Part B - Information Systems and Information Technology Solutions

B.4.4. Alternatives for Application Software Acquisition

There are four basic options for acquiring software, and of course, any combination of these:

In-house development
Contract development
Purchased package (Turn-key)
Transported system.

B.4.4.1. In-house Development

Under this option, the organization utilizes its own staff for the planning, definition, analysis, design,
and implementation of the applications. New staff may be hired or existing personnel can be trained
in information systems and computer technology.
In-house development of software offers the following advantages:

Complete internal control over project staff and schedules.

Lower per hour labor cost than contract development.

System maintenance and modification ability retained within the organization.

Disadvantages of in-house development include:

Hiring, supervision, and personnel management responsibilities.

Long-term expense of maintaining a technical staff.

No contractual (legal and financial) leverage over development, implementation, and

maintenance.

Possibly a lower level of productivity than with contractor personnel and thus higher
development cost.

Staff turnover and training requirements.

B.4.4.2. Contract Development

This alternative entails contracting with a software development organization for the design and
implementation of the desired applications.

Part B - Information Systems and Information Technology Solutions

The advantages of contract development include:

Tight control of development cost.

Legal and financial leverage over contractor.

Probably stronger technical talent than could be hired for an in-house team.

Possibly specific applicable prior experience of contractor.

Probably better adherence to development and implementation timetables.

Less requirement for in-house technical staff.

Development of software by a contractor may involve the following disadvantages:

Higher per hour labor cost than with in-house staff.

Possible business instability of the contractor.

Lack of assurance of long-term system maintenance without a continued contractual

relationship.

Additional time and expense for Request for Proposal preparation, proposal evaluation,
negotiation, and contracting.

Lack of understanding by contractor of actual and specific organizational requirements.

B.4.4.3. Purchased Package

The package option includes any arrangement whereby the organization acquires computer software,
and frequently also associated installation requirements, from another organization under a purchase
or license contract. This applies to either an in-house computer system or the contracted use of
equipment off premises.
The advantages of a purchased package include:

Proven and technically sound software.

Generally shorter implementation time.

Minimal development of new forms and procedures.

Lower cost than custom development.

Part B - Information Systems and Information Technology Solutions

Implementation experience usually available.

User references usually available.

Specific performance contract easier to define.

Warranty and short-term support generally available.

The disadvantages of a purchased package may include:

Incompatibility between packaged system capabilities and hospital's requirements.

Possible reliance on vendor for long-term support, maintenance, and modification.

Requirements for specific computer equipment.

Restrictions regarding copyright, distribution, and utilization of the system and modifying the
programs.

Limited staff involvement at the contracting organization.

B.4.4.4. Transported System

This alternative involves acquiring a system on an "as is" basis from another organization where the
system was developed and is in production. This option includes either implementation using inhouse hardware or the sharing of the computer facilities and network with the originating organization.
This alternative offers the following advantages:

Very low direct acquisition cost.

Installation and use advice normally available.

Disadvantages of this acquisition method include:

Minimal documentation generally available.

Reliance on originating organization or internal personnel for support, maintenance, and

modification.

No extensive contractual recourse usually available.

Possible inability of system to meet some specific organizational requirements.

Part B - Information Systems and Information Technology Solutions

Possibility of inordinately high implementation cost due to policy differences, quality of

documentation, and software difficulties.

Limited contracting organization staff involvement.