Topic 8 - Determining Feasibilityv2

Determining Feasibility and Managing Analysis and Design Activities

Feasibility Study

Guides the organization in determining whether to proceed with a project or not

Identifies the important risks associated with the project that must be addressed if the project is approved

Feasibility Study

Is it a practical approach that will solve a problem or take advantage of an opportunity to achieve company goals?

Are the necessary technical resources and people available for the project?

Feasibility Study

Is the problem worth solving, and will the request result in a sound business investment?

Can the proposal be accomplished within an acceptable time frame?

Feasibility

A feasibility study assesses the operational, technical, and economic merits of the proposed project

There are three types of feasibility:

Technical feasibility

Economic feasibility

Operational feasibility

Technical Feasibility

Technical feasibility assesses whether the current technical resources are sufficient for the new system

If they are not available, can they be upgraded to provide the level of technology necessary for the new system


Refers to the technical resources needed to develop, purchase, install, or operate the system

Analysis of technical risks like familiarity with the application or technology, project size, and compatibility


Do we have the

technical abilities and

resources to be able to build

the system?


Can the company acquire the necessary hardware, software, and network resources without difficulty?

Does the company have the needed technical expertise?

Does the proposed platform have sufficient capacity for future needs?


Will the hardware and software environment interface properly with external systems operated by customers and suppliers?

Do clear expectations and performance specifications exist?

Economic Feasibility

Economic feasibility determines whether the time and money are available to develop the system

Includes the purchase of

New equipment

Hardware

Software


Means that the projected benefits of the proposed system outweigh the estimated costs, which includes ongoing support and maintenance costs, as well as acquisition costs


Can we support the

systems development and

operational costs?


Development Costs Development team salaries

Consultant fees

Development training

Hardware and software

Vendor installation

Office space and equipment

Data conversion costs


Operational Costs Software upgrades

Software licensing fees

Hardware repairs

Hardware upgrades

Operational team salaries

Communications charges

User training


Tangible Benefits

Increased sales

Reductions in staff

Reductions in inventory and elimination of production delays

Reductions in IT costs

Better supplier prices


Intangible Benefits Increased market share

Increased brand recognition

Enhanced company image

Higher quality products

Improved employee job satisfaction

Improved customer service

Better supplier relations

Schedule Feasibility

Can the system be finished

on time?


Can the company or the IT team control the factors that affect schedule feasibility?

Has management established a firm timetable for the project?

What conditions must be satisfied during the development of the system?


Will an accelerated schedule pose any risks?

Will project management techniques be available to coordinate and control the project?

Will a project manager be appointed?

Operational Feasibility

Operational feasibility determines if the human resources are available to operate the system once it has been installed

Users that do not want a new system may prevent it from becoming operationally feasible


Means that the proposed system will be used effectively after it has been developed

A measure of the users attitude towards the system

Is it fit to the organization?


If users have a difficulty with a system, it will not produce the expected benefits


Is the problem worth solving

or will the solution to the

problem work?


Does management support the project?

Do users see the need for change?

Will the new system result in a workforce reduction?

Will the new system place any new demands on users or require any operating changes?


Will any information be less accessible or produced less frequently?

Will customers experience adverse effects in any way?

Do legal or ethical issues need to be considered?

Evaluating Feasibility

Even if the request is

feasible, it might not

be necessary

Costing The Systems Proposal

Systems Proposal

In order to prepare the systems proposal, analysts must use a systematic approach to identify hardware and software needs

Establishing hardware and software needs

Identifying and forecasting costs and benefits

Comparing costs and benefits

Choosing the most appropriate alternative

Establishing Hardware and Software Needs

Steps used to determine hardware and software needs

Inventory computer hardware currently available

Estimate current and projected workload for the system

Evaluate the performance of hardware and software using some predetermined criteria

