the prototype will be converted
to a polished production system. Figure 11-4 shows a four-step model of the prototyping
process.

Step 1: Identify the user’s basic requirements. The system designer (usually an information
systems specialist) works with the user only long enough to capture the user’s basic
information needs.

Step 2: Develop an initial prototype. The system designer creates a working prototype
quickly, using tools for rapidly generating software.

Step 3: Use the prototype. The user is encouraged to work with the system to determine
how well the prototype meets his or her needs and to make suggestions for improving the
prototype.

Step 4: Revise and enhance the prototype. The system builder notes all changes the user
requests and refines the prototype accordingly. After the prototype has been revised, the
cycle returns to Step 3. Steps 3 and 4 are repeated until the user is satisfied.

388 Part IV: Building and Managing Systems

Figure 11-4
The Prototyping
Process
The process of develop-
ing a prototype consists
of four steps. Because a
prototype can be
developed quickly and
inexpensively, systems
builders can go through
several iterations,
repeating steps 3 and 4,
to refine and enhance
the prototype before
arriving at the final opera-
tional one.

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Prototyping is especially useful in designing an information system’s user interface.
Because prototyping encourages intense end-user involvement throughout the
systems-development process, it is more likely to produce systems that fulfill user
requirements.

However, rapid prototyping may gloss over essential steps in systems development, such
as thorough testing and documentation. If the completed prototype works reasonably well,
management may not see the need to build a polished production system. Some hastily
constructed systems do not easily accommodate large quantities of data or a large number of
users in a production environment.

END-USER DEVELOPMENT

End-user development allows end users, with little or no formal assistance from technical
specialists, to create simple information systems, reducing the time and steps required to
produce a finished application. Using fourth-generation languages, graphics languages, and
PC software tools, end users can access data, create reports, and develop entire information
systems on their own, with little or no help from professional systems analysts or
programmers.

For example, Elie Tahari Ltd., a leading designer of women’s fashions, uses Information
Builders Inc.’s WebFOCUS software to enable authorized users to obtain self-service
reports on orders, inventory, sales, and finance. Sales executives use the system to view their
accounts, to determine what merchandise is selling, and to see what customers have ordered.
Users can also create ad hoc reports by themselves to obtain specific pieces of information
or more detailed data (Information Builders, 2009).

On the whole, end-user-developed systems are completed more rapidly than those
developed with conventional programming tools. Allowing users to specify their own
business needs improves requirements gathering and often leads to a higher level of user
involvement and satisfaction with the system. However, fourth-generation tools still cannot
replace conventional tools for some business applications because they cannot easily handle
the processing of large numbers of transactions or applications with extensive procedural
logic and updating requirements.

End-user development also poses organizational risks because systems are created
rapidly, without a formal development methodology, testing, and documentation. To help
organizations maximize the benefits of end-user applications development, management
should require cost justification of end-user information system projects and establish hard-
ware, software, and quality standards for user-developed applications.

PURCHASING SOLUTIONS: APPLICATION SOFTWARE PACKAGES
AND OUTSOURCING

Chapter 4 points out that the software for most systems today is not developed in-house
but is purchased from external sources. Firms may choose to purchase a software pack-
age from a commercial vendor, rent the software from a service provider, or outsource
the development work to another firm. Selection of the software or software service is
often based on a Request for Proposal (RFP), which is a detailed list of questions sub-
mitted to external vendors to see how well they meet the requirements for the proposed
system.

Application Software Packages
Most new information systems today are built using an application software package or
preprogrammed software components. Many applications are common to all business
organizations—for example, payroll, accounts receivable, general ledger, or inventory
control. For such universal functions with standard processes that do not change a great deal
over time, a generalized system will fulfill the requirements of many organizations.

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If a software package can fulfill most of an organization’s requirements, the company
does not have to write its own software. The company saves time and money by using the
prewritten, predesigned, pretested software programs from the package.

Many packages include capabilities for customization to meet unique requirements
not addressed by the package software. Customization features allow a software
package to be modified to meet an organization’s unique requirements without
destroying the integrity of the packaged software. However, if extensive customization is
required, additional programming and customization work may become so expensive
and time-consuming that it negates many of the advantages of software packages. If the
package cannot be customized, the organization will have to adapt to the package and
change its procedures.

The Interactive Session on Technology describes the experience of Zimbra, a software
company that selected a software package solution for its new marketing automation
system. As you read this case, try to identify the problem this company was facing, what
alternative solutions were available to management, why a software package was an appro-
priate solution, and how well the chosen solution worked.

Outsourcing
If a firm does not want to use its internal resources to build or operate information systems,
it can outsource the work to an external organization that specializes in providing these
services. Software service providers, which we describe in Chapter 4, are one form of out-
sourcing. An example would be the Girl Scouts leasing the software and hardware from
QuickBase to run their cookie-ordering system. Subscribing companies use the software and
computer hardware of the service provider as the technical platform for their systems. In
another form of outsourcing, a company would hire an external vendor to design and create
the software for its system, but that company would operate the system on its own
computers.

The outsourcing vendor might be domestic or in another country. Domestic outsourc-
ing is driven primarily by the fact that outsourcing firms possess skills, resources, and
assets that their clients do not have. Installing a new supply chain management system in
a very large company might require hiring an additional 30–50 people with specific
expertise in supply chain management software licensed, say, from JDA/Manugistics or
another vendor. Rather than hire permanent new employees, most of whom would need
extensive training in the software package, and then release them after the new system is
built, it makes more sense, and is often less expensive, to outsource this work for a 12-
month period.

In the case of offshore outsourcing, the decision tends to be much more cost-driven.
A skilled programmer in India or Russia earns about U.S. $10,000 per year, compared to
$70,000 per year for a comparable programmer in the United States. The Internet
and low-cost communications technology have drastically reduced the expense and
difficulty of coordinating the work of global teams in faraway locations. In addition to
cost savings, many offshore outsourcing firms offer world-class technology assets and
skills.

For example, Pinnacle West Capital Corporation, which sells and delivers electricity
and energy-related services to 1 million customers in the western United States, turned to
outsourcing to reduce operational costs. It contracted with the Indian software and
service provider Wipro Ltd. to handle its application development. Wipro develops
Pinnacle West’s applications, services system enhancements, and provides 24-hour
system support. Outsourcing to Wipro helped Pinnacle West accomplish 12 months of
development work in 7 months while reducing computer processing and application
development costs .

There is a very strong chance that at some point in your career, you’ll be working with
offshore outsourcers or global teams. Your firm is most likely to benefit from outsourcing if
it takes the time to evaluate all the risks and to make sure outsourcing is appropriate for its
particular needs. Any company that outsources its applications must thoroughly understand

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INTERACTIVE SESSION: TECHNOLOGY Zimbra Zooms Ahead with OneView

Zimbra is a software company whose flagship product
is its Zimbra Collaboration Suite (ZCS), an open
source e-mail collaboration suite that relies heavily on
Ajax to provide a variety of business functions.
Purchased by Yahoo in 2007, the company now has
accumulated 50 million paid mailboxes. In addition to
e-mail, ZCS combines contact lists, a shared calendar,
instant messaging, hosted documents, search, and
VoIP into one package, and can be used on any mobile
Web browser.

As an open source software company, Zimbra uses
viral marketing models, word-of-mouth marketing,
and open standards to grow its business. Customers
are as free to criticize Zimbra and ZCS as they are to
praise the company and its flagship offering. For the
most part, this strategy has proven very successful for
the company thus far.

Zimbra makes sales via its Web site and offers
both free and commercial versions. Zimbra’s business
model hinges on driving large numbers of visitors to
its Web site, allowing them to try the most basic
version of the software for free, and then persuading
them to purchase one of its more full-featured
commercial versions. Zimbra has over 200,000 visi-
tors to its Web site each week.

Zimbra’s sales process begins when one of these
200,000 weekly visitors downloads a 60-day trial
version. Salespeople try to identify which people
using the trial version are most likely to upgrade to
one of its commercial versions and then contact these
people via e-mail and telephone to try to close the
sale.

To make this work, Zimbra’s sales team needs capa-
bililities for weeding out the interested buyers from its
huge volume of Web visitors. As Greg Armanini,
Zimbra’s director of marketing pointed out, the sales
team will be overwhelmed with a ton of unqualified
leads unless sales and marketing automation tools are
able to focus sales reps only on the leads that will gen-
erate revenue. Zimbra uses its Web site to track visitor
activity and tie it to sales lead information in its
Salesforce.com customer relationship management
(CRM) system. Identifying sales prospects that visit the
Web site regularly and alerting sales reps when those
prospects are visiting the site helps the sales team select
which prospects to contact by telephone and when to
call them.

