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Chapter 13

Managing the Systems


Development Life Cycle

Accounting Information Systems, 7e


James A. Hall

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Objectives for Chapter 13
• Be able to identify the key stages in the SDLC.
• Recognize how a firm’s business strategy will shape
its information system.
• Understand the relationship between strategic
systems planning and legacy systems.
• Understand what transpires during systems
analysis.
• Understand the TELOS model for assessing project
feasibility.
• Be familiar with cost-benefit analysis issues related
to information systems projects.
• Understand the role of accountants in the SDLC.
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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Systems Development Life
Cycle (SDLC)
 A logical sequence of activities used to:
 identify new systems needs
 develop new systems to support those needs
 A model for reducing risk through planning,
execution, control, and documentation
 The SDLC model may be shown in five stages.
 We’ll look at the first two in this chapter and the
remaining three in chapter 14.

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System Development Life Cycle

Figure 13-1

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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Systems Development Participants
 Systems Professionals: analyze problems in
current systems and formulate solutions
 systems analysts
 systems designers
 programmers
 End Users: primary users of the system
 addressing their needs is critical to success
 Stakeholders: individuals who have an interest
in the system but are not end users
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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Systems Steering Committee
 Usually includes the CEO, CFO, CIO, senior
management from user areas and computer
services, and internal auditors
 Typical responsibilities:
 provide guidance
 resolve conflicts
 review projects and assigning priorities
 budget and allocate funds
 review the status of projects
 determine whether projects should be continued
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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Phase 1
Systems Strategy

Accounting Information Systems, 7e


James A. Hall

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Assessing Strategic Information
Needs
 Strategic systems planning involves the
allocation of resources at the macro level.
 usually a time frame of three to five years
 Key inputs in developing a sound systems
strategy include:
 strategic business needs of the organization
 situations involving legacy systems
 end user feedback

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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Strategic Business Needs
 Vision and mission
 systems strategy requires an understanding of top
management’s vision, which has shaped the
organization’s business strategy
 Industry and competency analysis
 industry analysis: the driving forces that affect the
industry and their organization’s performance, such
as important trends, significant risks, and potential
opportunities
 competency analysis: a complete picture of the
organization’s effectiveness as seen via four
strategic filters: resources, infrastructure,
products/services, and customers
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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Legacy Systems
Use legacy components to help develop an
architecture description.

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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
End User Feedback
 Identifying user needs is fundamental to
everything else
 During phase 1, pertains to substantial
perceived problems rather than minor systems
modifications
 Has five key phases at this point in the SDLC:
 recognize problems
 define problems
 specify systems objectives
 determine feasibility and contributions of projects
• may entail prioritizing individual projects
 preparing a formal project proposal
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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
End User Feedback:
Recognizing the Problem
 The need for a new, improved information
system is manifested through various
symptoms.
 Symptoms may seem vague and innocuous or go
unrecognized initially.
 The point at which the problem is recognized is
often a function of management’s philosophy.
 reactive management - responds to problems only
when they reach a crisis state
 proactive management - alert to subtle signs of
problems and aggressively looks for ways to
improve
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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
End User Feedback:
Defining the Problem
 Managers and end users should…
 avoid leaping to a single definition of a problem
 keep an open mind and gather facts before deciding
 learn to intelligently interact with systems
professionals
 An interactive process between managers/end
users and systems professionals is necessary
to arrive at an accurate problem definition.
 The next three stages of the end user feedback
process involve this interactive process.
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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
End User Feedback:
Specifying System Objectives
 The strategic objectives of the firm and
the operational objectives of the
information systems must be
compatible.
 At this point, the objectives only need to
be defined in general terms.

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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
End User Feedback:
Preliminary Project Feasibility-TELOS
 Technical feasibility - is the technology
necessary available?
 Economic feasibility - are the funds available
and appropriate for the system?
 Legal feasibility - does the system fall within
legal boundaries?
 Operational feasibility - can procedural
changes be made to make the system work?
 Schedule feasibility - can the project be
completed by an acceptable time period?
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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
End User Feedback:
Preparing a Formal Project Proposal
 A systems project proposal provides
management with a basis for deciding
whether or not to proceed with the project.
 It summarizes the findings of the study and
makes a general recommendation.
 It outlines the linkage between the
objectives of the proposed system and the
business objectives of the firm.

