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CHAPTER 20
INTRODUCTION TO SYSTEMS
DEVELOPMENT; SYSTEMS ANALYSIS
20.1 The approach to long-range AIS planning described in
this chapter is important for large organizations with extensive investments in
computer facilities. Should small organizations with far fewer
information systems employees attempt to implement planning programs? Why
or why not? Be prepared to defend your position to the class.
20.2 You are a consultant advising a firm on the design and
implementation of a new system. Management has decided to let several
employees go after the system is implemented. Some have many years of
company service.
How would you advise management to communicate this decision to
the affected employees? To the entire staff?
20.3 While reviewing a list of benefits from a computer vendor’s
proposal, you note an item that reads, “Improvements in management decision
making—$50,000 per year.” How would you interpret this item? What
influence should it have on the economic feasibility and the computer
acquisition decision?
20.4 For each of the following, discuss
which data-gathering method(s) are most appropriate and why:
1. Examining the adequacy of
internal controls in the purchase requisition procedure -
2. Identifying the
controller’s information needs
3. Determining how cash
disbursement procedures are actually performed
d. Surveying employees about the move to a total quality management
program
e. Investigating an increase in uncollectible accounts
20.5 The following problem situations occurred in a manufacturing
firm. What questions should you ask to understand the problem?
</para>Accounting sees an increase in the number and dollar
value of bad debt write-offs
Operating margins have declined each of the past four years due to
higher-than-expected production costs from idle time, overtime, and reworking
products
20.6 Give some examples of systems analysis decisions that
involve a trade-off between each of the following pairs of objectives:
1. economy and usefulness
2. economy and reliability
c. economy and customer service
d. simplicity and usefulness
e. simplicity and reliability
f. economy and capacity
g. economy and flexibility
20.7 For years, Jerry Jingle’s dairy production facilities
led the state in sales volume but recent declines worry him. Customers
are satisfied with his products but are troubled by the dairy’s late deliveries
and incomplete orders. Production employees (not the cows) are concerned
about bottlenecks in milk pasteurization and homogenization due to poor job
scheduling, mix-ups in customers’ orders, and improperly labeled
products. How should Jerry address the problems? What
data-gathering techniques would be helpful at this early stage?
20.8 A manufacturing firm needed a specialized software program to
identify and monitor cost overruns. After an extensive analysis, the
company purchased prepackaged software and assigned three programmers to modify
it to meet its individual circumstances and processes. After six months
of work, during final testing, the company told them to stop all work until
further notice. While reading the software vendor’s sales agreement, the
manufacturing manager found a clause stating that the software could not be
changed without the prior written consent of the vendor. The firm had to
pay the software vendor an additional fee so it could use the modified software
in its manufacturing process. Which aspect(s) of feasibility did the
manufacturing firm failed to consider prior to purchasing the
software.</para></problem>
20.9 Ajax Manufacturing installed a new bar code
based inventory tracking system in its warehouse. To close the books each
month on a timely basis, the six people who work in the warehouse must scan
each item in a 36-hour period while still performing their normal duties.
During certain months, when inventory expands to meet seasonal demands, the
scan takes as many as 30 hours to complete. In addition, the scanners do
not accurately record some inventory items that require low operating
temperatures. A recent audit brought to management’s attention that the
inventory records are not always accurate. Which aspect(s) of feasibility
did Ajax fail to consider prior to installing the inventory tracking
system.</para></problem>
20.1 How do you get a grizzled veteran police officer who is used to
filling out paper forms to use a computer to process his arrests and
casework—especially when he has little or no experience using a computer? That
was the problem facing the Chicago Police Department when it decided to
implement a relational database system. The system is capable of churning
through massive amounts of data to give officers the information they need to
fight crime more effectively.
Initially, the
department rolled out the case component of the CLEAR (Citizen Law Enforcement
Analysis and Reporting) system that provided criminal history and arrest
records. The officers hated it, complaining that the system was not
user-friendly, that approval from supervisors was complex and involved multiple
screens, and that they did not feel properly trained on the system. After
listening to the officers’ complaints for a year, the department clearly had to
do something. (Adapted from Todd Datz, “No Small
Change,” CIO (February 15, 2004): 66–72)
a. Identify as many system analysis
and design problems as you can.
1. b. What
could the department have done differently to prevent the officers’ complaints?
1. c. What
principles of system analysis and design were violated in this case?
20.2 Mary Smith is the bookkeeper for Dave’s Distributing Company, a
distributor of soft drinks and juices. Because the company is rather small,
Mary performs all daily accounting tasks herself. Dave, the owner of the
company, supervises the warehouse/delivery and front office staff, but he also
spends much of his time jogging and skiing.