Zimbra initially used marketing automation
software from Eloqua, which had a large number of
features but was too complicated for both marketing
and sales staff to use. For example, the Eloqua system
required salespeople to code conditional logic for any

data field containing data they wanted to collect.
Though doable, this task was a poor usage of Zimbra’s
sales staff time. Eloqua only worked with the Internet
Explorer Web browser, while two-thirds of Zimbra’s
sales department used Mozilla Firefox. And Eloqua
was expensive. Zimbra could only afford its entry-
level package, which provided access to only five
salespeople and one marketing person.

Zimbra did not need many of Eloqua’s features,
but it did need a more streamlined solution that
focused on the core areas of its marketing strategy:
lead generation, e-mail marketing, and Web analytics.
The new marketing automation system had to be easy
to install and maintain. Many available options
required several well-trained administrators, and
Zimbra could not afford to allocate even one employee
for this purpose.

After examining several software products,
Zimbra choose OneView, an on-demand marketing
automation solution from LoopFuse, a Georgia-based
software company that specializes in sales and market-
ing automation. OneView was more highly targeted
than the Eloqua software. Not only that, but much of
OneView consists of automated processes that allowed
Zimbra to quickly implement the solution and to
maintain it without dedicating someone to the task
full-time. The core functions of OneView include Web
site visitor tracking, automated marketing program
communication, customer activity alerts, and CRM
integration.

Zimbra was also pleased with LoopFuse’s conve-
nient pricing options, including its “unlimited seating”
and “pay-per-use” options, which allowed Zimbra to
pay for only the services it needed for as many users as
it required. Because of these options, Zimbra was able
to deploy LoopFuse across almost its entire 30-person
sales force.

Other benefits of OneView include easy integra-
tion with Salesforce.com, Zimbra’s preferred CRM
solution, simplified reporting processes, and the
ability to manage a larger number of leads thanks to
having more salespeople and time to devote to
demand generation. OneView works with multiple
Web browsers, including Firefox. The old solution
offered so many ways to handle and organize data
that generating data reports could take a long time.
With OneView’s simplified reporting processes, the
sales staff can generate reports in a fraction of the
time.

Has OneView improved Zimbra’s bottom line?
OneView reduced the amount of time Zimbra spent
using and maintaining its marketing system by 50

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1. Describe the steps in Zimbra’s sales process. How
well did its old marketing automation system sup-
port that process? What problems did it create?
What was the business impact of these problems?

2. List and describe Zimbra’s requirements for a new
marketing software package. If you were prepar-
ing the RFP for Zimbra’s new system, what
questions would you ask?

3. How did the new marketing system change the
way Zimbra ran its business? How successful was
it?

percent. Zimbra reports that since changing vendors, it
has witnessed a jump in its close rate on qualified sales
leads from 10 to 15 percent, a huge increase. The
answer appears to be a resounding “yes.”

Visit the LoopFuse Web site and then answer the fol-
lowing questions:

1. List and describe each of the major features of
LoopFuse OneView.

2. Select two of these features and describe how they
would help Zimbra’s sales team.

Sources: Jessica Tsai, “Less is More,” Customer Relationship Management,
August 2009, www.destinationCRM.com; and “LoopFuse OneView helps Zimbra
Raise Sales and Marketing Efficiency by 50 Percent,” www.loopfuse.com, May
2009.

CASE STUDY QUESTIONS MIS IN ACTION

392 Part IV: Building and Managing Systems

the project, including its requirements, method of implementation, source of expected
benefits, cost components, and metrics for measuring performance.

Many firms underestimate costs for identifying and evaluating vendors of information
technology services, for transitioning to a new vendor, for improving internal software
development methods to match those of outsourcing vendors, and for monitoring vendors to
make sure they are fulfilling their contractual obligations. Outsourcing offshore incurs
additional costs for coping with cultural differences that drain productivity and dealing with
human resources issues, such as terminating or relocating domestic employees. These
hidden costs undercut some of the anticipated benefits from outsourcing. Firms should be
especially cautious when using an outsourcer to develop or to operate applications that give
it some type of competitive advantage.

Figure 11-5 shows best- and worst-case scenarios for the total cost of an offshore
outsourcing project. It shows how much hidden costs affect the total project cost. The best
case reflects the lowest estimates for additional costs, and the worst case reflects the highest
estimates for these costs. As you can see, hidden costs increase the total cost of an offshore
outsourcing project by an extra 15 to 57 percent. Even with these extra costs, many firms
will benefit from offshore outsourcing if they manage the work well.

RAPID APPLICATION DEVELOPMENT FOR E-BUSINESS

Technologies and business conditions are changing so rapidly that agility and scalability
have become critical elements of system solutions. Companies are adopting shorter, more
informal development processes for many of their e-commerce and e-business applications,
processes that provide fast solutions that do not disrupt their core transaction processing
systems and organizational databases. In addition to using software packages, application
service providers, and other outsourcing services, they are relying more heavily on
fast-cycle techniques, such as joint application design (JAD), prototypes, and reusable
standardized software components that can be assembled into a complete set of services for
e-commerce and e-business.

The term rapid application development (RAD) refers to the process of creating
workable systems in a very short period of time. RAD includes the use of visual program-

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ming and other tools for building graphical user interfaces, iterative prototyping of key
system elements, the automation of program code generation, and close teamwork among
end users and information systems specialists. Simple systems often can be assembled from
prebuilt components (see Section 11.3). The process does not have to be sequential, and key
parts of development can occur simultaneously.

Sometimes a technique called joint application design (JAD) will be used to accelerate
the generation of information requirements and to develop the initial systems design. JAD
brings end users and information systems specialists together in an interactive session to
discuss the system’s design. Properly prepared and facilitated, JAD sessions can
significantly speed up the design phase and involve users at an intense level.

11.3 Modeling and Designing Systems

We have just described alternative methods for building systems. There are also alternative
methodologies for modeling and designing systems. The two most prominent are structured
methodologies and object-oriented development.

STRUCTURED METHODOLOGIES

Structured methodologies have been used to document, analyze, and design information
systems since the 1970s. Structured refers to the fact that the techniques are step by step,
with each step building on the previous one. Structured methodologies are top-down,
progressing from the highest, most abstract level to the lowest level of detail—from the
general to the specific.

Structured development methods are process-oriented, focusing primarily on modeling
the processes, or actions, that capture, store, manipulate, and distribute data as the data flow
through a system. These methods separate data from processes. A separate programming
procedure must be written every time someone wants to take an action on a particular piece
of data. The procedures act on data that the program passes to them.

The primary tool for representing a system’s component processes and the flow of data
between them is the data flow diagram (DFD). The data flow diagram offers a logical
graphic model of information flow, partitioning a system into modules that show manage-
able levels of detail. It rigorously specifies the processes or transformations that occur
within each module and the interfaces that exist between them.

Figure 11-6 shows a simple data flow diagram for a mail-in university course registra-
tion system. The rounded boxes represent processes, which portray the transformation of
data. The square box represents an external entity, which is an originator or receiver of

Chapter 11: Building Information Systems and Managing Projects 393

Figure 11-5
Total Cost of
Offshore
Outsourcing
If a firm spends $10
million on offshore
outsourcing contracts,
that company will actu-
ally spend 15.2 percent
in extra costs even under
the best-case scenario.
In the worst-case
scenario, where there is
a dramatic drop in
productivity along with
exceptionally high
transition and layoff
costs, a firm can expect
to pay up to 57 percent
in extra costs on top of
the $10 million outlay for
an offshore contract.

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information located outside the boundaries of the system being modeled. The open
rectangles represent data stores, which are either manual or automated inventories of data.
The arrows represent data flows, which show the movement between processes, external
entities, and data stores. They always contain packets of data with the name or content of
each data flow listed beside the arrow.

