This is Dr. Nancy Zeliff. I will discuss part 2 of Chapter 6 with you, which is on Systems Development: Self-sourcing and Outsourcing.
After reading Chapter 6 and listening/viewing this lecture, you will achieve these objectives: Describe the self-sourcing process as an alternative to the traditional SDLC. Discuss the importance of prototyping and prototyping within any systems development methodology, and describe the outsourcing environment and how outsourcing works.
As a reminder, organizations have three choices available to build a new system. Insourcing, self-sourcing, and outsourcing are the choices.
Self-sourcing (also called end-user development) is when YOU, the end-user, develop the system with little or no help from IT specialists. Although certainly not at the level of enterprisewide ERP systems, such as Northwest’s Banner or CatPaws, for example, self-sourcing development is a viable alternative. The major tools for self-sourcing have been and still continue to be spreadsheets and database management systems and Web development. Self-sourcing can relieve IT specialists of the burden of developing many smaller systems, and they can use their time for IT infrastructure demands. A successful strategy for self-sourcing is knowing which software applications are good candidates and providing end users with the right tools.
The self-sourcing approach is similar to the traditional systems development life cycle. The major exception is that design, development, testing, and implementation are replaced by the process of prototyping. Prototyping is the process of building models, and continually refining those models until they become the system.
When first planning a system, consider the organization’s goals and consider the time necessary to build the system. Identify any systems that require an interface and how end users will “use” such a system. Determine what type of external support you will require. Some projects may require support from IT specialists within the organization.
Even if developing a system yourself, document how the system works for other potential users. Be prepared to provide your own support and maintenance and to support other end users using the system. Examples of self-sourcing include a simple Excel worksheet I have developed to track graduate students in the Instructional Technology Master’s program. As the computer advisor for these 40+ students, I needed a “system” or simple database of students who applied for the program and of those who were actively enrolled in the program. Having their names, 919 numbers, email addresses, courses completed, application requirements, and when they planned to finish in one quick and easy “system” helped me in advising and tracking student progress. Before the online degree audit system at Northwest, I found a need for such a system or document. And now even with the online degree audit, I can open this spreadsheet document and search for a student and see in one horizontal row all the information I need about this student, and it is off-line, not needing Internet access. Another example that is more of a system than a “document” is a local optometry practice. This practice has long used a computerized record system that one of the optometrists developed. With his computer programming background and “hobby,” he built the system the practice used for over 25 years. Only recently upon my annual visit, did I learn he advised the practice to purchase a enterprisewide application that uses current digital eye scans and other current medical technology.
Advantages to self-sourcing include the ease of determining improvements and a great sense of “ownership” in the use of the system. Such systems are quicker to develop and reduce the backlog of systems that an organization needs to develop. The invisible backlog is the list of all systems that an organization needs to develop, but because of the prioritization of systems development needs, never get funded or done.
Self-sourcing disadvantages include inadequately developed systems that were developed by end users without the necessary expertise. This can lead to subpar IT systems and a lack of documentation for others to successfully use the system. Such systems may not interface or integrate well with other systems used in the organization.
Enterprisewide applications that are critical to the mission of an organization need to be developed by IT specialists either insourced or outsourced. These systems are not those that should be developed by self-sourcing. Systems that are infrastructure related, ERP, CRM, SCM, BI, or e-business. In addition, systems such as call center applications that support large numbers of concurrent users should be developed by IT specialists.
End users developing self-sourced systems should select tools that are easy to use, support multiple platforms, offer low cost of ownership, and support a wide range of data types.
Protoyping is the process of building a model that demonstrates the features of a proposed product, service, or system. A prototype is simply a model of that product, service, or system. Automobile manufacturers build prototypes of cars to demonstrate and test safety features, aerodynamics, and comfort. Building contractors construct models of homes and other structures to show layouts and fire exits. In systems development, a model is built from basic business requirements, users review the prototype and suggest changes, and the system is further refined and enhanced to include suggestions. A proof-of-concept prototype proves the technical feasibility of a proposed system. A selling prototype is one that is developed and used to convince others of the worth of the proposed system. It is the system that is used as a model to seek support and funding or one used in marketing efforts to sell to others.
