Preparing the Systems Proposal

CIS458

Last Class

• Project outline– Documents and reports

• Database Application Lifecycle– Database planning, system definition, requirements collection

and analysis, database design, application design, implementation, data conversion and loading, testing, and operational maintenance.

• Database planning – Mission statement, mission objectives

• Database Design– Conceptual level design, logical database design, and physical

database design.

Today

• Identifying and Forecasting Costs and Benefits

• Analysis– Feasibility analysis– How to prepare the charts (break even, payback)

• Tips for the report #1.– Recommendation

Database Application Lifecycle

• Database planning

• System definition

• Requirements collection and analysis

• Database design (conceptual, logical and

physical)

• DBMS selection (optional)

Database Application Lifecycle

• Application design

• Prototyping (optional)

• Implementation

• Data conversion and loading

• Testing

• Operational maintenance.

Database SystemCustomer

DB Developer

Fact Finding

Design

Implementation

Fact Finding

• Interview– Interview structure

• Questionnaire

• Observation

• Research

• Data format, procedures, etc.

Feasibility Analysis

• Technical feasibility.– Do we have adequate technology for the project?– DBMS, SDLC, and problem difficulty level

• Operational feasibility– Will users accept the new system?– How difficult to learn the new system?

• Economic feasibility– Is the new project cost effective?– Can the user afford it?

Business forecast

Estimation of costs and benefits

Identifying and Forecasting Costs and Benefits

• Costs and benefits– Interrelated and interdependent

• Forecasting costs and benefits– Predict certain key variables

• What-if analysis (credible, meaningful, valuable)

– Forecasting models: require historic data• Estimates from the sales force• Surveys to estimate customer demand• Scenarios or historical analogies

Forecasting with Historical Data

• Conditional forecast– There is an association between variables

• Correlation, Regression, Leading indicators

• Econometrics, Input output models

• Unconditional forecast– There is no need to identify any causal

relationship• Graphical judgment, moving averages, time series

Estimation of Trends

• Graphical judgment– Simple– Depend on individual judgment

• The method of least squares

• The moving average method

Graphical Judgment

The Method of Least Square

• Find the best fitting trend line– Minimizing the sum of the deviations from a line

• Data points– (X1, Y1), (X2, Y2), … (Xn, Yn)

• Line– Y = m * X + b

– (Y – Y’) = (((X – X’)(Y – Y’))/((X – X’)2) *(X –X’)

Moving Averages

• Seasonal, cyclical, or random patterns may be smoothed, leaving the trend patterns.

• The data at the very beginning and end are lost.

• Affected by extreme values

Identifying Benefits and Costs

• Tangible Benefits– Advantages measurable in dollars, resources,

time saved.– Increase in the speed of processing– Access to otherwise inaccessible information– Access to information on a more timely basis– Computing power

Identifying Benefits and Costs

• Intangible Benefits– Difficult to measure but are important

nonetheless.– Improve decision making process– Enhance accuracy– Become more comparative in the market– Customer service– Good business image

Identifying Benefits and Costs

• Tangible Costs– Cost of equipment

– Cost of resources

– The cost of systems analyst’s time (other employee's time and salary)

• Intangible costs– Losing a competitive edge

– Losing the reputation for being first

– Ineffective decision making

Comparing Costs and Benefits

• Break-Even Analysis (required)– The total costs of the current system and of the

proposed system• Operational cost + Development cost

– Benefits are assumed to remain the same (Disadvantage)

– Comparison of old systems cost vs. new system’s cost

Payback-Time Analysis (Required)

• A simple way to assess whether a business should invest in a proposed information system.

• The number of years of operation that the information system needs to pay back the cost of investing in it.

• Method: increasing revenues or increasing savings• Short-term approach• It does not consider the importance of how

repayments are timed• Total return

Return on Investment (ROI)

% rate that measure profitability by comparing net benefits (the return) received from a project to the total costs (the investment) of the project.

RROI = (total benefits – total costs)/ total costs

Present Value Analysis

• Consideration of Time value of money

• Interest rate vs. discount rate

Cash-flow Analysis

• This analysis examines the direction, size and pattern of cash flow.

Present Value

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 tot eh size of the company.

• Use present value when the payback period is long or when the cost of borrowing money is high

Logic for the Project Report Recommendation

• Benefits must exceed costs.– How much is enough?

• Payback time should be less than 3 years (based on your project size)

• Use the projection method– Yearly total sales– Increase rate– Historic data

• Your conclusion must be backed by your technical, operational, and economic analysis.

Project Requirement

• A coverage with team members and title

• Table of contents

• Executive summary

• Signature from the target business manager

• Business profile

• Business process description

• Problem statement

Project Requirement

• Analysis (cost/benefit)– Technical, operational, and economical analysis– Break-even and payback-time diagrams are required

• Recommendation• Project organization

– Team members– Group leader

• Project plan– Gantt Chart (required)– Task List