This data flow diagram shows that students submit registration forms with their names,
identification numbers, and the numbers of the courses they wish to take. In Process 1.0, the
system verifies that each course selected is still open by referencing the university’s course
file. The file distinguishes courses that are open from those that have been canceled or filled.
Process 1.0 then determines which of the student’s selections can be accepted or rejected.
Process 2.0 enrolls the student in the courses for which he or she has been accepted.
It updates the university’s course file with the student’s name and identification number and
recalculates the class size. If maximum enrollment has been reached, the course number is
flagged as closed. Process 2.0 also updates the university’s student master file with informa-
tion about new students or changes in address. Process 3.0 then sends each student applicant
a confirmation-of-registration letter listing the courses for which he or she is registered and
noting the course selections that could not be fulfilled.

Through leveled data flow diagrams, a complex process can be broken down into
successive levels of detail. An entire system can be divided into subsystems with a
high-level data flow diagram. Each subsystem, in turn, can be divided into additional
subsystems with lower-level data flow diagrams, and the lower-level subsystems can be
broken down again until the lowest level of detail has been reached. Process specifications
describe the transformation occurring within the lowest level of the data flow diagrams,
showing the logic for each process.

In structured methodology, software design is modeled using hierarchical structure
charts. The structure chart is a top-down chart, showing each level of design, its relation-
ship to other levels, and its place in the overall design structure. The design first considers
the main function of a program or system, then breaks this function into subfunctions, and
decomposes each subfunction until the lowest level of detail has been reached. Figure 11-7
shows a high-level structure chart for a payroll system. If a design has too many levels to fit
onto one structure chart, it can be broken down further on more detailed structure charts.
A structure chart may document one program, one system (a set of programs), or part of one
program.

394 Part IV: Building and Managing Systems

Figure 11-6
Data Flow Diagram
for Mail-in
University
Registration System
The system has three
processes: Verify
availability (1.0), Enroll
student (2.0), and
Confirm registration
(3.0). The name and
content of each of the
data flows appear
adjacent to each arrow.
There is one external
entity in this system: the
student. There are two
data stores: the student
master file and the
course file.

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OBJECT-ORIENTED DEVELOPMENT

Structured methods treat data and processes as logically separate entities, whereas in the real
world such separation seems unnatural. Different modeling conventions are used for analy-
sis (the data flow diagram) and for design (the structure chart).

Object-oriented development addresses these issues. Object-oriented development
uses the object, which we introduced in Chapter 4, as the basic unit of systems analysis and
design. An object combines data and the specific processes that operate on those data. Data
encapsulated in an object can be accessed and modified only by the operations, or methods,
associated with that object. Instead of passing data to procedures, programs send a message
for an object to perform an operation that is already embedded in it. The system is modeled
as a collection of objects and the relationships among them. Because processing logic
resides within objects rather that in separate software programs, objects must collaborate
with each other to make the system work.

Object-oriented modeling is based on the concepts of class and inheritance. Objects
belonging to a certain class, or general categories of similar objects, have the features of that
class. Classes of objects in turn inherit all the structure and behaviors of a more general class
and then add variables and behaviors unique to each object. New classes of objects are
created by choosing an existing class and specifying how the new class differs from the
existing class, instead of starting from scratch each time.

We can see how class and inheritance work in Figure 11-8, which illustrates the
relationships among classes concerning employees and how they are paid. Employee is the
common ancestor, or superclass, for the other three classes. Salaried, Hourly, and
Temporary are subclasses of Employee. The class name is in the top compartment, the
attributes for each class are in the middle portion of each box, and the list of operations is in
the bottom portion of each box. The features that are shared by all employees (ID, name,
address, date hired, position, and pay) are stored in the Employee superclass, whereas each
subclass stores features that are specific to that particular type of employee. Specific to
Hourly employees, for example, are their hourly rates and overtime rates. A solid line from
the subclass to the superclass is a generalization path showing that the subclasses Salaried,
Hourly, and Temporary have common features that can be generalized into the superclass
Employee.

Object-oriented development is more iterative and incremental than traditional
structured development. During systems analysis, systems builders document the functional
requirements of the system, specifying its most important properties and what the proposed
system must do. Interactions between the system and its users are analyzed to identify
objects, which include both data and processes. The object-oriented design phase describes
how the objects will behave and how they will interact with one other. Similar objects are

Chapter 11: Building Information Systems and Managing Projects 395

Figure 11-7 High-Level Structure Chart for a Payroll System
This structure chart shows the highest or most abstract level of design for a payroll system, providing an overview of the entire
system.

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grouped together to form a class, and classes are grouped into hierarchies in which a
subclass inherits the attributes and methods from its superclass.

The information system is implemented by translating the design into program code,
reusing classes that are already available in a library of reusable software objects and adding
new ones created during the object-oriented design phase. Implementation may also involve
the creation of an object-oriented database. The resulting system must be thoroughly tested
and evaluated.

Because objects are reusable, object-oriented development could potentially reduce the
time and cost of writing software if organizations reuse software objects that have already
been created as building blocks for other applications. New systems can be created by using
some existing objects, changing others, and adding a few new objects.

Component-Based Development, Web Services, and Cloud-Based
Development
To further expedite software creation, groups of objects have been assembled into software
components for common functions, such as a graphical user interface or online ordering
capability, and these components can be combined to create large-scale business applications.
This approach to software development is called component-based development.
Businesses are using component-based development to create their e-commerce applications
by combining commercially available components for shopping carts, user authentication,
search engines, and catalogs with pieces of software for their own unique business
requirements.

Chapter 4 introduced Web services as loosely coupled, reusable software components
based on Extensible Markup Language (XML) and other open protocols and standards that
enable one application to communicate with another with no custom programming required.
In addition to supporting internal and external integration of systems, Web services provide
nonproprietary tools for building new information system applications or enhancing existing
systems.

Platform as a service, introduced in the Chapter 4 discussion of cloud computing, also
holds considerable potential for helping system developers quickly write and test customer-
or employee-facing Web applications. These online development environments come from a
range of vendors, including Sun, IBM, Salesforce.com (Force.com), and Microsoft (Azure).
These platforms automate tasks such as setting up a newly composed application as a Web
service or linking to other applications and services. Some also offer a cloud infrastructure

396 Part IV: Building and Managing Systems

Figure 11-8
Class and
Inheritance
This figure illustrates
how classes inherit the
common features of their
superclass.

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service, or links to cloud vendors such as Amazon, so that developers can launch what they
build in a cloud infrastructure.

COMPUTER-AIDED SOFTWARE ENGINEERING (CASE)

Computer-aided software engineering (CASE)—sometimes called computer-aided
systems engineering—provides software tools to automate the methodologies we have just
described to reduce the amount of repetitive work in systems development. CASE tools
provide automated graphics facilities for producing charts and diagrams, screen and report
generators, data dictionaries, extensive reporting facilities, analysis and checking tools, code
generators, and documentation generators. CASE tools also contain features for validating
design diagrams and specifications.

CASE tools facilitate clear documentation and coordination of team development
efforts. Team members can share their work by accessing each other’s files to review or
modify what has been done. Modest productivity benefits are achieved if the tools are used
properly. Many CASE tools are PC based, with powerful graphical capabilities.

11.4 Project Management

Your company might have developed what appears to be an excellent system solution.
Yet when the system is in use, it does not work properly or it doesn’t deliver the benefits that
were promised. If this occurs, your firm is not alone. There is a very high failure rate among
information systems projects because they have not been properly managed. The Standish
Group consultancy, which monitors IT project success rates, found that only 29 percent of
all technology investments were completed on time, on budget, and with all features and
functions originally specified (Levinson, 2006). Firms may have incorrectly assessed the
business value of the new system or were unable to manage the organizational change
required by the new technology. That’s why it’s essential to know how to manage informa-
tion systems projects and the reasons why they succeed or fail.

The Interactive Session on People provides an example of a failed project. Kaiser
Permanente, one of the largest health management organizations in the United States, was
unable to establish its own center for handling kidney transplants. Kaiser opened its
transplant center in 2004, but had to shut down the facility less than two years after it
opened. A major factor was the company’s mismanagement of information and information
systems.

PROJECT MANAGEMENT OBJECTIVES

A project is a planned series of related activities for achieving a specific business objective.
Information systems projects include the development of new information systems,
enhancement of existing systems, or projects for replacement or upgrading of the firm’s
information technology (IT) infrastructure.

Project management refers to the application of knowledge, skills, tools, and techniques
to achieve specific targets within specified budget and time constraints. Project management
activities include planning the work, assessing risk, estimating resources required to
accomplish the work, organizing the work, acquiring human and material resources, assigning
tasks, directing activities, controlling project execution, reporting progress, and analyzing the
results. As in other areas of business, project management for information systems must deal
with five major variables: scope, time, cost, quality, and risk.

