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CHAPTER 11 M ETHODOLOGIES FOR P URCHASED S OFTWARE P ACKAGES

CHAPTER 11 M ETHODOLOGIES FOR P URCHASED S OFTWARE P ACKAGES. T HE M AKE-OR- B UY D ECISION. Decision should be made jointly by business managers and IS professionals Advantages of purchasing: Cost savings Faster speed of implementation Disadvantages of purchasing:

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CHAPTER 11 M ETHODOLOGIES FOR P URCHASED S OFTWARE P ACKAGES

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  1. CHAPTER 11 METHODOLOGIES FOR PURCHASED SOFTWARE PACKAGES

  2. THE MAKE-OR-BUY DECISION • Decision should be made jointly by business managers and IS professionals • Advantages of purchasing: • Cost savings • Faster speed of implementation • Disadvantages of purchasing: • Seldom exactly fits a company’s needs • Often forces trade-offs Page 406

  3. PURCHASING METHODOLOGY The Purchasing Steps Page 407 Figure 11.1 The Purchasing Process

  4. PURCHASING METHODOLOGY Initiating the Purchasing Process Figure 11.2 Comparison of Costs and Building vs. Purchasing a System Page 407

  5. PURCHASING METHODOLOGY Establish Criteria for Selection Figure 11.3 Key Criteria for Software Package Selection Page 408

  6. PURCHASING METHODOLOGY Develop and Distribute the RFP Request for proposal (RFP) – a formal document sent to potential vendors inviting them to submit a proposal describing their software package and how it would meet the company’s needs Page 409

  7. Develop and Distribute the RFP Page 409 Figure 11.4 Sample RFP Table of Contents

  8. PURCHASING METHODOLOGY Evaluate Vendor Responses to RFP and Choose Package • Evaluation steps: • Review vendors’ responses from RFPs • Request demonstrations of leading packages • Request references from users of software packages in other companies • Assess how well package capabilities satisfy company’s needs • Understand extent of any additional development efforts or costs to tailor software • Make decision Page 410-411

  9. PURCHASING METHODOLOGY Evaluate Vendor Responses to RFP and Choose Package Figure 11.6 Matching Company Needs with Capabilities of the Package Page 411

  10. PURCHASING METHODOLOGY Construction Phase • If no software package modifications required: • Skip system design and building steps • Move directly to system testing • Develop any necessary process changes • If software package is modified: • Consider contracting with vendor or a third party for changes versus modifying in-house • Determine if changes are required to other existing company systems Page 413

  11. PURCHASING METHODOLOGY Project Team for Purchasing Packages • Business managers and users • IS professionals • Project manager – usually a business manager • Software vendor personnel • Sometimes includes a third-party implementation partner • Purchasing specialists • Attorneys Page 414-415

  12. PURCHASING METHODOLOGY Purchasing Advantages and Disadvantages Figure 11.7 Advantages and Disadvantages of Purchasing Packaged Software Page 416

  13. SPECIAL CASE: ENTERPRISE SYSTEM PACKAGES • Enterprise Resource Planning (ERP) system packages: • Companies purchase to achieve business benefits and IT platform benefits • Enables access to integrated data for better decision making • Often require heavy reliance on third-party consultants • Implementation efforts usually complex, and sometimes not successful Page 417

  14. SPECIAL CASE: ENTERPRISE SYSTEM PACKAGES • Factors that need to be managed well for ERP implementation to be successful: • Top management is engaged in the project, not just involved • Project leaders are veterans, and team members are decision makers • Third parties fill gaps in expertise and transfer their knowledge • Change management goes hand-in-hand with project planning • A satisfying mindset prevails Brown and Vessey, 2003 Page 417

  15. NEW PURCHASING OPTION: APPLICATION SERVICE PROVIDERS (ASPs) • New trend beginning 2000s • Purchasing option: purchaser elects to use a “hosted” application rather than to purchase the software application and host it on its own equipment • ASP is an ongoing service provider • Company pays third party (ASP) for delivering the software functionality over the Internet to company employees and sometimes business partners Page 418

  16. NEW PURCHASING OPTION: APPLICATION SERVICE PROVIDERS (ASPs) • Some advantages: • Cost savings and faster speed of implementation • Usually involves monthly fees rather than large infrastructure investment • Disadvantages: • Dependence on an external vendor for both software and ongoing operations • Good assessment of required service levels even more critical Page 418-419

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