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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Strategic Systems Plan
 After collecting input, the steering committee
and systems professionals evaluate the pros
and cons of each proposal.
 Assessing each potential project’s:
 benefits
 costs
 strategic impact
 Development will proceed on proposals with
the greatest potential for supporting the
organization’s business objectives at the
lowest cost.
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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Create an Action Plan:
the Balanced Scorecard
 The next step is to translate strategy into
action
 Many companies have found the balanced
scorecard (BSC) a useful tool for this step.
 The BSC recommends viewing an
organization using four perspectives:
 learning and growth
 internal business process
 customer
 financial
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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Balanced Scorecard
Primary objective: capture information on orthogonal
dimensions that are important to every organization
financial: how do we look to our shareholders?
customer: how do we look to our customers?
internal business process: what must we excel at?
learning and growth: can we continue to improve?
Second objective: prevent the proliferation of reports and
information. Concentrate only on critical success factors to
which everyone in the organization will pay attention.
Hall, Accounting Information Systems, 7e 19
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Phase 2
Project Initiation

Accounting Information Systems, 7e


James A. Hall

Hall, Accounting Information Systems, 7e

©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Systems Analysis

 A business problem must be fully


understood before a solution can be
formulated.
 A defective analysis will lead to a defective
solution.
 System analysis is a two-step process
 survey of current systems
 analysis of users’ needs
Hall, Accounting Information Systems, 7e 21
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Analysis Step
 Systems analysis is an intellectual process
that is commingled with fact gathering.
 A formal systems analysis report, prepared
and presented to the steering committee,
contains:
 reasons for system analysis
 scope of study
 problem identified with current system
 statement of user requirements
 resource implications
 recommendations
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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Conceptualization Phase
 Purpose: produce alternative
conceptual solutions that satisfy the
requirements identified during systems
analysis
 How much detail?
 enough to highlight the differences
between critical features of competing
systems rather than their similarities

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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Alternative Conceptual Designs
for a Purchasing System

Figure 13-6
Hall, Accounting Information Systems, 7e 24
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Systems Evaluation and Selection

 A critical juncture in the SDLC


 a formal mechanism for selecting the
one system from the set of alternative
conceptual designs that will go forward
for construction
 an optimization process that seeks to
identify the best system
 a structured decision-making process
that reduces uncertainty and risk
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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Role of Accountants
 Accountants ensure that the following are
considered during evaluation and selection:
 only escapable (relevant) costs are used in
calculations of cost savings benefits
 reasonable interest rates are used in measuring
present values of cash flows
 one-time and recurring costs are completely and
accurately reported
 realistic useful lives are used in comparing
competing projects
 intangible benefits are assigned reasonable
financial values
Hall, Accounting Information Systems, 7e 26
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Cost-Benefit Analysis:
Identify Costs

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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Cost-Benefit Analysis:
Identify Benefits—Tangible

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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Cost-Benefit Analysis:
Identify Benefits—Intangible

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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Comparing Costs and Benefits
 Two methods commonly used for evaluating
the costs and benefits of information
systems:
 Net Present Value Method: deduct the present value
of costs from the present value of benefits over the
life of the project.
• The optimal choice is the project with the greatest net
present value.
 Payback Method: do break-even analysis of total
costs (one-time costs plus present value of recurring
costs) and total benefits (present value of benefits).
After the break-even point, the system earns future
profits.
• The optimal choice is the project with the greatest future
profits.
Hall, Accounting Information Systems, 7e 30
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
How Should We Get the System?
 Once the optimal system is selected, decide
how to acquire it:
 develop the system in-house: best for systems
that need to meet unique and proprietary
business needs
 purchase commercial software: best for systems
that are expected to support “best industry
practices”
 a mix of the first two approaches: make in-house
modifications, to varying degrees, of a
commercial system to meet the organization’s
unique needs
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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Announcing the New System Project…

 can be the most delicate aspect of the SDLC.


 End user support is critical to success.
 All end users need to be made to understand
the objectives of the new system.
 End users and managers who view the new
system as a potential benefit to their jobs,
rather than a threat, are more likely to
cooperate with the project.

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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Why are Accountants Involved
with SDLC?
 The creation of an information system
consumes significant resources and has
financial resource implications.
 The quality of accounting information
systems and their output rests directly
on the SDLC activities that produce
them.

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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
How are Accountants Involved
with SDLC?
 As end users who must provide a clear
picture of their problems and needs
 As members of the development team
 As auditors who must ensure that the
system is designed with appropriate
internal controls and computer audit
techniques.

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©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Accountant’s Role in Systems
Strategy
 Auditors should routinely review the
organization’s systems strategy.
 Careful systems planning is a cost-effective
way to reduce the risk of creating
unneeded, unwanted, inefficient, and
ineffective systems.
 Both internal and external auditors have
vested interests in this outcome.
Hall, Accounting Information Systems, 7e
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
The Accountant’s Role in Systems
Selection
 Economic feasibility is a primary concern to
accountants. Accountants should ensure that:
 use only escapable costs in calculations of cost-
savings benefits
 use reasonable interest rates in measuring present
values of cash flows
 one-time v. recurring costs are accurately reported
 use realistic useful lives in comparing competing
projects
 intangible benefits are assigned reasonable financial
values
Hall, Accounting Information Systems, 7e 36
©2011 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.