Scope defines what work is or is not included in a project. For example, the scope of a
project for a new order processing system might include new modules for inputting orders
and transmitting them to production and accounting but not any changes to related accounts
receivable, manufacturing, distribution, or inventory control systems. Project management
defines all the work required to complete a project successfully, and should ensure that the
scope of a project does not expand beyond what was originally intended.

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INTERACTIVE SESSION: PEOPLE Kaiser Permanente Botches Its Kidney Transplant Center Project

Kaiser Permanente is one of the country’s foremost
health maintenance organizations (HMOs), also
referred to as integrated managed care organizations.
HMOs provide health care that is fulfilled by hospitals,
doctors, and other providers with which the HMO has
a contract. While Kaiser is a non-profit organization,
the company earned $34.4 billion in revenues in 2007.
Kaiser has approximately 170,000 employees, over
13,000 doctors, and serves 8.7 million members in
nine states. The company is headquartered in Oakland,
CA.

Kaiser is known for pioneering electronic medical
records and currently boasts the world’s largest
electronic medical record storage system. The
company also consistently ranks among the top HMOs
in customer satisfaction. However, a 2004 attempt by
Kaiser to handle kidney transplants on its own by
setting up a transplant center was a public relations
and information technology disaster. The company
forced its members to transfer to its kidney transplant
program without having adequately prepared to treat
those patients.

In 2004, Kaiser implemented a kidney transplant
program in Northern California under which trans-
plants would be performed in-house at a transplant
center owned and managed by Kaiser. Previously, the
HMO had contracted with nearby university-affiliated
California hospitals, such as UC San Francisco and
UC Davis. The fledgling transplant center was shut
down just two years later because of a litany of
mistakes pertaining to paperwork, technology, and
procedural planning. Through the duration of the
doomed project, twice as many people died waiting for
a transplant as received successful transplants. Patients
now receive care from local hospitals once again.

Kaiser did very little correctly in its attempt to
create its own kidney transplant program. The com-
pany lost track of records when transferring them to
the new transplant center. More than 1,000 of the
1,500 patient records had incomplete or incorrect
data, such as erroneous social security numbers and
missing test results. Despite Kaiser’s longtime expe-
rience with electronic medical records, the new cen-
ter’s records were stored primarily on paper. Kaiser
had no comprehensive transplant patient master list
or database. Many other transplant programs have
multiple IT professionals assigned to maintain the
complicated databases required for a transplant
program. Kaiser attempted to run such a program
without similar resources. Kaiser employees dedi-
cated to processing information on prospective trans-
plant recipients were overworked, logging 10- to 16-

hour days as they tried to keep up with the avalanche
of information. The company did not accurately
anticipate the personnel requirements of their under-
taking.

These were by no means the company’s only
mistakes, however. There were no specific procedures
for transferring data on the initial patients to the
United Network for Organ Sharing (UNOS), which
oversees national transplant waiting lists. There were
no systematic processes for tracking or responding to
patient complaints or requests. The Kaiser staff lacked
guidance and training regarding their job requirements
and uniformly lacked prior experience with transplant
programs. And there was no executive governance to
identify and correct any of these procedural problems
that arose almost immediately after the beginning of
the project. Kaiser had seemingly made no attempt to
identify and define the processes required to ensure a
smooth transition from external transplant programs to
an in-house program.

Kaiser also failed to give patients credit for time
spent on waiting lists at other hospitals, sometimes
dropping patients who had waited the longest down to
the bottom of the list. Unlike other companies, IT
mismanagement in health care companies can cost
individuals their lives, and in Kaiser’s case many
plaintiffs seeking damages against the company
believe the errors surrounding the Kaiser transplant
center have done just that.

At the outset of the transition, Kaiser mailed
potential kidney recipients consent forms but did not
offer specific directions about what to do with the
forms. Many patients failed to respond to the letter,
unsure of how to handle it, and others returned the
forms to the wrong entity. Other patients were unable
to correct inaccurate information, and as a result,
UNOS was not able to approve those patients for
inclusion on Kaiser’s repopulated kidney wait list.

Despite all of the IT mishaps, the medical aspect
of the transplant program was quite successful. All 56
transplant recipients in the first full year of business
were still living one year later, which is considered to
be strong evidence of high quality. But as the organiza-
tional woes continued to mount, Kaiser was forced to
shut the program down in 2006, absorbing heavy
losses and incurring what figures to be considerable
legal expenses.

Kaiser paid a $2 million fine to be levied by the
California Department of Managed Health Care
(DMHC) for the various state and federal regulations it
failed to adhere to in its attempt to set up a transplant

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program. Kaiser was also forced to make a $3 million
charitable donation.

Many families of people who died waiting for
kidneys from Kaiser are suing the company for med-
ical negligence and wrongful death. Other patients,
such as Bernard Burks, are going after Kaiser them-
selves for the same reasons. In March 2008, Burks
won the right to have his case heard by a jury in a pub-
lic courtroom, rather than a private judge or lawyer in

arbitration. Most patient disputes with Kaiser are tra-
ditionally settled behind closed doors, presumably to
minimize the damage to the company’s reputation and
increase the likelihood of winning their cases. Burks
was the first of over 100 patients on Kaiser’s kidney
transplant waiting list to win the right to a jury trial.

Sources: Marie-Anne Hogarth, “Kidney Patient Beats Kaiser Arbitration Rule,”
East Bay Business Times, March 21, 2008 and Kim S. Nash, “We Really Did
Screw Up,” Baseline Magazine, May, 2007.

1. Classify and describe the problems Kaiser faced
in setting up the transplant center. What was the
role of information systems and information man-
agement in these problems?

2. What were the people, organization, and technol-
ogy factors responsible for those problems?

3. What steps would you have taken to increase the
project’s chances for success?

4. Were there any ethical problems created by this
failed project? Explain your answer.

Explore the Web site for TeleResults (www.telere-
sults.com), a provider of state-of-the-art electronic
medical record (EMR) solutions and transplant soft-
ware, then answer the following question:

1. How could this company’s products have helped
Kaiser Permanente manage transplant informa-
tion?

CASE STUDY QUESTIONS MIS IN ACTION

Chapter 11: Building Information Systems and Managing Projects 399

Time is the amount of time required to complete the project. Project management
typically establishes the amount of time required to complete major components of a
project. Each of these components is further broken down into activities and tasks. Project
management tries to determine the time required to complete each task and establish a
schedule for completing the work.

Cost is based on the time to complete a project multiplied by the daily cost of human
resources required to complete the project. Information systems project costs also include
the cost of hardware, software, and work space. Project management develops a budget for
the project and monitors ongoing project expenses.

Quality is an indicator of how well the end result of a project satisfies the objectives
specified by management. The quality of information systems projects usually boils
down to improved organizational performance and decision making. Quality also consid-
ers the accuracy and timeliness of information produced by the new system and ease of
use.

Risk refers to potential problems that would threaten the success of a project. These
potential problems might prevent a project from achieving its objectives by increasing time
and cost, lowering the quality of project outputs, or preventing the project from being
completed altogether. We discuss the most important risk factors for information systems
projects later in this section.

SELECTING PROJECTS: MAKING THE BUSINESS CASE FOR A
NEW SYSTEM

Companies typically are presented with many different projects for solving problems and
improving performance. There are far more ideas for systems projects than there are resources.
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Determining Project Costs and Benefits
As we pointed out earlier, the systems analysis includes an assessment of the economic
feasibility of each alternative solution—whether each solution represents a good investment
for the company. In order to identify the information systems projects that will deliver the
most business value, you’ll need to identify their costs and benefits and how they relate to
the firm’s information systems plan.

Table 11.3 lists some of the more common costs and benefits of systems. Tangible
benefits can be quantified and assigned a monetary value. Intangible benefits, such as more
efficient customer service or enhanced decision making, cannot be immediately quantified.
Yet systems that produce mainly intangible benefits may still be good investments if they
produce quantifiable gains in the long run.

To determine the benefits of a particular solution, you’ll need to calculate all of its costs
and all of its benefits. Obviously, a solution where costs exceed benefits should be rejected.
But even if the benefits outweigh the costs, some additional financial analysis is required to
determine whether the investment represents a good return on the firm’s invested capital.
Capital budgeting methods, such as net present value, internal rate of return (IRR), or account-
ing rate of return on investment (ROI), would typically be employed to evaluate the proposed
information system solution as an investment. You can find out more about how these capital
budgeting methods are used to justify information system investments in our Learning Tracks.

