MANAGING THE SYSTEMS DEVELOPMENT LIFE CYCLE

The Systems Development Life Cycle (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.
System Development Life Cycle

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
in-house development, a commercial
package, or both
Systems Development Participants
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
Systems Steering Committee
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

Overview of Phases 1 and 2

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

PHASE 1: SYSTEMS STRATEGY

Assessing Strategic Information Needs
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
Strategic Business Needs
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

Legacy Systems
Use legacy components to help develop an
architecture description.

proactive management - alert to subtle

signs of problems and aggressively looks
for ways to improve

End User Feedback: Defining the Problem

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.
End User Feedback: Specifying System
Objectives
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.

End User Feedback

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
End
User
Feedback:
Recognizing
the
Problem
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

End User Feedback: Preliminary Project

Feasibility-TELOS
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?
End User Feedback: Preparing a Formal
Project Proposal
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.
Strategic Systems Plan
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.

Relationship Between Priority, Cost, and

Strategic Impact

Create an Action Plan: the Balanced

Scorecard
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
The Balanced Scorecard
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.
Balanced Scorecard for Online Banking

PHASE 2: PROJECT INITIATION

Project Initiation
The second phase in SDLC involves:
understanding 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
Systems Analysis
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
Survey of Current Systems
Advantages:
identifies aspects of the old system which
should be retained in the new system
aids in planning the implementation of the
new system
may allow conclusive determination of the
cause of the reported problems
Disadvantages:
the current physical tar pit
can stifle new ideas
The Survey Step
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

The Analysis Step

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
The Conceptualization Phase
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
Alternative Conceptual
Purchasing System

Designs

for

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

Detailed Feasibility Study

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
Cost-Benefit Analysis: Identify Costs

Systems Evaluation and Selection

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
]
The Role of Accountants
Accountants ensure that the following are
considered during evaluation and selection:
only escapable (relevant) costs are used in
calculations of cost savings benefits

Cost-Benefit
Tangible

Analysis:

Identify

Benefits

a mix of the first two approaches: make in-house

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

Cost-Benefit
Intangible

Analysis:

Identify

Benefits

Announcing the New System Project

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.
Why are Accountants Involved with SDLC?
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.
How are Accountants Involved with SDLC?
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.

Comparing Costs and Benefits

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.
How Should We Get the System?
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

The Accountants Role in Systems Strategy

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.
The Accountants Role in Conceptual Design
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.
The Accountants Role in Systems Selection
Economic feasibility is a primary concern
to
accountants.
Accountants
should
ensure that:

use
only
escapable
costs
in
calculations of cost-savings 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