Choose the vendor according to the evaluation

Obtain hardware and software from the vendor

Hardware Inventory

When inventorying hardware check

Type of equipment

Status of equipment operation

Estimated age of equipment

Projected life of equipment

Physical location of equipment

Department or person responsible for equipment

Financial arrangement for equipment

Evaluating Hardware

Criteria for evaluating hardware

Time required for average transactions (including time for input and output)

Total volume capacity of the system

Idle time of the central processing unit

Size of memory provided

People that Evaluate Hardware

The people involved

Management

Users

Systems analysts

Acquisition of Computer Equipment

Buying

Leasing

Rental

Buying

Leasing

Renting

Evaluating Hardware Support

When evaluating hardware vendors, the selection committee needs to consider

Hardware support

Software support

Installation and training support

Maintenance support

Software Evaluation

Use the following to evaluate software packages:

Performance effectiveness

Performance efficiency

Ease of use

Flexibility

Quality of documentation

Manufacturer support

Guidelines for evaluating software

Software Alternatives

Created custom software

Purchased as COTS (commercial off-the-shelf) software

Provided by an application service provider (ASP)

Creating Custom Software

Purchasing COTS Packages

Using An ASP

Identifying and Forecasting Costs and Benefits

Costs and Benefits

Systems analysts should take tangible costs, intangible costs, tangible benefits, and intangible benefits into consideration to identify cost and benefits of a prospective system

Tangible Costs

Tangible costs are those that can be accurately projected by systems analysts and the business' accounting personnel

Examples:

Cost of equipment

Cost of resources

Cost of systems analysts' time

Intangible Costs

Intangible costs are those that are difficult to estimate, and may not be known

Examples:

Cost of losing a competitive edge

Declining company image due to increased customer dissatisfaction

Ineffective decision making due to untimely or inaccurate information

Intangible Benefits

Intangible benefits are advantages from use of the information system that are difficult to measure

Examples:

Improved effectiveness of decision-making processes

Maintaining a good business image

Cost and Benefit Categories

1. Development costs- costs that are incurred during the development of the system are one time investment.

Wages

Equipment

Cost and Benefit Categories

2. Operating costs

Wages

Supplies

Overheads

Another classification of the costs can be:

Hardware/software costs: It includes the cost of purchasing or leasing of computers and it's peripherals. Software costs involves required software costs.

Personnel costs: It is the money, spent on the people involved in the development of the system. These expenditures include salaries, other benefits such as health insurance, conveyance allowance, etc.


Facility costs: Expenses incurred during the preparation of the physical site where the system will be operational. These can be wiring, flooring, acoustics, lighting, and air conditioning.

Operating costs: This includes the maintenance of the system. That can be in the form of maintaining the hardware or application programs or money paid to professionals responsible for running or maintaining the system.


Supply costs: These are variable costs that vary proportionately with the amount of use of paper, ribbons, disks, and the like. These should be estimated and included in the overall cost of the system.

CBA Example

A sales director is deciding whether to implement a new computer-based contact management and sales processing system. His department has only a few computers, and his salespeople are not computer literate. He is aware that computerized sales forces are able to contact more customers and give a higher quality of reliability and service to those customers. They are more able to meet commitments, and can work more efficiently with fulfillment and delivery staff.

COST

New computer equipment:

10 network-ready PCs with supporting software @ $1,225 each

1 server @ $1,750

3 printers @ $600 each

Cabling & Installation @ $2300

Sales Support Software @ $7500

COST

Training costs:

Computer introduction - 8 people @ $ 200 each

Keyboard skills - 8 people @ $ 200 each

Sales Support System - 12 people @ $350 each

COST

Other costs:

Lost time: 40 man days @ $ 100 / day

Lost sales through disruption: estimate: $10,000

Lost sales through inefficiency during first months: estimate: $10,000

Total cost:

$55,800

Benefits

Tripling of mail shot capacity: estimate: $20,000 / year

Ability to sustain telesales campaigns: estimate: $10,000 / year

Improved efficiency and reliability of follow-up: estimate: $25,000 / year

Benefits

Improved customer service and retention: estimate: $15,000 / year

Improved accuracy of customer information: estimate: $5,000 / year

More ability to manage sales effort: $15,000 / year

Total Benefit:

