Systems Analysis and Design ROJECT INITIATION Chapter 2

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Systems Analysis and DesignROJECT
INITIATIONChapter 2

• Alan Dennis, Barbara Wixom, and David Tegarden
• John Wiley Sons, Inc.
• Slides by Fred Niederman
• Edited by Solomon Negash

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Key Ideas

• IS projects begin when someone sees an
  opportunity to create business value from using
  information technology.
• Feasibility analysis is used to aid in the
  decision of whether or not to proceed with the IS
  project.
• The project sponsor is a key person proposing
  development or adoption of the new information
  technology .
• The approval committee reviews proposals from
  various groups and units in the organization and
  decides which project to commit to developing.

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Defining the Problem/Opportunity

• The problem statement should address
• A description of the problem, need, or
  opportunity
• Goals and objectives of the system
• A general indication of the range of possible
  actions
• A good problem statement is focused (not broad),
  descriptive, and based on an examination of the
  problem

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Examples of Problem definition

• Bad problem definition
• A photographer wants to computerize his business
• Inadequate problem statement
• The Allstar Sportwears Company wants to make more
  money and thinks a Web site will be the answer
• Better problem definition
• A photographer who owns a studio has grown his
  business to the point that it is difficult to
  keep track of his customers, the orders they
  place, and the invoices that need to be sent. The
  owner of the studio desires a system that will
  assist him and his employees with the management
  of customer information, orders, and billing.

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Good problem statements1

• Currently, the Allstar Sportswear company employs
  a database system that stores customer
  information and account information. This
  information is entered manually, and the database
  is updated when a customer notifies the company
  of a change of address for billing, or shipping
  information.
• The update process is time-consuming and
  inefficient.
• The turnaround time of ordering an item, mailing
  the order, processing the order, and receiving an
  order needs to be decreased.
• The company would like to expand its market
  share.
• The company would like to establish a
  relationship with customers, and offer services
  that the customer can access on-line.
• Existing competitors have already entered the
  e-commerce market.
• Allstar needs to improve its efficiency and
  competitive strategies to remain a viable player
  in the sportswear retail marketplace. Employing
  better use of technology and exploring e-commerce
  options present avenues which will help Allstar
  achieve its goals.

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Good problem statements2

• Human Resources is responsible for the selection,
  screening, and hiring of employees for ABC
  Airlines, in this case pilots, in conjunction
  with representatives from the pilot group's
  recommendations. The initial candidate selection
  phase is based on manual and computerized
  processes. The following specific problems have
  also been noted.
• Qualified applicants are no longer available when
  finally notified for an interview.
• The input of the high volume of applicant
  information is very time consuming.
• Inputting of the applicant information is
  resource intensive. Other areas of airline
  employment are often ignored in order to take
  care of the pilot group.
• Finding personnel to handle this position in
  human resources is becoming more difficult.
• Many of the pilot candidates who are
  interviewed/hired only meet minimum standards. A
  more experienced group is desired.
• Questions of discrimination and also reverse
  discrimination are often raised about the hiring
  process.
• The existing computer and manual processes are
  not adequate for the volume of applications that
  ABC Airlines receives and the growing number of
  pilots necessary to maintain operations. The
  Human Resources department for ABC Airlines
  desires to improve the system it uses for pilot
  candidate selection.

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Business Case Scenario

• The Business Case Scenario gives a view on what
  will happen in the future within the context of
  achieving business goals.
• This vision of the future can be described by
  answering the question, "How will things be
  different when this problem is solved?"
• A complete business case scenario includes the
• problem to be solved and the desired end state
• participants and their roles
• customers or beneficiaries and how they will be
  affected
• methods and strategies to be used
• innovations and other changes needed to solve the
  problem
• References
• http//www.spacefuture.com/habitat/businesscase.sh
  tml
• http//www.newgrange.org/white_papers/business_cas
  e_analysis.htm

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Scope

• Definition
• scope sets the boundaries of the project
  providing rules for what belongs and what does
  not belong to the project.
• Dimensions time, requirements, budget, and
  skills
• Time How long does it take? When can we start?
• Budget Can we afford it? Can we do part of it?
• Skills Do our employees know how to do it?
  Should we hire consultants?

requirements
Resources (skills budget)
SCOPE
time
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System Request

• Lists key elements of the project
• Project name
• Project sponsor
• Business need
• Functionality
• Expected value
• Special issues or constraints

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Feasibility

• Feasibility studies look at the viability of the
  project and the ability to successfully complete
  a proposed project
• Feasibility studies often provide justification
  for the business case
• They answer the question Is the project worth
  doing?