For several
years, profits were good, and sales grew faster than industry averages.
Although the accounting system was working well, bottlers were pressuring Dave
to computerize. With a little guidance from a CPA friend and with no mention to
Mary, Dave bought a new computer system and some accounting software. Only one
day was required to set up the hardware, install the software, and convert the
files. The morning the vendor installed the computer system, Mary’s job
performance changed dramatically. Although the software company provided two
full days of training, Mary resisted learning the new system. As a result, Dave
decided she should run both the manual and computer systems for a month to
verify the new system’s accuracy.
Mary continually
complained that she lacked the time and expertise to update both systems by
herself. She also complained that she did not understand how to use the new
computer system. To keep accounts up to date, Dave spent two to three hours a
day running the new system himself. Dave found that much of the time spent
running the system was devoted to identifying discrepancies between the
computer and manual results. When the error was located, it was usually in the
manual system. This significantly increased Dave’s confidence in the new
system.
At the end of the
month, Dave was ready to scrap the manual system, but Mary said she was not
ready. Dave went back to skiing and jogging, and Mary went on with the manual
system. When the computer system fell behind, Dave again spent time catching it
up. He also worked with Mary to try to help her understand how to operate the
computer system.
Months later,
Dave was very frustrated because he was still keeping the computer system up to
date and training Mary. He commented, “I’m sure Mary knows how to use the system, but she doesn’t seem
to want to. I can do all the accounting work on the
computer in two or three hours a day, but she can’t even do it in her normal
eight-hour workday. What should I do?”
a. What do you believe is the real
cause of Mary’s resistance to computers?
b. What events may have contributed to the new system’s failure?
c. In retrospect, how should Dave have handled the accounting system
computerization?
d. At what point in the
decision-making process should Mary have been informed? Should she have
had some say in whether the computer was purchased? If so, what should have
been the nature of her input? If Mary had not agreed with Dave’s decision
to acquire the computer, what should Dave have done?
e. A hard decision must be made regarding Mary. Significant
efforts have been made to train her, but they have been unsuccessful.
What would you recommend at this point? Should she be fired?
Threatened with the loss of her job? Moved somewhere else in the
business? Given additional training?
20.3 Wright Company’s information system was developed in stages over
the past five years. During the design process, department heads specified the
information and reports they needed. By the time development began, new
department heads were in place, and they requested additional reports. Reports
were discontinued only when requested by a department head. Few reports were
discontinued, and a large number are generated each period.
Management, concerned about the number of reports produced, asked internal
auditing to evaluate system effectiveness. They determined that more
information was generated than could be used effectively and noted the
following reactions:
§ Many departments did not
act on reports during peak activity periods. They let them accumulate in the
hope of catching up later.
§ Some had so many reports they
did not act at all or misused the information.
§ Frequently, no action was
taken until another manager needed a decision made. Department heads did not
develop a priority system for acting on the information.
§ Department heads often
developed information from alternative, independent sources. This was easier
than searching the reports for the needed data.
a. Explain whether each reaction is a functional or dysfunctional
behavioral response.
b. Recommend procedures to
eliminate dysfunctional behavior and prevent its recurrence.
20.4 The controller of Tim’s Travel (TT) is deciding between upgrading
the company’s existing computer system or replacing it with a new one.
Upgrading the four-year-old system will cost $97,500 and extend its useful life
for another seven years. The book value is $19,500, although it would sell for
$24,000. Upgrading will eliminate one employee at a salary of $19,400; the new
computer will eliminate two employees. Additional annual operating costs are
estimated at $15,950 per year. Upgrading is expected to increase profits 3.5%
above last year’s level of $553,000.
The BetaTech Company has quoted a price of $224,800 for a new
computer with a useful life of seven years. Annual operating costs are
estimated to be $14,260. The average processing speed of the new computer is
12% faster than that of other systems in its price range, which would increase
TT’s profits by 4.5%.
Tim’s present tax rate is 35%, and the cost of
financing (minimum desired rate of return) is 11%. After seven years,
the salvage value, net of tax, would be $12,000 for the new computer and $7,500
for the present system. For tax purposes, computers are depreciated over five
full years (six calendar years; a half year the first and last years),
and the depreciation percentages are as follows:
Year Percent (%)
1 20.00
2 32.00
3 19.20
4 11.52
5 11.52
6
5.76
<para>Using a spreadsheet package, prepare an economic
feasibility analysis to determine if Tim’s Travel should rehabilitate the old
system or purchase the new computer. As part of the analysis, compute the
after-tax cash flows for years 1 through 7 and the payback, NPV, and IRR of
each alternative.
