Identify the key stages in the SDLC

How a firms business strategy shapes its information

system
The relationship between strategic systems planning
and legacy systems
What transpires during systems analysis
The TELOS model for assessing project feasibility
Cost-benefit analysis issues related to information
systems projects
The role of accountants in the 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.

Well look at the first two in this chapter and the

remaining three in chapter 14.

Systems Development Life Cycle

Business Needs and
Strategy
Legacy Situation
Business Requirements

1. Systems Strategy
-- Assessment
Assessment
-- Develop
Develop Strategic
Strategic Plan
Plan

System Interfaces, Architecture

and User
User Requirements

Feedback:
Feedback:
User requests for New Systems
High Priority Proposals undergo
Additional Study and Development

2. Project Initiation
-- Feasibility
Feasibility Study
Study
-- Analysis
Analysis
-- Conceptual
Conceptual Design
Design
-- Cost/Benefit
Cost/Benefit Analysis
Analysis

Selected System Proposals

go forward for Detailed
Design

3. In-house Development

Feedback:
Feedback:
User requests for System
Improvements and Support

4. Commercial Packages

-- Construct
Construct
-- Deliver
Deliver

-- Configure
Configure
-- Test
Test
-- Roll-out
Roll-out

New and Revised

Systems Enter into
Production

5. Maintenance & Support

-- User
User help
help desk
desk
-- Configuration
Configuration Management
Management
-- Risk
Risk Management
Management &
& Security
Security

Phase 1 - Systems Strategy

understand the strategic needs of the organization

examine the organizations mission statement
analyze competitive pressures on the firm
examine current and anticipated market conditions
consider the information systems implications
pertaining to legacy systems
consider concerns registered through user feedback
produce a strategic plan for meeting these various
and complex needs
produce a timetable for implementation

Phase 2 - Project Initiation

assess systems proposals for consistency with
the strategic systems plan
evaluate feasibility and cost-benefit
characteristics of proposals
consider alternative conceptual designs
select a design to enter the construct phase of
the SDLC
examine whether the proposal will require inhouse development, a commercial package, or
both

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

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

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

Vision and mission

systems strategy requires an understanding of

top managements vision, which has shaped the
organizations business strategy

Industry and competency analysis

industry analysis: the driving forces that affect
the industry and their organizations
performance, such as important trends,
significant risks, and potential opportunities
competency analysis: a complete picture of the
organizations effectiveness as seen via four
strategic filters: resources, infrastructure,
products/services, and customers

Use legacy components to help develop an

architecture description.

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

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 managements 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

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.

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.

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?

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.

After collecting input, the steering

committee and systems professionals
evaluate the pros and cons of each proposal.
Assessing each potential projects:
benefits
costs
strategic impact

Development will proceed on proposals with

the greatest potential for supporting the
organizations business objectives at the
lowest cost.

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

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.

The second phase in SDLC involves:

understanding

of users needs and

problems
proposing multiple alternative solutions
assessing alternatives in terms of feasibility
and cost-benefit characteristics
selecting the best option and proceeding to
the construct phase
examining whether the selected option will
require in-house development, a
commercial package, or both

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

Advantages:
allows aspects of the old system which
should be kept to be identified
aids in planning the implementation of the
new system
may allow conclusive determination of the
cause of the reported problem symptoms

Disadvantages:
the current physical tar pit
can stifle new ideas

Fact-gathering techniques include

observing, participating, interviewing,
and reviewing documents.
Facts must be gathered regarding:

data sources and data stores

users
processes
data flows
controls, especially audit trails
transaction volumes
error rates
resource costs
bottlenecks and redundant operations

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

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

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

Accountants ensure that the following are

considered during evaluation and selection:
only escapable 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

Similar to the preliminary project

feasibility analysis (TELOS), but
now more detailed and oriented to
deciding on a specific system
design. Examine:
technical

feasibility
economic feasibility
legal feasibility
operational feasibility
schedule feasibility

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.

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 inhouse modifications, to varying degrees, of a
commercial system to meet the
organizations unique needs

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.

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.

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.

Auditors should routinely review the

organizations systems strategy.
Careful systems planning is a costeffective way to reduce the risk of
creating unneeded, unwanted,
inefficient, and ineffective systems.
Both internal and external auditors
have vested interests in this outcome.

Accountants should be responsible for

the conceptual system
and

the systems professionals for the

physical system.

If important accounting considerations

are not conceptualized at this point, they
may be overlooked, exposing the
organization to potential financial loss.
The auditability of a system depends in
part on its design characteristics.

Economic feasibility is a primary concern to

accountants. Accountants should ensure that:

use only escapable costs in calculations of costsavings 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