Lesson 2: System Planning

Learning Objectives:
1. Discuss the people involved in systems development and the roles they play.
2. Explain the importance of systems development planning and describe planning techniques.
3. Discuss the various types of feasibility analysis and calculate economic feasibility.
4. Explain why system changes trigger behavioral reactions,
5. What form this resistance to change takes, and how to avoid or minimize the resulting
problems.
6. Explain the five phases of the systems development life cycle.

1.0 Introduction to System Planning

 The objective of systems planning is to link individual system projects or applications to the
strategic objectives of the firm.

 Strategic Systems Planning

o Strategic systems planning involves the allocation of systems resources at the
macro level and often deals with a time frame of three to five years.

 Project Planning
o The purpose of project planning is to allocate resources to individual applications
within the framework of the strategic plan.
o The project proposal provides management with a basis for deciding whether to
proceed with the project.
2) Time o The project schedule is a budget of the time and costs for all the phases of the
frame should SDLC and represents management’s commitment to the project.
be in the
proposal.

3) Project
schedule is
the time.

How business plan and system projects create the

system planning.
 The role of Accountants
o Accountants offer expertise at various points in SDLC to guide and shape the
finished system.
o Provide technical expertise
 The detailed design phase involves precise specifications of procedures,
rules, and conventions to be used in the system.
 In the case of an AIS, these specifications must comply with GAAP, GAAS,
SEC regulations, and IRB codes. (Like the system will auto count which
product need GST 6%)
 Failure to so comply can lead to legal exposure for the firm.
o Specify documentation standards
 Because financial systems must periodically be audited, they must be
adequately documented.
 Verify Control Adequacy (Authorization)
 Controls may be programmed or manual procedures. (Call customer
service to proceed the transaction)
 Some controls are part of the daily operation of the system, while
others are special actions that precede, follow, or oversee routine
processing.

1.1 7 Phases in System Planning If top management

not allowed, then
1. Discussing and planning of the top management nothing would happen
 System development efforts have the support from top management
 To discern the strategic plans, key success factors, and overall objectives of top
management
Remember this for Final exam.
2. Establishing a systems planning – Information system steering committee
 Act as advisory group.
 Consist of high-level members of user functions such as manufacturing, marketing
and the head of information system.
 Steering committee meet periodically to set and review important policy, budget and
project decisions relating to information systems.
 Internal audit function might participate in this committee to advise and review the
information system function
 Role of IS:
 Identifying the priorities in the project
 Review the progress of the project against the milestones set (monitoring)
 Providing advice on the budget
 Monitoring the quality of the project as it develops

3. Establishing overall objectives and constraints

 Specific objectives for individual subsytems within the company
 General objectives relating to the co.’s long-run planning cycle
 Key success factors – distinguish a company from its competitors and are the keys
to its success
4. Developing a strategic information system plan – Master Plan
 Form of a written document that incorporates both the short- and long-run goals of
the co.’s systems development effort.
 Key elements of a strategic systems plan:
- an overall statement relating to key success factors of the company and overall
obj.
- What the system will consist of
- Cost/benefit analysis
- Developmental and operational requirements (people, hardware, software, and
financial)
- Schedule of the activities required to develop and operate the new application
- Where the AIS is headed – A 3 years planning time frame; regularly updated

5. Identifying and prioritizing specific areas within the organization for the system development
focus
 The strategic plan should identify specific areas to be given the highest priority –
financial resources are limited - As in capital budgeting
 Specific benefits should be defined for projects and their costs should be estimated
as closely as possible

6. Setting forth a system proposal to serve as a basis of the analysis and preliminary design for
a given subsystem

7. Assembling a team of individuals for purposes of the analysis and preliminary systems
design
 Management
 Accountants
 Users
 Information systems steering committee
 Project development team
 Systems analysts and programmers
1.2 Planning Technique

1. Planning Technique—PERT Chart

 Program Evaluation and Review Technique (PERT)
 Requires all activities in a project be identified along with the activities that precede and
follow them.
 These activities are used to draw a PERT diagram, which consists of a network of:
– Arrows—representing activities that require time and resources.
– Nodes—representing completion and initiation of activities.
 Completion time estimates made
 Critical path—the path requiring the greatest amount of time is determined

2. Planning Technique—GANTT Chart

 A bar chart with project activities on the left-hand side and units of time across the top
 Graphically shows the entire schedule for a large, complex project
2.0 Feasibility Analysis

An investigation to determine whether it is practical to develop a new application or system.