20.5. Rossco is considering the purchase of a new
computer with the following estimated costs: initial systems design, $54,000;
hardware, $74,000; software, $35,000, one-time initial training, $11,000;
system installation, $20,000; and file conversion, $12,000. A net reduction of
three employees is expected, with average yearly salaries of $40,000. The
system will decrease average yearly inventory by $150,000. Annual operating
costs will be $30,000 per year.
The expected life
of the machine is four years, with an estimated salvage value of zero. The
effective tax rate is 40%. All computer purchase costs will be depreciated
using the straight-line method over its four-year life. Rossco can invest money
made available from the reduction in inventory at its cost of capital of 11%.
All cash flows, except for the initial investment and start-up costs, are at
the end of the year. Assume 365 days in a year.
Use a spreadsheet
to perform a feasibility analysis to determine if Rossco should purchase the
computer. Compute the following as part of the analysis: initial
investment, after-tax cash flows for years 1 through 4, payback period, net
present value, and internal rate of return.
20.6 A recently completed feasibility study to upgrade XYZ’s computer
system shows the following benefits. Compensation figures in parentheses
include wages, benefits, and payroll taxes.
1. Production
a. Market forecasts, which take two $400 person-days a
month, will be more accurate with software making the calculations.
b. Effective inventory control will prevent part stockouts
and reduce inventory by $1,000,000. XYZ’s cost of capital is 20%.
c. Detailed evaluations of plan changes will increase
production flexibility, reduce sales losses, and eliminate two clerks ($75,000
each).
2. Engineering
a. Computerized updating of bills of material and
operations lists will save 40% of an engineer’s ($100,000) and 25% of a clerk’s
($60,000) time.
b. Computerized calculations of labor allocations, rates,
and bonus details will save 40% of a clerk’s ($80,000) time.
3. Sales. Improved reporting will enable the
five-person sales staff to react more quickly to the market, producing a
$10,000 per person sales increase.
4. Marketing. Revised reports and an improved
forecasting system will increase net income by $50,000.
5. Accounting
a. Quickly determining new product costs will save 30% of
the accountant’s ($100,000) time.
b. An incentive earnings system will save 40% of the
payroll clerk’s ($60,000) time.
<para>As a
board member, which of the benefits can you defend as relevant to the system’s
cost justification? Calculate how much XYZ will save with the new system.</para>
Adapted from
the SMAC Exam
20.7 The following list
presents specific project activities and their scheduled starting and
completion times:
Activity
Starting Date
Ending Date
A
Jan. 5
Feb. 9
B
Jan. 5
Jan. 19
C
Jan. 26
Feb. 23
D
Mar. 2
Mar. 23
E
Mar. 2
Mar. 16
F
Feb. 2
Mar. 16
G
Mar. 30 Apr. 20
H
Mar. 23 Apr. 27
a. Using a format similar to that in
<link linkend="ch18fig03" preference="0">Figure
18-3<xref linkend="ch18fig03"
label="18-3"/></link>, prepare a Gantt chart for this project.
Assume that each activity starts on a Monday and ends on a Friday.
b. Assume today is February 16 and
activities A and B have been completed, C is half completed, F is a quarter
completed, and the other activities have not yet commenced. Record this
information on your Gantt chart. Is the project behind schedule, on
schedule, or ahead of schedule? Explain.
c. Discuss the relative merits of the Gantt chart and
PERT as project planning and control tools.
20.8 Recent years have brought an explosive growth in electronic
communication. Laptops, netbooks, e-readers, personal digital assistants,
sophisticated cell phones, fax machines, e-mail, teleconferencing, office
productivity software, and sophisticated management information systems have
changed the way information is received, processed, and transmitted. With the
decreasing costs of computer equipment and the increasing power of automation,
the full impact of computerization has yet to be felt. Although the development
of computer applications is directed at being user friendly or user oriented,
the integration of computers into the organization has had both positive and
negative effects on employees.
a. Describe the benefits companies and employees receive from
electronic communications.
1. c. Discuss
the organizational impact of introducing new electronic communication systems.
2. d. Explain
A. Why an employee might
resist the introduction of electronic communication systems
B. The steps an organization
can take to alleviate this resistance.
20.9 PWR manufactures precision nozzles for fire hoses. Ronald Paige,
an engineer, started the corporation and it has experienced steady growth.
Reporting to Ronald are six vice presidents representing marketing, production,
research and development, information services, finance, and human resources.
The information services department was established last year when PWR began
developing a new information system consisting of a server connected to each
employee’s personal computer. The PCs can download and upload data to the
server. PWR is still designing and developing applications for its new system.