Some of the tangible benefits obtained by the Girl Scouts were increased productivity
and lower operational costs resulting from automating the ordering process and from
reducing errors. Intangible benefits included enhanced volunteer job satisfaction and
improved operations.

The Information Systems Plan
An information systems plan shows how specific information systems fit into a company’s
overall business plan and business strategy. Table 11.4 lists the major components of such a

400 Part IV: Building and Managing Systems

TABLE 11.3

Costs and Benefits of
Information Systems

IMPLEMENTATION COSTS
Hardware

Telecommunications

Software

Personnel costs

OPERATIONAL COSTS

Computer processing time

Maintenance

Operating staff

User time

Ongoing training costs

Facility costs

TANGIBLE BENEFITS

Increased productivity

Lower operational costs

Reduced workforce

Lower computer expenses

Lower outside vendor costs

Lower clerical and professional costs

Reduced rate of growth in expenses

Reduced facility costs

Increased sales

INTANGIBLE BENEFITS

Improved asset utilization

Improved resource control

Improved organizational planning

Increased organizational flexibility

More timely information

More information

Increased organizational learning

Legal requirements attained

Enhanced employee goodwill

Increased job satisfaction

Improved decision making

Improved operations

Higher client satisfaction

Better corporate image

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Chapter 11: Building Information Systems and Managing Projects 401

TABLE 11.4

Information Systems
Plan

1. Purpose of the Plan
Overview of plan contents
Current business organization and future organization
Key business processes
Management strategy

2. Strategic Business Plan Rationale
Current situation
Current business organization
Changing environments
Major goals of the business plan
Firm’s strategic plan

3. Current Systems
Major systems supporting business functions and processes
Current infrastructure capabilities

Hardware
Software
Database
Telecommunications and the Internet

Difficulties meeting business requirements
Anticipated future demands

4. New Developments
New system projects

Project descriptions
Business rationale
Applications’ role in strategy

New infrastructure capabilities required
Hardware
Software
Database
Telecommunications and the Internet

5. Management Strategy
Acquisition plans
Milestones and timing
Organizational realignment
Internal reorganization
Management controls
Major training initiatives
Personnel strategy

6. Implementation of the Plan
Anticipated difficulties in implementation
Progress reports

7. Budget Requirements
Requirements
Potential savings
Financing
Acquisition cycle

plan. The plan contains a statement of corporate goals and specifies how information
technology will help the business attain these goals. The report shows how general goals
will be achieved by specific systems projects. It identifies specific target dates andIS

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milestones that can be used later to evaluate the plan’s progress in terms of how many
objectives were actually attained in the time frame specified in the plan. The plan indicates
the key management decisions concerning hardware acquisition; telecommunications;
centralization/decentralization of authority, data, and hardware; and required organizational
change.

The plan should describe organizational changes, including management and employee
training requirements, changes in business processes, and changes in authority, structure, or
management practice. When you are making the business case for a new information system
project, you show how the proposed system fits into that plan.

Portfolio Analysis
Once you have determined the overall direction of systems development, portfolio analysis
will help you evaluate alternative system projects. Portfolio analysis inventories all of the
firm’s information systems projects and assets, including infrastructure, outsourcing
contracts, and licenses. This portfolio of information systems investments can be described
as having a certain profile of risk and benefit to the firm (see Figure 11-9), similar to a
financial portfolio. Each information systems project carries its own set of risks and benefits.
Firms try to improve the return on their information system portfolios by balancing the risk
and return from their systems investments.

Obviously, you begin first by focusing on systems of high benefit and low risk. These
promise early returns and low risks. Second, high-benefit, high-risk systems should be
examined; low-benefit, high-risk systems should be totally avoided; and low-benefit,
low-risk systems should be reexamined for the possibility of rebuilding and replacing them
with more desirable systems having higher benefits. By using portfolio analysis, manage-
ment can determine the optimal mix of investment risk and reward for their firms, balancing
riskier, high-reward projects with safer, lower-reward ones.

The U.S. Army’s Office of the CIO/G-6, which oversees an annual IT budget of more
than $7 billion and manages over 1,500 systems and programs, uses portfolio analysis to
inventory, evaluate, and rank its IT investments. Portfolio analysis helped the Office identify
redundant systems and ensure that its IT investments provide needed capabilities.

Another method for evaluating alternative system solutions is a scoring model. Scoring
models give alternative systems a single score based on the extent to which they meet
selected objectives. Table 11.5 shows part of a simple scoring model that could have been
used by the Girl Scouts in evaluating their alternative systems. The first column lists the
criteria that decision makers use to evaluate the systems. Table 11.5 shows that the Girl
Scouts attach the most importance to capabilities for sales order processing, ease of use,
ability to support users in many different locations, and low cost. The second column in
Table 11.5 lists the weights that decision makers attached to the decision criteria. Columns 3
and 5 show the percentage of requirements for each function that each alternative system

402 Part IV: Building and Managing Systems

Figure 11-9
A System Portfolio
Companies should
examine their portfolio of
projects in terms of
potential benefits and
likely risks. Certain kinds
of projects should be
avoided altogether and
others developed rapidly.
There is no ideal mix.
Companies in different
industries have different
information systems
needs.

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meets. Each alternative’s score is calculated by multiplying the percentage of requirements
met for each function by the weight attached to that function. The QuickBase solution has
the highest total score.

MANAGING PROJECT RISK AND SYSTEM-RELATED CHANGE

Some systems development projects are more likely to run into problems or to suffer
delays because they carry a much higher level of risk than others. The level of project risk
is influenced by project size, project structure, and the level of technical expertise of the
information systems staff and project team. The larger the project—as indicated by the
dollars spent, project team size, and how many parts of the organization will be affected
by the new system—the greater the risk. Very large-scale systems projects have a failure
rate that is 50 to 75 percent higher than that for other projects because such projects are
complex and difficult to control. Risks are also higher for systems where information
requirements are not clear and straightforward or the project team must master new
technology.

Chapter 11: Building Information Systems and Managing Projects 403

TABLE 11.5

Example of a Scoring Model for the Girl Scouts Cookie System

Criteria Weight Microsoft Access Microsoft Access QuickBase QuickBase
System (%) System Score System (%) System Score

1.0 Order processing

1.1 Online order entry 5 67 335 83 415

1.2 Order tracking by troop 5 81 405 87 435

1.3 Order tracking by 5 72 360 80 400
individual Girl Scout

1.4 Reserving warehouse pickups 3 66 198 79 237

Total order processing 1,298 1,487

2.0 Ease of use

2.1 Web access from multiple 5 55 275 92 460
locations

2.2 Short training time 4 79 316 85 340

2.3 User-friendly screens and 4 65 260 87 348
data entry forms

Total ease of use 851 1,148

3.0 Costs

3.1 Software costs 3 51 153 65 195

3.2 Hardware (server) costs 4 57 228 90 360

3.3 Maintenance and 4 42 168 89 356
support costs

Total costs 549 911

Grand Total 2,698 3,546

Implementation and Change Management
Dealing with these project risks requires an understanding of the implementation process
and change management. A broader definition of implementation refers to all the organiza-
tional activities working toward the adoption and management of an innovation, such as a
new information system. Successful implementation requires a high level of user involve-
ment in a project and management support.

If users are heavily involved in the development of a system, they have more opportuni-
ties to mold the system according to their priorities and business requirements, and more
opportunities to control the outcome. They also are more likely to react positively to the
completed system because they have been active participants in the change process.
Incorporating user knowledge and expertise leads to better solutions.

The relationship between end users and information systems specialists has traditionally
been a problem area for information systems implementation efforts because of differing back-
grounds, interests, and priorities. These differences create a user-designer communications
gap. Information systems specialists often have a highly technical orientation to problem
solving, focusing on technical solutions in which hardware and software efficiency is optimized
at the expense of ease of use or organizational effectiveness. End users prefer systems that are
oriented toward solving business problems or facilitating organizational tasks. Often the
orientations of both groups are so at odds that they appear to speak in different tongues.

These differences are illustrated in Table 11.6, which depicts the typical concerns of end
users and technical specialists (information systems designers) regarding the development
of a new information system. Communication problems between end users and designers
are a major reason why user requirements are not properly incorporated into information
systems and why users are driven out of the implementation process.