a) Economic:
 Will system benefits justify the time, money, and resources required to implement it? Pg
662 table 20-8
 Cost benefit Analysis
o Benefits and costs are estimated and compared to determine whether the system
is cost beneficial.
o Benefits and costs that are not easily quantifiable are estimated and included.
o If they cannot be accurately estimated, they are listed, and their likelihood and
expected impact on the organization evaluated.
 Techniques:
o Payback Period
 Number of years required for the net savings to equal the initial cost of
the investment.
o Net Present Value (NPV)
 Future benefits are discounted back to the present.
 Initial cost is subtracted.
 Positive NPV = economically feasible.
o Internal Rate of Return (IRR)
 The effective interest rate that results in an NPV of zero.
 A project’s IRR is compared with a minimum acceptable rate to determine
acceptance or rejection.

b) Technical:
 Can the system be developed and implemented using existing technology?

c) Legal:
 a) Does the system comply with all applicable federal and state laws, administrative
agency regulations, and contractual obligations?

d) Scheduling
a) Can the system be developed and implemented in the time allotted?

e) Operational
a) Does the organization have access to people who can design, implement, and
operate the proposed system? Will people use the system?

3.0 Resistance – Contribute to System Failure

Behavioral aspects of change – The positive and negative ways people react to change;
managing these behavioral reactions is crucial to successfully implementing a new system.

1. Why resist?
a. Fear – don’t know how to use the new system, need to learn to use and afraid new
system could replace their job and they will be terminated
b. Lack of top management support – subordinate will follow the top management
instruction (it is not compulsory), need support in terms of provide training to the
employees
c. Lack of communication - don't have enough information on the benefits/advantages or
reasons of the new system, no clear explanation on how to use and employees tend to
ignore it
d. Disruptive nature of change – increase workload at the beginning to use 2 systems,
time consuming to transfer data to new system and affect their work performance
e. Methods of instituting change – employees not being informed on the phases of
changes and it could disrupt their daily operations
f. Biases and emotions – could be termination of employees due to new system
introduction thus could affect the remaining staffs
g. Personal characteristics and background – too comfort with the current system and
resist to change and staff with senior ages difficult to learn new technology

2. Types of resistance:
a. Aggression
 Behavior that destroys, cripples, or weakens system effectiveness, such as
increased error rates, disruptions, or deliberate sabotage
b. Projection
  Blaming the new system for everything that goes wrong

c) Avoidance
 Ignoring a new AIS in the hope that the problem (the system) will eventually go
away

3. Preventions

 Obtain management support

 Meet user needs
 Involve users
 Stress new opportunities
 Avoid being too emotional
 Provide user training
 Reexamine performance evaluation to make sure they are aligned with new
system
 Keep communication lines open
 Control users expectations

4.0 System Development Life Cycle (SDLC)

A five step process used to design, and implement a new system.

Step 1: System Analysis

○ Information about system needs, costs, and so on are gathered.
○ This is to decide whether to purchase, develop or modify system
○ Development requests are screened and prioritized
○ System survey and feasibility study is conducted
○ The current system’s strengths & weaknesses are identified
 ○ Analysis report is prepared and submitted to the info systems steering
committee (They can provide advice for it.)

Step 2: Conceptual Design

○ Gather system/user requirements
○ Meeting of user needs is established
○ Need to identify & evaluate design alternatives - Buying, developing, outsourcing
○ Should specify what the system is to do and the internal control
○ A conceptual design report is prepared and submitted to the info systems
steering committee

Step 3: Physical Design

○ Concepts are translated into detailed specifications
○ From concept to actual
 Code & treat programs
 Design input & output docs
 Creation of file & DB –DBMS integration possibilities
 Development procedures – IC
 A physical design report is prepared and submitted to the info systems
steering committee

Step 4: Implementation and Conversion

○ All the elements of the system are dealt with together
○ New hardware and software are installed and tested
○ Employees are hired and trained or existing employees relocated
○ Processing procedures are tested and modified
 ○ Standards and controls for the new system are established and system
documentation completed
○ Convert from old to new system & deliver the operational system
○ A final report of the outcome is prepared and submitted to the info systems
steering committee

Step 5: Operation and Maintenance

○ Fine tune & do post implementation review
○ New system is periodically reviewed – Kaizen
○ Modifications are made as problems arise or as new needs become evident
○ A final report of the evaluation is prepared and submitted to the info systems
steering committee

SDLC Phase