Information System Development:Alternative strategies for information systems acquisition

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1.4 Alternative strategies for information systems acquisition

In this book we will focus on custom systems development, that is, where the construction of the IS is part of the life-cycle. It is also possible to outsource IS development to a third party, to buy a package solution, or to rent an IS solution. We will look at these in turn.

1.4.1 Packaged solutions

Some organizations have decided not to embark automatically on major in-house system development activities but to first ascertain whether their requirements can be purchased in the form of application packages or 'turn-key' systems. This is regarded as a quick and relatively cheap way of implementing systems for organizations that have fairly standard requirements. A degree of package modification and integration may be required which may still be undertaken in-house. If there is a deep divide between requirements and provision, then the modifications may be very expensive to implement and a packaged solution a poor investment. On the other hand, many applications are similar between organizations, and these are likely to include all the accounting applications. In such cases, an application package is likely to be cheaper and quicker to implement.

1.4.2 Outsourcing

Outsourcing is the provision of services by an external company. In the IS context, it may be as small as the provision of a few contract programmers, to the external development of an application, hardware provision, and finally to the development and running of all applications. It is argued that an outsourcing company is more likely to have the human resources available for a new system and be quicker to develop the application. The vendor may agree to manage and be responsible for the provision and development of the information system for the organization who will be less concerned about how the system is developed and more interested in the end results. There is a trend toward outsourcing as it rids the organization of IT and IS responsibilities, which may be seen as being not of strategic importance – it is not their core business. Nevertheless, it is usually regarded as important that the organization maintains some residual IS specialists to ensure that the vendor is fulfilling both the contract and the organization's needs.

1.4.3 Application service providers

A combination of Internet and mobile technologies, IS skills shortage and growing application size and complexity has encouraged the development of a new kind of outsourcing, provided by application service providers (ASP). ASPs are sometimes formed from an alliance between a hardware vendor and a software provider such as Hewlett-Packard and SAP or IBM and Oracle, or may be third party providers such as the large consultancy groups. An ASP will build the data pool, develop applications, ensure the appropriate level of security, run the applications, allow access, monitor usage, tune, upgrade and enhance the application. Typically, these applications might relate to customer relationship management, enterprise resource planning or e-business. The relationship between an ASP and its client organization is critical, since an ASP places a further layer between the organization and its information resource.

Summary

• Information systems are central to organizational survival.

• A methodology for developing information systems is needed to bring order and structure to a complex technical and organizational process.

• Many traditional methodologies are inflexible, and end up being ignored or followed for their own sake rather than for organizational benefit.

• There are alternative approaches to the stepwise refinement approach of the waterfall life-cycle model that may be more appropriate to organizations.

• Although it is commonplace for organizations to develop their own applications, there are alternatives, such as packaged solutions, outsourcing and application service providers.

Exercises

1. Suggest different types of information system used at your university or another organization: formal, informal, clerical and computerized.

2. For any information system, argue for and against using an information systems development methodology.

3. What are the crucial differences between the waterfall life-cycle model and alternative models for information systems development?

4. What risks might an organization be exposed to in adopting extreme programming and agile development?

5. Argue for and against developing in-house applications and alternatives, such as packaged solutions, outsourcing and application service providers.

Further reading

Avison, D. and Fitzgerald, G., (2002). Information Systems Development: Methodologies, Techniques and Tools, 3rd edition, McGraw-Hill, Maidenhead.

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