Ronald received a letter from the external auditor and called a meeting with
his vice presidents to review the recommendation that PWR form an information
systems steering committee.
a. Explain why the auditors would recommend an information systems
steering committee and discuss its specific responsibilities. What advantages
can the committee offer PWR? What advantages can such a steering
committee offer PWR?
b.
Identify the PWR managers most likely to serve on the committee.
20.10 Businesses often modify or replace their financial information
system to keep pace with their growth and take advantage of improved IT. This
requires a substantial time and resource commitment. When an organization
changes its AIS, a systems analysis takes place.
a. Explain the purpose and reasons for surveying an
organization’s existing system.
b. Explain the activities commonly performed during
systems analysis.
c. Systems analysis is often
performed by a project team composed of a systems analyst, a management
accountant, and other knowledgeable and helpful people. What is the management
accountant’s role in systems analysis?
20.11 Don Richardson, JEM Corporation’s vice president of marketing, is part of a management team that for several months has been discussing plans to develop a new line of business. Rumors about the major organizational changes that may be required to implement the strategic plan have been circulating for months.
Several employees
who are anxious about the expected changes confronted Don. The sales manager
said, “It is imperative that we speak to you right away. The employees are very
apprehensive about the proposed changes, and their job performance has slacked
off.” The accounting manager added, “That’s right. My staff are asking me all
sorts of questions about this new line of business, and I don’t have any
answers for them. They’re not buying the ‘We will make an official announcement
soon’ line any longer. I suspect that some of them are already looking for jobs
in case the department changes phase out their positions.”
Implementing organizational change is one of the most demanding
assignments an executive faces. It has been suggested that every change
requires three steps: unfreezing the current situation, implementing the
change, and refreezing the effected change. This view, however, lacks the
specific details needed by an operating manager who must initiate the change.
1. a. Explain
why employees resist organizational change.
b. Discuss ways JEM Corporation can
alleviate employee resistance to change.
20.12 Remnants, Inc., with headquarters in St. Louis, manufactures
designer clothing. The company markets and services its products by region,
with each functioning as a profit center. Each region has a manager, an
accounting department, a human resources department, and several area offices
to market and service the products. Each area office has sales, service, and administrative departments whose
managers report to an area manager.
The New York area office departed from the standard organizational structure by
establishing a branch office to market and service the firm’s products in
Boston. A branch manager who reports directly to the New York area manager
heads the local office.
The Boston branch manager is encouraging the New York area manager
to consider a new information system to handle the local branch’s growing
information needs. The NewYork area manager and the eastern region manager want
to establish a project team with employees from the region, area, and branch
office. The team will assess the information needs at the Boston branch office
and develop system recommendations. The following employees have been appointed
to the project team, with Keith Nash as chairperson:
Eastern Region Office
Kurt Johnson, Budget Supervisor
Sally Brown, Training Director
New York Area Office
Keith Nash, Administrative Director
Boston Branch
Heidi Meyer, Branch and Sales Manager
Bobby Roos, Assistant Branch and Service Manager
Joe Gonzalez, Salesperson
Juana Martinez, Serviceperson
a. P</inst>roject team members contribute their skills to help
accomplish a given objective. Characteristics of group members can
influence the functioning and effectiveness of a project team. Identify
some of these characteristics.
b. Due to the team’s
composition, what sources of conflict can you see arising among its
members? Do you think the group will succeed in its objective to develop
an information system for the Boston branch office? Why or why not?
c. What contribution would a person who holds a
position as budget supervisor make in a project team such as this one?
20.13 Managers at some companies face an ongoing
systems development crisis: IS departments develop systems that businesses
cannot or will not use. At the heart of the problem is a “great divide” that
separates the world of business and the world of IS. Few departments seem able
or ready to cross this gap.
One reason for the crisis is that many companies are looking for ways to
improve existing, out-of-date systems or to build new ones. Another is the
widespread use of PC-based systems that have spawned high user expectations
that IS departments are not meeting. Users seek more powerful applications than
are available on many older systems.
The
costs of the great divide can be devastating. An East Coast chemical company
spent over $1 million on a budgeting and control system that was never used.
The systems department’s expertise was technical excellence, not budgets. As a
result, the new system completely missed the mark when it came to meeting
business needs. A Midwestern bank used an expensive computer-aided software
engineering (CASE) tool to develop a system that users ignored because there
had been no design planning. A senior analyst for the bank said, “They built
the system right; but unfortunately they didn’t build the right system.”
a. What is the
great divide in the systems development process? What causes the gap?
b. What would you suggest to solve this great divide information
crisis?
c. Discuss the role a systems designer, business
manager, and end user can take to narrow the great divide.
d. Who plays the most
vital role in the effective development of the system?