$90,000/year

Comparing Costs and Benefits

Break-even analysis

Payback

Cash-flow analysis

Break-Even Analysis

The point at which the total cost of the current system and the proposed system intersect

Useful when a business is growing and volume is a key variable in costs

Disadvantage Benefits are assumed to remain the same

Advantage Can determine how long it will take for the

benefits of the system to pay back the costs of developing it

Break-even analysis showing a payback period of three and a half years

Cash-Flow Analysis

Examines the direction, size, and pattern of cash flow that is associated with the proposed information system

Determine when cash outlays and revenues will occur for both not only for the initial purchase, but over the life of the information system

Cash-flow analysis for the computerized mail-addressing system

Guidelines for Analysis

Use break-even analysis if the project needs to be justified in terms of cost, not benefits

Use payback when the improved tangible benefits form a convincing argument for the proposed system

Use cash-flow analysis when the project is expensive, relative to the size of the company

Comparing Alternatives with the Feasibility Analysis Matrix

In a feasibility analysis matrix, The columns correspond to the candidate solutions Some rows correspond to the feasibility criteria The cells contain the feasibility assessment notes for each

candidate. Each row can be assigned a rank or score for each criterion

(e.g., for operational feasibility, candidates can be ranked 1, 2, 3, etc.).

After ranking or scoring all candidates on each criterion, a final ranking or score is recorded in the last row.

Examples of other evaluation criteria: quality of output, ease of use, vendor support, cost of maintenance, load on system

Feasibility

Criteria

%

Wt Plan A Plan B Plan C

Operational

Feasibility

Functionality. A

description of to

what degree the

candidate would

benefit the

organization and

how well the

system would

work.

30%

Only supports

Member

Services

requirements

and current

business

processes

would have

to be modified

to take

advantage of

software

functionality

Fully supports

user

required

functionality.

Same as

candidate 2.

Score: 60 Score: 100 Score: 100

Feasibility

Criteria

%


Technical

Feasibility

Technology. An

assessment of

the maturity,

availability (or

ability to

acquire), and

desirability of

the computer

technology

needed to

support

this candidate.

30%

Current

production

release of

Platinum has only

been on the

market for 6

weeks.

Maturity of

product is a risk

and company

charges an

additional

monthly fee for

technical support.

Required to hire

or train C++

experts to

perform

modifications.

Although current

technical staff has

only Powerbuilder

experience, the

senior analysts who

saw the MS Visual

Basic demonstration

and presentation,

has agreed the

transition will be

simple and finding

experienced VB

programmers will be

easier than finding

Powerbuilder

programmers and at

a much cheaper

cost.

MS SQL Server is

a current company

standard and

competes with

SYBASE in the

Client/Server

DBMS market.

Because of

this we have no

guarantee future

versions of

Powerbuilder will

play well with our

current version

SQL

Server.


Feasibility

Criteria

%


Economic

Feasibility

Cost to develop:

Payback period

(discounted):

Net present value:

Detailed

calculations:

30%

Approximately

$350,000.

Approximately

4.5 years.

Approximately

$210,000.

See Attachment

Approximately

$418,040.

Approximately 3.5

years.

Approximately

$306,748.

See Attachment A.

Approximately

$400,000.

Approximately 3.3

years.

Approximately

$325,500.

See Attachment A.


Feasibility

Criteria

%


Operational

Feasibility 30%


Technical Feasibility 30% Score: 50 Score: 95 Score: 100

Economic Feasibility 30% Score: 60 Score: 85 Score: 90


An assessment of

how long the solution

will take to design and

implement.

10%

Less than 3

months

9-12 months 9 months


Ranking 100%

60.5 92 95.5

Topic 8 - Determining Feasibilityv2

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