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Categories of Feasibility

• Feasibility is often divided into categories such
  as
• Technical feasibility
• Organizational feasibility
• Economic feasibility
• Operational
• Schedule
• Legal and contractual
• Political

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Technical FeasibilityCan We Build It?

• Technical feasibility is often viewed in relation
  to technical risk.
• Technical risk is contingent on
• project size number of people, time, and
  features)
• maturity (and standardization) of the hardware,
  software, development tools, etc.
• development group's experience with the
  application and technology area
• user group's experience with development projects
  and application area.

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Organizational Feasibility

• Organizational feasibility is assessing the
  likelihood that the project will attain its
  desired objectives.
• It addresses whether the problem is worth solving
  and whether there is 'buy in' from the user
  community and project champion.
• It also assesses the impact the proposed system
  will have on the organization (is it too big a
  change, is the organizational environment
  supportive of the impact the system will
  have....).

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Organizational FeasibilityIf we build it, will
they come?

• Stakeholder analysis considers
• Project champion(s)
• Organizational management
• System users

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Economic FeasibilityShould We Build It?

• Economic feasibility is the financial assessment
  of the benefits of the project.
• Economic factors
• Development costs
• Annual operational costs
• Annual benefits
• Intangible costs and benefit

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Economic Feasibility - Tangible vs Intangible

• In economic feasibility, there are two areas that
  should be considered tangible benefits and
  intangible benefits.
• Tangible benefits can be measured in dollars.
• Intangible benefits can't be measured with
  certainty and are hard to quantify (employee
  morale, customer satisfaction, customer loyalty,
  waste reduction, etc.).
• Most feasibility studies focus on tangibles but
  include some form of narrative statement related
  to intangible benefits.

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Methods to assess Economic Feasibility

• Expected value
• cost benefit analysis for tangibles and
  intangibles
• Return on Investment (ROI)
• ROI (benefits-costs)/total cost
• Net Present Value (NPV)
• NPVPV / (1rate)n
• nnumber of periods
• Example NPV100,000/(1.05)595,242.63
• The value of 100k in 5 years at 5 annual
  interest

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Cost-Benefit Analysis

• The best way to start an economic feasibility
  study is to list all the benefits of the proposed
  system and then all the costs.
• Certain costs are known (hardware, etc.), while
  others are estimated (development costs).
• Quantifiable benefits are usually estimated
  (reduced personnel measured by salary and benefit
  costs).
• The final goal is to compare the estimated costs
  to the estimated benefits.
• The process involves much estimation but you try
  to use the best educated (or informed) analysis
  that you can.

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Cash Flow Method for Cost Benefit Analysis
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Return on Investment (ROI)

• ROI is the ratio of cash receipts divided by cash
  outlays
• Predicts a rate of return for the investment
• Often the goal is for the ROI to be above the
  rate at which the money would earn if invested in
  other opportunities

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ROI Example
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Break-Even Analysis

• Projects the time it takes for the cumulative
  cash flow from a project to equal the investment
• The time at which the system pays for itself,
  identified by the first year of Overall Positive
  Cash Flow
• Use the figures for the year with first positive
  overall NPV cash flow (the first year where
  benefits exceed costs)

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Project success/failure

• Factors for a successful system
• System meets users need
• System completed on time
• System cost within budget
• Factors for system failure
• Technical issues
• Business issues
• Data integrity
• Ineffective teams
• Common team problems
• Ineffective leadership
• Failure to compromise or cooperate
• Lack of participation
• Procrastination, Scope creep
• Ineffective peer evaluation, Lack of confidence
• Humphrey, W. Introduction to the Team Software
  Process

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Summary

• Project initiation involves creating and
  assessing goals and expectations for a new system
• Identifying the business value of the new project
  is a key to success
• The system request describes an overview of the
  proposed system.
• The feasibility study is concerned with insuring
  that technical, economic, and organizational
  benefits outweigh costs and risks
• Important to include problem statement, business
  case scenario, and scope statement