If an information systems project has the backing and commitment of management at
various levels, it is more likely to receive higher priority from both users and the technical
information systems staff. Management backing also ensures that a systems project receives
sufficient funding and resources to be successful. Furthermore, to be enforced effectively, all
the changes in work habits and procedures and any organizational realignments associated
with a new system depend on management backing.

Controlling Risk Factors
There are strategies you can follow to deal with project risk and increase the chances of a
successful system solution. If the new system involves challenging and complex technology,
you can recruit project leaders with strong technical and administrative experience.
Outsourcing or using external consultants are options if your firm does not have staff with
the required technical skills or expertise.

404 Part IV: Building and Managing Systems

TABLE 11.6

The User-Designer
Communications Gap

User Concerns Designer Concerns

Will the system deliver the information I need How much disk storage space will the master
for my work? file consume?

How quickly can I access the data? How many lines of program code will it take
to perform this function?

How easily can I retrieve the data? How can we cut down on CPU time when we
run the system?

How much clerical support will I need to enter What is the most efficient way of storing
data into the system? the data?

How will the operation of the system fit into What database management system should
my daily business schedule? we use?

Large projects benefit from appropriate use of formal planning and tools for
documenting and monitoring project plans. The two most commonly used methods for
documenting project plans are Gantt charts and PERT charts. A Gantt chart lists project
activities and their corresponding start and completion dates. The Gantt chart visually
represents the timing and duration of different tasks in a development project as well as their
human resource requirements (see Figure 11-10). It shows each task as a horizontal bar
whose length is proportional to the time required to complete it.

Although Gantt charts show when project activities begin and end, they don’t depict task
dependencies, how one task is affected if another is behind schedule, or how tasks should be
ordered. That is where PERT charts are useful. PERT stands for Program Evaluation and
Review Technique, a methodology developed by the U.S. Navy during the 1950s to manage
the Polaris submarine missile program. A PERT chart graphically depicts project tasks and
their interrelationships. The PERT chart lists the specific activities that make up a project
and the activities that must be completed before a specific activity can start, as illustrated in
Figure 11-11.

The PERT chart portrays a project as a network diagram consisting of numbered nodes
(either circles or rectangles) representing project tasks. Each node is numbered and shows
the task, its duration, the starting date, and the completion date. The direction of the arrows
on the lines indicates the sequence of tasks and shows which activities must be completed
before the commencement of another activity. In Figure 11-11, the tasks in nodes 2, 3, and 4
are not dependent on each other and can be undertaken simultaneously, but each is
dependent on completion of the first task.

Project Management Software Commercial software tools are available to automate the
creation of Gantt and PERT charts and to facilitate the project management process. Project
management software typically features capabilities for defining and ordering tasks,
assigning resources to tasks, establishing starting and ending dates for tasks, tracking
progress, and facilitating modifications to tasks and resources. The most widely used project
management tool today is Microsoft Office Project.

Overcoming User Resistance
You can overcome user resistance by promoting user participation (to elicit commitment as
well as to improve design), by making user education and training easily available, and by pro-
viding better incentives for users who cooperate. End users can become active members of the
project team, take on leadership roles, and take charge of system installation and training.

You should pay special attention to areas where users interface with the system, with
sensitivity to ergonomics issues. Ergonomics refers to the interaction of people and
machines in the work environment. It considers the design of jobs, health issues, and the
end-user interface of information systems. For instance, if a system has a series of
complicated online data entry screens that are extremely difficult or time-consuming to
work with, users will reject the system if it increases their work load or level of job stress.

Users will be more cooperative if organizational problems are solved prior to introducing
the new system. In addition to procedural changes, transformations in job functions,
organizational structure, power relationships, and behavior should be identified during
systems analysis using an organizational impact analysis.

MANAGING PROJECTS ON A GLOBAL SCALE

As globalization proceeds, companies will be building many more new systems that are
global in scale, spanning many different units in many different countries. The project
management challenges for global systems are similar to those for domestic systems, but
they are complicated by the international environment. User information requirements,
business processes, and work cultures differ from country to country. It is difficult to
convince local managers anywhere in the world to change their business processes and ways
of working to align with units in other countries, especially if this might interfere with their
local performance.

Chapter 11: Building Information Systems and Managing Projects 405
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Figure 11-10
A Gantt Chart
The Gantt chart in this figure shows the task, person-days, and initials of each responsible person, as well as the start and finish
dates for each task. The resource summary provides a good manager with the total person-days for each month and for each
person working on the project to manage the project successfully. The project described here is a data administration project.

Chapter 11: Building Information Systems and Managing Projects 407

Figure 11-11
A PERT Chart
This is a simplified PERT chart for creating a small Web site. It shows the ordering of project tasks and the relationship of a task
with preceding and succeeding tasks.

Involving people in change, and assuring them that change is in the best interests of the
company and their local units, is a key tactic for convincing users to adopt global systems
and standards. Information systems projects should involve users in the design process with-
out giving up control over the project to parochial interests.

One tactic is to permit each country unit in a global corporation to develop one transna-
tional application first in its home territory, and then throughout the world. In this manner,
each major country systems group is given a piece of the action in developing a
transnational system, and local units feel a sense of ownership in the transnational effort.
On the downside, this assumes the ability to develop high-quality systems is widely
distributed, and that, a German team, for example, can successfully implement systems in
France and Italy. This will not always be the case.

A second tactic is to develop new transnational centers of excellence, or a single center
of excellence. These centers draw heavily from local national units, are based on
multinational teams, and must report to worldwide management. Centers of excellence
perform the business and systems analysis and accomplish all design and testing.
Implementation, however, and pilot testing are rolled out to other parts of the globe.
Recruiting a wide range of local groups to transnational centers of excellence helps send the
message that all significant groups are involved in the design and will have an influence.

11.5 Hands-On MIS Projects

The projects in this section give you hands-on experience evaluating information systems
projects, designing and building a customer system for auto sales, and analyzing Web site
information requirements.IS

MANAGEMENT DECISION PROBLEMS

1. In 2001, McDonald’s Restaurants undertook a project called Innovate to create an
intranet connecting headquarters with its 30,000 restaurants in 120 countries to provide
detailed operational information in real time. The new system would, for instance,
inform a manager at the company’s Oak Brook, Illinois, headquarters immediately if
sales were slowing at a franchise in London, or if the grill temperature in a Rochester,
Minnesota, restaurant wasn’t hot enough. The idea was to create a global enterprise
resource planning application touching the workings of every McDonald’s restaurant.
Some of these restaurants were in countries that lacked network infrastructures. After
spending over $1 billion over several years, including $170 million on consultants and
initial implementation planning, McDonalds terminated the project. What should man-
agement have known or done at the outset to prevent this outcome?

2. Caterpillar is the world’s leading maker of earthmoving machinery and supplier of
agricultural equipment. Caterpillar wants to end its support for its Dealer Business
System (DBS), which it licenses to its dealers to help them run their businesses.
The software in this system is becoming outdated, and senior management wants to
transfer support for the hosted version of the software to Accenture Consultants so
Caterpillar can concentrate on its core business. Caterpillar never required its dealers to
use DBS, but the system had become a de-facto standard for doing business with the
company. The majority of the 50 Cat dealers in North America use some version of
DBS, as do about half of the 200 or so Cat dealers in the rest of the world. Before
Caterpillar turns the product over to Accenture, what factors and issues should it con-
sider? What questions should it ask? What questions should its dealers ask?

IMPROVING DECISION MAKING: USING DATABASE SOFTWARE
TO DESIGN A CUSTOMER SYSTEM FOR AUTO SALES

Software skills: Database design, querying, reporting, and forms
Business skills: Sales lead and customer analysis

This project requires you to perform a systems analysis and then design a system solution
using database software.

Ace Auto Dealers specializes in selling new vehicles from Subaru. The company
advertises in local newspapers and also is listed as an authorized dealer on the Subaru Web
site and other major Web sites for auto buyers. The company benefits from a good local
word-of-mouth reputation and name recognition and is a leading source of information for
Subaru vehicles in the Portland, Oregon, area.

When a prospective customer enters the showroom, he or she is greeted by an Ace sales
representative. The sales representative manually fills out a form with information such as
the prospective customer’s name, address, telephone number, date of visit, and make and
model of the vehicle in which the customer is interested. The representative also asks where
the prospect heard about Ace—whether it was from a newspaper ad, the Web, or word of
mouth—and this information is noted on the form also. If the customer decides to purchase
an auto, the dealer fills out a bill of sale form.

