Post on 03-May-2018
transcript
Feasibility Study:
• Economic feasibility
• Technical feasibility
• Operational feasibility
• Organizational feasibility
• Legal feasibility
• Schedule feasibility
Feasibility Analysis:
“Once is not enough”
(Creeping Commitment approach)
Feasibility Study • Economic feasibility
• cost-benefit analysis
• Technical feasibility
• ability to construct system - risks
• greater returns from riskier projects - manage risks
• fail to attain benefits,
• cost/ time overruns
• inadequate system performance levels
• unable to integrate with existing hardware, software
• Technical risk
• larger projects are riskier
• project team size, project duration, number of organizational units involved, programming effort
• structured and easily obtainable requirements less risky
• use of standard technology less risky than novel or non standard technology
• development team familiarity with hardware, software development environment, OS; application area; systems of similar scope
• less risk when user group is familiar with system development process and application area
• Operational feasibility
• likelihood of project attaining desired objectives
• how new system will affect organizational structures and processes,
• how it fits into current day-to-day operations
• Organizational/political feasibility
• how key stakeholders in organization view system
• system can affect distribution of information, thus power
• Schedule feasibility
• likelihood that timeframes can be met and that this is adequate to meet organization’s needs
• resource availability to enable schedule
• Legal feasibility • copyrights, anti-trust laws (systems that share data across organizations),
financial reporting requirements, contractual obligations, software ownership, outsourcing arrangements, etc.
Work Project steps Estimating Completed Accuracy 2% Project proposal 80% with Feasibility User Requirements System Definition 15% Feasibility Study 40% Preliminary Design 30% Feasibility Study 20% Detailed Design Program Design 60% Feasibility Study 10% Program and Test Implementation Plan 80% Feasibility Study 10% System Test Installation Training Acceptance /ChangeOver
Economic Feasibility:
• System Costs:
• Development Costs
• IS Personnel, consultants
• hardware, software procurement
• data conversion
• documentation, user trg
• Computer room, etc
• Production Costs
• operation and maintenance
• manpower, software / hardware upgrading,supplies
• System Benefits:
• Tangible
• reduced operating costs, transaction costs errors
• Increased transaction throughput
• Intangible
• improved customer relations
• better decision making, etc
Cost Benefit Analysis:
• Payback Point: Development Costs
(Years to payback) Benefits per year
• Sensitivity Factors
• Possible variation in cost/benefit estimates
1.1 Cost can be higher by 10%
• Effect of Inflation
• Time Value of Money
• Present Value (PV) = amt * 1 / (1 +c) ^ n
n : # of periods in time
c : Cost of Money ( discount rate )
• Profitability Index
• Earnings per dollar invested
• (Present value of total cash flow) (value of initial investment )
• Yearly cash flow = (Projected Annual Benefits) (Projected Annual
Production Cost)
Calculation of Profitability Index (in last example):
Year1 Year 2 Year 3 Year 4 Year 5
PV of Yearly 40,918 38,632 36,480 34,428 32,480
cash flow (eg. 63,818-22,900 = 40, 918)
Total PV yearly Cash Flow = 18,938
PI = Total PV of Yearly Cash Flow/Total Development Cost
= 182,938/107,250
= 1.71
• Example of Cost Benefit analysis for Tri-County Insurance
Note that this example does not consider sensitivity factors or inflation. The discount rate used for calculations is 8%.
Calculations in this example are done a little differently than in the earlier example – Present values are calculated for the cash-flows here, whereas in the last example the PVs were calculated for the costs and benefits separately.