Chapter Ten Questions and Answers

Chapter 10

Section 10.1

1. What are some problems associated with assessing the costs of IT?
When assessing the costs of IT, many challenges can arise. One of these major problems that companies face is to allocate fixed costs among different IT projects. Similarly, complications can arise when the cost of a system does not end when the system is installed. Costs for maintaining, debugging, and improving the system can accumulate over many years.

2. What difficulties accompany the intangible benefits from IT?
Benefits can be harder to quantify due to these benefits being in an intangible form. Due to the fact that organizations use IT for several different purposes complicating benefit analysis.As many systems in reality are not implemented on time or within budget constraints creating problems when obtaining a return from an IT investment.If the proposed system is ‘cutting edge’- there may be no previous evidence of what sort of financial payback the company can expect.

3. Define NPV and ROI, and business case approaches.
NPV is the net present value calculation for cost-benefit analysis. ROI is return on investment; it measures the management’s effectiveness in generating profits with its available assets.

Section 10.5

1. What type of companies provides outsourcing service?
The types of companies that provide outsourcing services are small or medium-sized companies with few IT staff and restricted budgets. Large companies may also choose to use outsourcing if for example; they might want to experiment with new IT technologies without making a substantial up-front investment. Software companies; (IBM to Oracle), IT outsourcers; (EDS), also large CPA companies and management consultants; (Accenture).

2. Define ASPs and list their advantages to companies using them.
ASPs Application service provider is an agent or vendor who assembles the software needed by enterprises. The advantages; saves expenses in development stage, helps reduce the cost of software maintenance and upgrading and the company can select another software product from the vendor to meet its changing needs.

3. List some disadvantages of ASPs.
The disadvantages associated with ASPs include:
-ASPs might not offer adequate security protection
-Software might not be a perfect fit for the desired application.
-Company must make certain that the speed of the Internet connection between the customer and the ASP is adequate to handle the requirements of the application.

Section 10.6

1. List the major steps of selection of a vendor and a software package.
The major steps of selection of a vendor and a software package:
Step 1: Identify Potential Vendors
Step 2: Determine the evaluation criteria
Step 3: Evaluate Vendors and Packages
Step 4: Choose the Vendor and Package
Step 5: Negotiate a contract
Step 6: Establish a service level agreement.

2. Describe a request for proposal (RFP).
An RFP is a document that is sent to potential vendors inviting them to submit a proposal that describes their software package and explains how it would meet the companies needs.

3. Describe SLAs.
Service Level agreements (SLAs) are formal agreements that specify how work is to be divided between the company and its vendors. These divisions are based on a set of agreed-upon milestones, quality checks, and what-if scenarios.