Ace does not believe it has enough information about its customers. It cannot easily
determine which prospects have made auto purchases, nor can it identify which customer
touch points have produced the greatest number of sales leads or actual sales so it can
focus advertising and marketing more on the channels that generate the most revenue.
Are purchasers discovering Ace from newspaper ads, from word of mouth, or from the
Web?

Prepare a systems analysis report detailing Ace’s problem and a system solution that
can be implemented using PC database management software. Then use database
software to develop a simple system solution. Your systems analysis report should include
the following:

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Chapter 11: Building Information Systems and Managing Projects 409

• Description of the problem and its organizational and business impact.
• Proposed solution, solution objectives, and solution feasibility.
• Costs and benefits of the solution you have selected. The company has a PC with

Internet access and the full suite of Microsoft Office desktop productivity tools.
• Information requirements to be addressed by the solution.
• People, organization, and technology issues to be addressed by the solution, including

changes in business processes.

On the basis of the requirements you have identified, design the database and populate it
with at least 10 records per table. Consider whether you can use or modify the existing
customer database in your design. Print out the database design. Then use the system you have
created to generate queries and reports that would be of most interest to management. Create
several prototype data input forms for the system and review them with your instructor.
Then revise the prototypes.

ACHIEVING OPERATIONAL EXCELLENCE: ANALYZING WEB SITE
DESIGN AND INFORMATION REQUIREMENTS

Software skills: Web browser software
Business skills: Information requirements analysis, Web site design

Visit the Web site of your choice and explore it thoroughly. Prepare a report analyzing the
various functions provided by that Web site and its information requirements. Your report
should answer these questions: What functions does the Web site perform? What data does
it use? What are its inputs, outputs, and processes? What are some of its other design
specifications? Does the Web site link to any internal systems or systems of other organiza-
tions? What value does this Web site provide the firm?

LEARNING TRACKS

The following Learning Tracks provide content relevant to topics covered in this
chapter:

1. Capital Budgeting Methods for Information System Investments

2. Enterprise Analysis (Business Systems Planning) and Critical Success Factors
(CSFs)

3. Unified Modeling Language (UML)

4. IT Investments and Productivity

Review Summary

1 What are the core problem-solving steps for developing new informationsystems? The core problem-solving steps for developing new information systems
are: (1) define and understand the problem, (2) develop alternative solutions, (3) evaluate
and choose the solution, and (4) implement the solution. The third step includes an
assessment of the technical, financial, and organizational feasibility of each alternative.
The fourth step entails finalizing design specifications, acquiring hardware and software,
testing, providing training and documentation, conversion, and evaluating the system
solution once it is in production.IS

410 Part IV: Building and Managing Systems

2 What are the alternative methods for building information systems? The systemslifecycle requires that information systems be developed in formal stages. The stages
must proceed sequentially and have defined outputs; each requires formal approval before
the next stage can commence. The system lifecycle is rigid and costly but nevertheless
useful for large projects.

Prototyping consists of building an experimental system rapidly and inexpensively for
end users to interact with and evaluate. The prototype is refined and enhanced until users are
satisfied that it includes all of their requirements and can be used as a template to create the
final system. End-user-developed systems can be created rapidly and informally using
fourth-generation software tools. End-user development can improve requirements
determination and reduce application backlog.

Application software packages eliminate the need for writing software programs when
developing an information system. Application software packages are helpful if a firm does
not have the internal information systems staff or financial resources to custom-develop a
system.

Outsourcing consists of using an external vendor to build (or operate) a firm’s informa-
tion systems. If it is properly managed, outsourcing can save application development costs
or enable firms to develop applications without an internal information systems staff.

Rapid application design, joint application design (JAD), cloud-based platforms, and
reusable software components (including Web services) can be used to speed up the systems
development process.

3 What are the principal methodologies for modeling and designing systems? The two principal methodologies for modeling and designing information systems are
structured methodologies and object-oriented development. Structured methodologies focus
on modeling processes and data separately. The data flow diagram is the principal tool for
structured analysis, and the structure chart is the principal tool for representing structured
software design. Object-oriented development models a system as a collection of objects
that combine processes and data.

4 How should information systems projects be selected and evaluated? To determine whether an information system project is a good investment, one must
calculate its costs and benefits. Tangible benefits are quantifiable, and intangible benefits
cannot be immediately quantified but may provide quantifiable benefits in the future.
Benefits that exceed costs should then be analyzed using capital budgeting methods to make
sure they represent a good return on the firm’s invested capital.

Organizations should develop information systems plans that describe how information
technology supports the company’s overall business plan and strategy. Portfolio analysis and
scoring models can be used to evaluate alternative information systems projects.

5 How should information systems projects be managed? Information systemsprojects and the entire implementation process should be managed as planned
organizational change using an organizational impact analysis. Management support and
control of the implementation process are essential, as are mechanisms for dealing with the
level of risk in each new systems project. Project risks are influenced by project size, project
structure, and the level of technical expertise of the information systems staff and project
team. Formal planning and control tools (including Gantt and PERT charts) track the
resource allocations and specific project activities. Users can be encouraged to take active
roles in systems development and become involved in installation and training. Global
information systems projects should involve local units in the creation of the design without
giving up control of the project to parochial interests.

Chapter 11: Building Information Systems and Managing Projects 411

Information systems
plan, 400

Intangible benefits, 400
Joint application design

(JAD), 393
Maintenance, 386
Object-oriented

development, 395
Organizational impact

analysis, 405
Parallel strategy, 386
PERT charts, 405
Phased approach, 386
Portfolio analysis, 402
Process specifications, 394
Production, 386
Project, 397
Project management, 397
Prototyping, 388

Rapid application
development (RAD), 392

Request for Proposal
(RFP), 389

Scope, 397
Scoring model, 402
Structure chart, 394
Structured, 393
System testing, 384
Systems analysis, 382
Systems design, 383
Systems development

lifecycle (SDLC), 387
Tangible benefits, 400
Test plan, 384
Testing, 384
Unit testing, 384
User-designer communica-

tions gap, 404

Acceptance testing, 384
Component-based

development, 396
Computer-aided software

engineering (CASE), 397
Conversion, 386
Customization, 390
Data flow diagram

(DFD), 393
Direct cutover strategy, 386
Documentation, 384
End-user development, 389
Ergonomics, 405
Feasibility study, 383
Formal planning and

tools, 405
Gantt chart, 405
Implementation, 404
Information

requirements, 382

Key Terms

Review Questions

1. What are the core problem-solving steps for developing new information systems?
• List and describe the problem-solving steps for building a new system.
• Define information requirements and explain why they are important for developing a

system solution.
• List the various types of design specifications required for a new information system.
• Explain why the testing stage of systems development is so important. Name and

describe the three stages of testing for an information system.
• Describe the roles of documentation, conversion, production, and maintenance in

systems development.

2. What are the alternative methods for building information systems?
• Define the traditional systems lifecycle and describe its advantages and disadvantages

for systems building.
• Define information system prototyping and describe its benefits and limitations. List and

describe the steps in the prototyping process.
• Define end-user development and explain its advantages and disadvantages.
• Describe the advantages and disadvantages of developing information systems based on

application software packages.
• Define outsourcing. Describe the circumstances in which it should be used for building

information systems. List and describe the hidden costs of offshore software
outsourcing.

• Explain how businesses can rapidly develop e-business applications.

3. What are the principal methodologies for modeling and designing systems?
• Compare object-oriented and traditional structured approaches for modeling and

designing

systems.

4. How should information systems projects be selected and evaluated?
• Explain the difference between tangible and intangible benefits.
• List six tangible benefits and six intangible benefits.IS

• List and describe the major components of an information systems plan.
• Describe how portfolio analysis and scoring models can be used to establish the worth of

systems.

5. How should information systems projects be managed?
• Explain the importance of implementation for managing the organizational change

surrounding a new information system.
• Define the user-designer communications gap and explain the kinds of implementation

problems it creates.
• List and describe the factors that influence project risk and describe strategies for

minimizing project risks.
• Describe tactics for managing global projects.

412 Part IV: Building and Managing Systems

Video Cases

Video Cases and Instructional Videos illustrating some of the concepts in this chapter are
available. Contact your instructor to access these videos.