20.14 <para>Joanne Grey, a senior consultant, and David Young, a
junior consultant, are conducting a systems analysis for a client to determine
the feasibility of integrating and automating clerical functions. Joanne had
previously worked for the client, but David was a recent hire.
The first morning on the job, Joanne directed David to interview a
departmental supervisor and learn as much as possible about department
operations. David introduced himself and said, “Your company has hired us to
study how your department works so we can make recommendations on how to
improve its efficiency and lower its cost. I would like to interview you to
determine what goes on in your department.”
David questioned the supervisor for 30 minutes but found him to be
uncooperative. David gave Joanne an oral report on how the interview went and
what he learned about the department.
<para>Describe several flaws in David’s approach to
obtaining information. How should this task have been
performed?</para></problem>
</para></problem>
SUGGESTED ANSWERS TO THE
CASES
20-1 Audio Visual Corporation (AVC) manufactures and sells visual
display equipment. Headquartered in Boston, it has seven sales offices with
nearby warehouses that carry its inventory of new equipment and replacement
parts. AVC has a departmentalized manufacturing plant with assembly,
maintenance, engineering, scheduling, and cost accounting departments as well
as several component parts departments.
When management decided to upgrade its AIS, they installed a
mainframe at headquarters and local area networks at each sales office. The IS
manager and four systems analysts were hired shortly before they integrated the
new computer and the existing AIS. The other IS employees have been with the
company for years.
During its early years, AVC had a centralized decision-making
organization. Top management formulated all plans and directed all operations.
As the company expanded, decision making was decentralized, although data
processing was highly centralized. Departments coordinated their plans with the
corporate office but had the freedom to develop their own sales programs.
However, information problems developed, and the IS department was asked to
improve the company’s information processing system once the new equipment was
installed.
Before acquiring the new computer, the systems analysts studied
the existing AIS, identified its weaknesses, and designed applications to solve
them. In the 18 months since the new equipment was acquired, the following
applications were redesigned or developed: payroll, production scheduling,
financial statement preparation, customer billing, raw materials usage, and
finished goods inventory. The departments affected by the changes were rarely
consulted until the system was operational.
Recently the president stated, “The systems people are doing a
good job, and I have complete confidence in their work. I talk to them
frequently, and they have encountered no difficulties in doing their work. We
paid a lot of money for the new equipment, and the systems people certainly
cost enough, but the new equipment and new IS staff should solve all our
problems.”
Two additional conversations regarding the new AIS took place.
BILL TAYLOR, IS MANAGER AND JERRY ADAMS, PLANT MANAGER
JERRY: Bill, you’re trying to run my plant for me. I’m the
manager, and you keep interfering. I wish you would mind your own business.
BILL: You’ve got a job to do, and so do I. As we analyzed
theinformation needed for production scheduling and by top management, we saw
where we could improve the workflow. Now that the system is operational, you
can’t reroute work and change procedures, because that would destroy the value
of the information we’re processing. And while I’m on that subject, we can’t
trust the information we’re getting from production. The documents we receive
from production contain a lot of errors.
JERRY: I’m responsible for the efficient operation of
production. I’m the best judge of production efficiency. The system you
installed reduced my workforce and increased the workload of the remaining employees,
but it hasn’t improved anything. In fact, it might explain the high error rate
in the documents.
BILL: This new computer cost a lot of money, and I’m trying
to make sure the company gets its money’s worth.
JERRY ADAMS, PLANT MANAGER AND TERRY WILLIAMS, HUMAN RESOURCES
MANAGER
JERRY: My best production assistant, the one I’m grooming to
be a supervisor, told me he was thinking of quitting. When I asked why,
he said he didn’t enjoy the work anymore. He’s not the only one who is unhappy.
The supervisors and department heads no longer have a voice in establishing
production schedules. This new computer system took away the contribution we
made to company planning and direction. We’re going back to when top management
made all the decisions. I have more production problems now than I ever had. It
boils down to my management team’s lack of interest. I know the problem is in
my area, but I thought you could help me.
TERRY: I have no recommendations, but I’ve had similar
complaints from purchasing and shipping. We should explore your concerns during
tomorrow’s plant management meeting. Adapted from the CMA Examination
<para><emphasis role="strong">Evaluate the preceding information, and answer the following
questions:</emphasis></para>
1. Identify the problems the new
computer system created </inst> and discuss what caused them.
2. How could AVC have avoided the
problems? How can they prevent them in the future?
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