Chapter 10: Acquiring Infomration Systems & Applications

1. What are some problems associated with assessing the costs of IT?
Placing a dolar value on the cost of IT investments may not be as simple as it sounds.
One of the major challanges that companies face is to allocate fixed costs among different IT projects. Fixed costs are those coss tah tremain teh same regardless of any change in teh activity level.
For IT, fixed costs include infrastructure cost, cost of IT services, and IT management cost. For e.g. teh salary of the IT director is fixed, and afdding one ore application will not change it.
Another complication is taht the cost of a system does not end when the system is installed. Costs for maintaining, debugging, and improving the system can accumulate over many years. In some caes, the company does not even anticipate them when it makes the investment. E.g. is the cost of the year 2000 (Y2K) reprogramming projects that cost organisations worldwide billions of dollars at the end of the 2oth century.

2. What difficulties accompany the intangible benefits from IT?
-benefits may be harder to quantidy, especially becasue many of them are intangible (e.g. improved customr or partner relations or iproved decision making.
-The fac tthat org's use IT for several purposes further complicates benefit analysis.
- In addition, to obtain a return from an IT investment, the company must implement the technology successfully.
- In reality, many systems are not implemented on time, wihtin budget, or with all the features originally envisioned for them.
- Finally, the proposed system may be "cutting edge." In these cases there may be no previous evidence of what sort of financial payback the company can expect.

3. Define NPV and ROI, and business case approaches.
Net Present Value: calculations for cost-benefit analyses. Using the NPV method, analysts convert future values of benefits to their present-value equivalent by "discounting" them at the organisation's cost of funds. They can then compare the present value of the future benefits to the cost required to achieve those benefits and determine whether the benefits exceed the costs.

ROI: measures managements effectiveness in generating profits with its available assets. It is a percenatge, and the higher the percentage return the better.

4. What type of companies provide outsourcing service?
Small/medium sized companies with few IT staff and limited budgets are best served by outside contractors. Acquiring IT applications from outside contractors or external organisations is called outsourcing.
Several types of vendors offer services for creating and operating IT systems inclusing e-commerce applications. Amnay softeare companies, from IBm to Oracle, offer a range of outsourcing services for developing, operating, and maintaining IT applications. IT outsourcers such as EDS, offer a variety of services.

5. Define ASPs and list their advantages to companies using them
Application Service Provider (ASP) is an agent or a vendor whoasssmebles teh software needed by enterprises and packages the software with services such as developemnt, operations, and maintenance. The custoerm then accesses these applciations via the internet.
-using hosting vendors is particualrly desirable option for SME businesses.
-developing and opearting IT applications in-house can be time-consuming and expensive for these entities.

6. List some disadvantages of ASPs.
Leasing from ASP's offers such compaies several advantages.
- It saves various expenses (labour costs) in the initial developement stage.
- Helps reduce the costs of software maintenance and upgrading and user training over the long run.
- the companycan select another software product from the vendor to meet its chamging needs.
- This oppostion savse the comapny the costs of upgrading the existign software.
- Makes teh company more competitive by enhancing teh comapy's ability to adapt to the changing market conditions.

7. List the major steps of selection of a vendor and a software package.
Step 1. Identify Potential Vendors through software catalogues, technical and trade journals, consultants and industry analysts, web searches.
Step 2. Determine the evaluation criteria.
-characteristsics of the vendor
-functional requirements of the sysetm
- technical requirements tah tthe software must satisfy
- amount and quality of documentation provided
- vendor support of the package
Step 3. Evaluate Vendors and Packages
Often the gives the vendors and packages an overall score:
- assigning an importnace weight to each of the criteria
- ranking the vendors on each of the weighted criteria (1 to 10)
- and then multiplying the ranks by the associated weights
Step 4. Choose the vendor and package
Once teh company has shortened the list of potential suppliers, it can begin negotiations with these vendors to determine how their packages might be modified to remove any discrepancies with teh companys IT needs.
Step 5. Negotiate a contract.
It specifies both the price of the software and the type and amount to support that the vendor agrees to provide. The contarct will be the only recourse if ither the system or the vendor does not performa s expected.
step 6. Establish a Service Level Agreement
SLA's are foraml agreemnts that specify how woerk is to be divided between the company and its vendors.They describe how quality checks will be made and what is to be done inc ase of dsiputes.

8. Describe a request for proposal (RFP).
is a document that is sent to potential vendors inviting them to submit a prposal taht describes their software package and expalins how it would meet the companys needs. The RFP provides the vendors with information abou tt eh objectives and requiremnts of the system. Specifically, it describes the enviroenmtn in which the system will be used, the geanearl criteria tah tthe comapny will use to evaluate the proposals and the conditions for submitting the proposals.

9. Describe SLAs.
SLA's are foraml agreemnts that specify how woerk is to be divided between the company and its vendors.They describe how quality checks will be made and what is to be done in case of dsiputes.
Accompish tehse goals:
1. definign the responsibilities of both partners
2. providing a framework for designing support services
3. allowing the company to retain as much control as possible over its own systems.