Collaboration and Teamwork

Preparing Web Site Design Specifications
With three or four of your classmates, select a system described in this text that uses the
Web. Review the Web site for the system you select. Use what you have learned from the
Web site and the description in this book to prepare a report describing some of the design
specifications for the system you select. If possible, use Google Sites to post links to Web
pages, team communication announcements, and work assignments; to brainstorm; and to
work collaboratively on project documents. Try to use Google Docs to develop a presenta-
tion of your findings for the class.

Discussion Questions

1. Discuss the role of business end users and
information system professionals in devel-
oping a system solution. How do both roles
differ when the solution is developed using
prototyping or end-user development?

2. It has been said that systems fail when
systems builders ignore “people” problems.
Why might this be so?

Chapter 11: Building Information Systems and Managing Projects 413

BUSINESS PROBLEM-SOLVING CASE

The U.S. Census Bureau Field Data Collection Project: Don’t Count On It

census to Harris Corp. Due to the immaturity of the
mobile technology selected and the inexperience of
Harris regarding projects of this size and scale, it was
important that the bureau give accurate system
requirements and scheduling information, which it failed
to do. Implementations of mobile technology tend to be
very complicated, requiring sound management and
careful planning. The systems have a variety of
components, carriers, devices, and applications to
organize and coordinate.

Census Bureau Director Steve Murdock testified
before Congress in April 2008 that the Census Bureau
had failed to effectively convey the complexity of census
operations or the project’s IT requirements to Harris.
The initial contract contained 600 requirements for the
mobile handheld systems, but the Census Bureau later
added 418 more. The constant addition of more require-
ments made designing the product unnecessarily
difficult. The bureau did not press Harris hard enough to
provide continued updates on project progress. Yet
Harris also did not present the bureau with an accurate
initial estimate to begin with.

The struggles of the FCDA don’t threaten the
completion of the 2010 census. It will occur as
scheduled, but will be far less efficient and cost a great
deal more, approximately $3 billion in additional fund-
ing over five years. The bureau will do what it can with
the mobile devices it has and continue to rely on paper.
The mobile handhelds will be used to initially canvas
addresses, but won’t be able to be used during the
second-stage canvassing of people who don’t respond to
initial census questionnaires. The bureau will
consequently be forced to abandon several new initia-
tives to ensure accurate coverage of areas that have been
traditionally undercounted.

The initial estimate was that rolling out mobile
devices and providing complementary systems would
cost $3 billion of a total $11.5 billion project cost. The
total costs of the 2010 census will approach $14.5
billion, well over the initial budget. The bureau’s
blunders set census modernization back at least another
decade. The bulk of the FDCA “dress rehearsal” was
slated to take place during 2008 and 2009 in order to
ensure the success of the handheld devices in 2010, but
these setbacks forced the rehearsal to be less compre-
hensive than was originally planned.

The GAO had reported in March 2006 that the FDCA
had not adequately prepared to effectively manage the
FDCA program. In that report, the agency cited lack of
validated and approved baseline requirements for the

The U.S. Census is an enumeration of the American
population performed once every 10 years, also called
a decennial census. It is the responsibility of the
United States Census Bureau and is used to determine
allocation of congressional seats, allocation of federal
assistance, and realignment of the boundaries of
legislative districts within states. Correctly managing
the census leads to billions of dollars in savings,
improved service to the public, and strengthened
confidence and trust in government.

Reports from the U.S. Government Accountability
Office (GAO) and other sources suggest that the 2010
census represents a high-risk area that has been misman-
aged for years. The bureau botched implementation of
the Field Data Collection Automation (FDCA) program,
an effort to integrate handheld electronic devices into the
census data collection process. The handhelds were
intended to replace the millions of paper forms and maps
that census workers carried when going door to door to
collect household data. Paper-based methods for collect-
ing and recording data made gathering census informa-
tion time-consuming and difficult to organize.

The FDCA program is intended to assist with the
initial step of the process: the collection of respondent
information. The goal of the program is to implement
handheld devices that make census participation as
simple as signing for a package. The result would be
reduced costs, improved data quality, and better
collection efficiency. In 2006, the bureau contracted with
Harris Corporation for $595.7 million to oversee the
implementation of these mobile computing devices.
Harris develops communications products for
government and commercial customers worldwide,
including wireless transmission equipment. As of this
writing, the handhelds have been far too slow and report
data too inconsistently to be used reliably for the 2010
census.

Lack of executive oversight is more common in the
federal sector as opposed to the private sector, because
there are more incentives in the private sector for execu-
tives to perform. Federal projects such as the FDCA pro-
ject can suffer from lack of accountability for the same
reason. The federal government doesn’t use certified pro-
gram managers and highly qualified executives for these
kinds of projects, and they didn’t for the FDCA program.

The FDCA suffered from poor communication and
appropriate testing procedures. For example, the project
team did not specify the testing process to measure
performance of handheld devices. It also did not
accurately describe the technical requirements of the

414 Part IV: Building and Managing Systems

project, lack of a risk management process, and
ineffective management oversight as factors potentially
damaging to the project. The most prominent example of
the inadequacy of the project’s risk management is that
the performance problems with the handhelds had been
reported to project management, but were not identified
as a risk going forward. In 2007, GAO reported that
changes in system requirements made after the fact were
the primary cause for scheduling delays and budget
overruns. GAO’s 2008 report reiterated its earlier
recommendations and emphasized the importance of
quickly implementing them in time for the 2010 census,
if possible.

The most crucial area in which the bureau fell short
with the FDCA program were in its risk management
activities. During testing in 2007, field operatives had
reported the mobile devices’ slow speeds in processing
addresses in large assignment areas, their tendency to
fail while transmitting data to the central data processing
center, and other associated bugs and flaws. However,
the bureau had no procedures in place to record those
observations as potential risks and handle them
accordingly. The risks related to mobile handheld
performance were not documented.

Also, the bureau has not yet determined a method of
measuring the handhelds’ performance. The FDCA
contract described a “control panel” application that
would easily record and display the performance of
handhelds on the Web, accessible via any computer with
Internet connectivity. That application has not been
developed. Without the ability to accurately measure
device performance, it is impossible for the FDCA to
verify that the devices are ready for the 2010 census.
The large variation in performance specifications
submitted to the contract or upon initiation of the con-
tract and the additional specifications added after the fact
also attest to the lack of a process for measuring ade-
quate handheld performance. The report also notes that
there were no processes for sharing risks and suggesting
appropriate solutions to bureau executives.

While the bureau agreed with the majority of the
report’s recommendations, it often argued that the
contractor was to blame for a portion of the failings of
the project thus far. For example, it claimed that Harris

was responsible for the risks associated with the
handhelds, and that its initial contract estimate was
inaccurate. Regardless, the bureau admits that it
committed many crucial management errors with the
FDCA project.

Despite Harris’s role in mismanaging the project, the
company was not penalized for its performance. A
March 2009 report by the U.S. Department of
Commerce Office of the Inspector General noted that
“award fees were excessive and not supported by techni-
cal assessments of Harris’s performance.” The project
had not adequately defined criteria for good performance
or established any measurable goals that could be used
to reward excellent performance. Harris received 93
percent ($3.2 million) and 91 percent ($11 million) of
available fees during the early phases of the project,
despite serious performance problems noted by the
Census Bureau’s technical reviewers.

Taxpayers will now bear the brunt of the FDCA’s
mismanagement, and the bureau will need to wait
another 10 years for the 2020 census for another
opportunity to revamp the way the U.S. Census is done.

Sources: U.S. Department of Commerce, Office of Audit and Evaluation, “Census
2010: Revised Field Data Collection Automation Contract Incorporated OIG
Recommendations, But Concerns Remain Over Fee Awarded During Negotiations,”
Field Report No. CAR 18702, March 2009; Jean Thilmany, “Don’t Count on It,”
CIO Insight, May 2008; and U.S. Government Accountability Office, “Significant
Problems of Critical Automation Contribute to Risks Facing 2010 Census,” March 5,
2008.

Case Study Questions
1. How important is the FDCA project for the U.S.

Census Bureau? How does it impact decision making
and operational activities?

2. Evaluate the risks of the FDCA project and key risk
factors.

3. Classify and describe the problems the Census
Bureau faced in implementing its new wireless data
collection system. What people, organization, and
technology factors caused these problems?

4. Describe the steps you would have taken to control
the risk in this project.

5. If you were in charge of managing this project, what
else would you have done differently to increase
chances for success?

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