Make, buy or rent decision for information systems in the heavy engineering industry / Matthee, T.F.
Matthee, Thomas Francois
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The study focuses on the use of information systems in the Heavy Engineering industry in South Africa and the decision to make, buy or rent information systems. Special focus was placed on the factors that influence the decision to make, buy or rent information systems. It is undeniable that changes in the competitive environment, such as technological advances and globalisation, are driving organisations toward new ways of operating. In striving to become flexible, lean, and more competitive, organisations have been increasingly swift to externalise support service functions. Every organisation must adapt to the current economic environment, the technology available in its industry and consider the risk and rewards within the industry framework. Organisations should carefully analyse the impact of their decisions, especially in consideration of the extent to which organisational competencies and competitive advantage could be affected. An extensive literature study was conducted on the factors that influence the decision to make, buy or rent. The literature study portrays the ideal state or methodologies for acquiring information systems and the best practices used in evaluating the best option for the organisation. The literature indicated the criteria for evaluating the decision to make, buy or rent information systems are the business need, in–house experience, project skills, project management and the time frame. These criteria can be broken down into the factors that have an influence on the decision, competitive advantage, security, skills, expertise, available resources, cost, time, implementation, support, maintenance, performance, quality, documentation, vendor issues, size of organisation, expected annual transactions, software control, functionality, productivity and increased turnover. Calculating the benefit that can be achieved from information systems must also include measures to incorporate the total benefit, not only the financial benefit. The balance scorecard approach measures the total return accompanying an investment in information systems, broken down into four sections, the financial perspective that measures the tangible outcomes, the customer perspective that measures customer value (quality, delivery and skill), the internal process perspective that measures the internal processes that add value and have the greatest impact on strategy and finally the learning and growth perspective that measures the intangible assets which focuses on human capital. Information systems form part of the corporate strategy, competitive positioning and must be aligned with the overall strategy of the organisation. A survey was done to determine the opinions about the different options managers/organisations have to consider when seeking to fulfil organisational requirements for information systems. Methodological issues as well as considerations with regard to gathering the data were discussed. A questionnaire was designed to collect data to obtain the information needed to solve the research problem. The internal consistency of the questionnaire was tested and it was found that a moderate to high level of consistency exists. The survey results were then presented in frequency tables and were analysed using descriptive statistics as well as inferring possible trends or conclusions based on relationships between certain responses on specific related questions and referring to the literature study. A framework was compiled from the literature study and empirical study that can be used for the purpose of decision–making in the make, buy or renting of information systems in the heavy engineering environment in South Africa. Benefits from purchasing software from a vendor include competitive advantage, available resources, implementation of the system, support to the system, system performance, documentation and training, and business functionality. Benefits from open source offerings include the size of the organisation and the number of expected annual transactions by the organisation. Benefits from SaaS (Software as a service) include competitive advantage, expertise, system performance and business functionality. Benefits from the outsourcing of development and other IT functions include competitive advantage, security, skills, available resources, implementation of the system, support to the system, system performance, documentation and training, business functionality and technical functionality. Benefits from developing in–house all or part of the effort include competitive advantage, security, skills, expertise, available resources, time, implementation of the system, support to the system, maintenance and upgrades, system performance, quality, documentation and training, business functionality, technical functionality, productivity improvements and increased turnover. Overall the linkage between the literature study and the empirical study concludes
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