Prototyping is often used in the traditional systems development life cycle to form a technical system blueprint. In self-sourcing, developers can continue to refine the prototype until it becomes the final system. There are four steps in the prototyping process. These types include: identify basic requirements, develop the initial prototype, have users review the prototype, and revise and enhance the prototype.
The advantages of prototyping are active user participation and the inclusion of many users, which can resolve discrepancies among those many users. Prototyping gives potential users a real feel for the final system and determines the true feasibility of use. Finally, the prototype can be used to “sell” the system to potential users, those that can fund the system, and other potential buyers/users.
The disadvantages of prototyping are that many believe that the final product or service will follow immediately; this may not be true. Prototypes seldom take all operational conditions into considerations and cannot show how the system will perform once the system is launched. Prototyping may reduce or eliminate the proper testing and documentation that is necessary. Your textbook mentions a Department of Motor Vehicle system launched by a state on the East Coast that suffered from a prototype system. When the system was tested on 20 workstations, it worked well. But when it was launched statewide with 1200 workstations, the system spent its time managing communication traffic, that it could not manage transactions. This happened in 2012 in the state of Kansas with their new department of motor vehicle system. The system when launched was shut down for a few days until IT specialists could make the system work on a larger scale than was tested or prototyped.
The third choice of who will build your IT system is outsourcing. Outsourcing is the delegation of specified work to a third party for a specified length of time, at a specified cost, and at a specified level of service. Human resources is one of the top outsourcing areas for many companies, including payroll processing, centralized call centers, transaction processing systems, and Web-based employee self-service systems.
The rapid growth of outsourcing is because of globalization and the need for companies to deliver international services. Many outsourcing service providers are located throughout the globe. The lack of capital as a barrier to entry is greatly reduced due to e-business and the Internet. In the United states, building a competitive workforce domestically is more expensive and more difficult. Advances in technology are rapid and expensive, and many companies cannot keep up. Finally, markets have opened up due to deregulation in varied industries, such as telecommunications and energy.
IT outsourcing options include purchasing existing software, purchasing existing software and paying the publisher to make certain modifications, purchasing software and paying the publisher for the right to make modifications yourself, and outsourcing the development of an entirely new and unique system for which no software exists. When Northwest moved to Banner or CatPaws, items #2 and #3 were the options. Northwest purchased Banner and paid the publisher for modifications, but now additional modifications are both purchased and developed inhouse by our own computer programmers.
Like self-sourcing, the outsourcing process looks similar to the traditional systems development life cycle. Planning is necessary where the project scope is identified and business requirements are identified. But outsourcing is telling another organization what you want and you convey these wants in a RFP or request for proposal, which is a formal document that details the requirements of the proposed system and invites outsourcing organizations to submit bids for its development. Once the RFPs are received, they are reviewed and a vendor is selected.
Once a vendor is selected, a service level agreement (or SLA) is drawn, which is a formal contractually obligated agreement between the organization and the vendor.
The three different forms of outsourcing are onshore, nearshore, and offshore. Onshore engages another company within the same country for services. Nearshore arranges development with a company in a nearby country. Offshore contracts are with a company that is geographically far away.
Offshore outsourcing began as a cost-cutting concept but has moved ahead and established itself as a successful business model (although controversial) by not only providing cost-effective services but also sophisticated and highly efficient quality service. Therefore, the advantages of outsourcing include that companies can concentrate on their core services. In the case of Energizer, they can put their efforts on manufacturing batteries and outsource human resources to HR specialists. Costs are reduced and predictable of the services that are outsourced. Organizations can benefit from leading-edge technology used by the outsourced vendors. Finally, contracts with outsourced vendors can identify the level of performance expected, or that vendor can be dropped.
Disadvantages to outsourcing include the reduction of control and the need to depend on other organizations. There is vulnerability when strategic information of your organization is shared with other organizations. Finally, outsourcing is a way of exploiting the intellect of another organization, which means your organization does not have that expertise internally. Your organization may never develop that expertise and must in the future always outsource that service.
Let’s revisit crowdsourcing, which is getting nonpaid, nonemployees to participate in the development of a product or service. Organizations are spinning crowdsourced competitions. These competitions offer grants or money for the development of smartphone apps that can diagnose health problems or the development of an algorithm that can predict patients most likely to be admitted to a hospital in 12 months. The US Government offers $50 million in grants annually with the America Competes Act.
This concludes our discussion of self-sourcing and outsourcing.