Systems Development: Investigation and Analysis - Principles of Information Systems - page 495

In some cases, the achievement of performance objectives can be easily measured (e.g., by
tracking the time it takes to determine product availability). In other cases, it is sometimes
more difficult to ascertain in the short term. For example, it might be difficult to determine
how many customers are lost because of slow responses to customer inquiries regarding
product availability. These outcomes, however, are often closely associated with corporate
goals and are vital to the long-term success of the organization. Senior management usually
dictates their attainment.
Cost Objectives
Organizations can spend more than is necessary during a systems development project. The
benefits of achieving performance goals should be balanced with all costs associated with the
system, including the following:
• Development costs. All costs required to get the system up and running should be
included. Some computer vendors give cash rewards to companies using their systems to
reduce costs and act as an incentive.
• Costs related to the uniqueness of the system application. A system's uniqueness has a
profound effect on its cost. An expensive but reusable system might be preferable to a
less costly system with limited use.
• Fixed investments in hardware and related equipment. Developers should consider
costs of such items as computers, network-related equipment, and environmentally
controlled data centers in which to operate the equipment.
• Ongoing operating costs of the system. Operating costs include costs for personnel,
software, supplies, and resources such as the electricity required to run the system. Tridel
Corporation ( www.tridel.com ) used systems development to build a new invoicing appli-
cation, called Invoice Zero, to save over $20,000 in operating costs. 29 The new invoicing
application, which consolidated invoices and sent them out once a month, cut the num-
ber of monthly invoices from 2,400 to just 17. Reducing costs was also an important
factor for Cincinnati Bell. By switching from dedicated PCs to thin client computers and
virtualization software, Cincinnati Bell expects to see a large reduction in help desk
costs. 30 Some experts predict that help desk costs could be reduced by 70 percent or
more. For many IS operations, ongoing operating costs are much higher than devel-
opment or acquisition costs. According to a Gartner study, acquisition or development
cost is only 20 percent of the total cost of a new information system. 31
Balancing performance and cost objectives within the overall framework of organizational
goals can be challenging. Setting objectives is important, however, because they allow an
organization to allocate resources effectively and measure the success of a systems develop-
ment effort. For PC manufacturers, for example, parts and components of a typical PC can
cost under $500, which includes about $130 for the processor, $100 for a CD or DVD, $100
for memory, $45 for the Windows operating system, and the rest for other hardware parts
and components. Some believe these low costs will eventually lead to lower costs for PCs.