System Implementations

American corporations spend about $300 Billion ayear on software implementation/upgrade projects

System Changes

Why?– To stay competitive– Growth/consolidation– Mergers or divestitures– Regulatory changes– Technology changes (better and/or cheaper)– Age of existing system

System Changes

Benefits:– Improved business processes– Productivity gains– Increased growth capacity– Increased efficiency– Enhanced availability of information– Downsizing– Enhanced system controls

System Development

Why should accountants care:

– Users of the system: can help specify system requirements (system input types, adequate output)

– Members of the development team: can ensure appropriate integration of data, identify shared data, highlight reporting requirements

– Auditors: ensure integrity of information provided by system, including adequate internal controls, user access, regulatory compliance, and evidentiary concerns

System Development

System Development Life Cycle (SDLC):

The process organizations follow to obtain and implement a new and well designed AIS

System Development Life Cycle Components

System Analysis: Components

• Determine and document information and processing volume needs of system users and managers – current/future

• Define what new system should accomplish (what is currently working/what is not?)

• Define what is out of scope of system• Determine available hardware, software and

personnel• Determine what is feasible and cost effective

System Analysis: Information Requirements

• Processes involved• Data elements required• Outputs – what types, timing, method• Inputs – what, timing, how• Constraints• Controls

System Analysis: Information Gathering Tools

• Interviews• Questionnaires• Observation• Existing System Documentation• Policies and Procedures• Desk Manuals• Internal Control Frameworks

System Analysis: Documentation

The information gathered during this phase must be documented so it can be used throughout the system development project

Means of documentation:• Data flow diagram• Flowcharts-document/system• Narratives• Checklists• Gantt/PERT charts

System Analysis Conclusion

Confirmation of the understanding of information gathered in this phase is key:

– Obtain appropriate user approval of documentation and conclusions

– Confirm system understanding with IT– Obtain management sign-off of system

requirements documents

Conceptual Design Phase

• Create general framework to implement user requirements and solve problems identified in the previous phase (Analysis).

• Three steps involved are:1. Evaluation of design alternatives2. Preparation of design specifications3. Preparation of conceptual systems design

report

Conceptual Design Phase - Evaluation

• Things to consider:

– Hardcopy vs. electronic (input and output)– Centralized vs. distributed– Packaged software vs. in-house development– In-house vs. outsourcing– Modification vs. replacement

Conceptual Design Phase - Evaluation

• A variety of design alternatives should be identified and evaluated.

• Questions to be asked:– Organizational goals met?– System objectives obtainable?– Economically feasible?– Time constraints realistic?– Expertise available?

• Advantages and Disadvantages should be highlighted for each alternative

Conceptual Design Phase – Design Specifications

Once design has been selected by steering committee conceptual design specifications are developed for:

» Data inputs» Data processing» Data storage» Informational outputs

Conceptual Design Phase - Report

Report prepared at end of Conceptual Design Phase to:

» guide physical system design activities» communicate how management and user

information needs will be met

Physical Design Phase

• How the conceptual AIS design is to be implemented.

• User requirements are translated into detailed specifications used to code and test computer programs

Physical Design Phase steps

• Output design• File and Database Design• Input Design• Forms Design• Computer screen Design• Program Design• Procedures Design• Controls Design

Implementation/Conversion Phase

• Process of installing hardware and software• Getting the AIS functional

Implementation/Conversion Phase Steps

• Developing a plan• Preparing the site• Installing and testing hardware/software• Selecting and training personnel• Completing documentation• Testing the system

Implementation/Conversion Phase Approaches

• Ways to change from the old AIS to the new (including hardware, software, data files and procedures):– Direct– Parallel– Phase-in– Pilot

Operations/Maintenance Phase

• A post-implementation review should be conducted to ensure:– New AIS met its planned objectives– Users are satisfied– System is reliable, accurate and timely– Internal Controls are adequate and working as

management intended– Documentation and training is adequate

• Any issues noted should be brought to management’s attention and remediation performed in a timely manner

• Final user acceptance sign-off should be obtained

System Implementation and Internal Controls

During an IT modification, controls need to be in place to ensure the continuation of system:

• Reliability• Security• Confidentiality• Integrity• Availability

System Implementation and Internal Controls

• It is much easier to build controls into a system at the initial stage then to add them after the fact.

• Accountants and other control experts should be an important part of the team that develops or modifies an information system.

Cisco Case - Implementing an ERP

Questions to be answered (pg 11):

• What factors made a difference between success and failure?

• Where had Cisco been smart?• Where had Cisco been lucky?• Could they do it again?