SDLC Guide - Feasibility Analysis

7/30/2019 SDLC Guide - Feasibility Analysis

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SDLC GuideFeasibility Analysis

UNITED STATES MINTOffice of the Chief Information Officer (OCIO)

DRAFT June 29, 2003

Version:Date:


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SDLC Guide Feasibility Analysis

Revision History

Date Version Description Custodian/Organization

mm/dd/yyyy 1.0 Initial publication. / OCIO

SDLC Guide Feasibility Analysis 2 5/27/2013


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Table of Contents

Overview......................................................................................................................................5Programmatic or other causes and symptoms of the requirement or opportunity..................5Affected organizations.............................................................................................................5Types of information needed...................................................................................................5High-level information processing capabilities.........................................................................5Ability of the current systems and procedures to address the requirement or opportunity.....5Timeframes within which the requirement or opportunity must be resolved...........................5

Areas for Feasibility Analysis...................................................................................................7Cultural Feasibility ...................................................................................................................7

Economic Feasibility ...............................................................................................................7Financial Feasibility .................................................................................................................7Managerial Feasibility .............................................................................................................7Political Feasibility ...................................................................................................................7Safety Feasibility .....................................................................................................................8Social Feasibility .....................................................................................................................8Technical Feasibility ................................................................................................................8

Scope of Feasibility Analysis ...................................................................................................9Needs Analysis .......................................................................................................................9Process Work ..........................................................................................................................9Engineering & Design .............................................................................................................9

Cost Estimate ........................................................................................................................10Financial Analysis .................................................................................................................10Project Impacts .....................................................................................................................10Alternative Descriptions ........................................................................................................10Evaluation Criteria .................................................................................................................11Conclusions and Recommendations ....................................................................................11

A. Feasibility Analysis Checklist............................................................................................12Price ......................................................................................................................................13Quality ...................................................................................................................................13Innovations ............................................................................................................................13

Market share .........................................................................................................................13Growth of market share ........................................................................................................13Implicit marketing strategy (aggressive, etc.) .......................................................................13Market position (leader, etc.) ................................................................................................13Who is profitable ...................................................................................................................13Trends in profitability .............................................................................................................13Weaknesses/strengths ..........................................................................................................13Life cycle stage of industry? .................................................................................................13



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Resulting implications on marketing strategies? ..................................................................13



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Overview

Feasibility is a measure of how beneficial or practical the development of an informationsystem will be to an organization. The feasibility study describes the information managementor business requirement or opportunity in clear, technology-independent terms on which allaffected organizations can agree. An information management requirement or opportunity canbe prompted by such factors as new legislation, changes to regulations, or the growth of aprogram beyond the support capability of existing systems.

The purpose of a feasibility analysis is to:

Determine whether feasible solutions to defined concepts exist before full life cycle

resources are committed

Provide a structured method to focus on problems, identify objectives, evaluatealternatives, and aid in the selection of the best solution

Improve confidence that the recommended action is the most viable solution to the

problem

Assure that projects requiring information systems resources can be done, should be

done, and will be done

You assess the requirement or opportunity in terms of technical, economic, and operationalfeasibility. The study contains decision criteria, comparisons of general solution possibilities,and a proposed program (solution). Before conducting the analysis, you should address the

following key decisions. What is the specific requirement? State the requirement and establish the broad

objectives of the feasibility analysis. Address characteristics of the requirement such as:

o Programmatic or other causes and symptoms of the requirement or opportunity

o Affected organizations

o Types of information needed

o High-level information processing capabilities

o Ability of the current systems and procedures to address the requirement or

opportunity

o Timeframes within which the requirement or opportunity must be resolved

What new information needs are associated with the problem? State whether a

new information will be needed to support the proposed solution. Describe the scope ofthe effort entailed in providing the needed information in terms of affected missions andorganizations.



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How broad a scope should the proposed solution cover? Provide an overall context

or environment within which the potential solution is defined. Ensure that the solutionfocuses on the major priority areas.

The feasibility study contains decision criteria, comparisons of general solution possibilities,and a proposed solution. Use the Feasibility Analysis Checklist, provided in Appendix A, toensure that you have performed all steps.



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Areas for Feasibility Analysis

You can determine the feasibility of a project in terms of technical factors, economic factors, orboth. To document the feasibility study, you use a report showing all the ramifications of theproject, which can include the areas listed below.

Cultural Feasibility

This area deals with the compatibility of the proposed project with the corporate and projectculture; for example, projects that are well-accepted at Headquarters might not be as well-accepted at remote sites.

Economic Feasibility

This area involves the feasibility of the proposed project to generate economic benefits. A cost-benefit analysis and a breakeven analysis are important aspects of evaluating the economicfeasibility of new projects. You should translate the tangible and intangible aspects of a projectinto economic terms to provide a consistent basis for evaluation.

Financial Feasibility

Financial feasibility is not the same as economic feasibility. Financial feasibility involves thecapability of the project organization to raise the appropriate funds needed to implement theproposed project. Project financing can be a major obstacle in large projects because of the

level of capital required.

Managerial Feasibility

This area involves the capability of the infrastructure of a process to achieve and sustainprocess improvement. Management support, employee involvement, and commitment are keyelements required to gauge managerial feasibility.

Political Feasibility

You could refer to a politically feasible project as a "politically correct project." Politicalconsiderations often dictate direction for a proposed project. This is particularly true for large

projects with national visibility that may have significant government inputs and politicalimplications. For example, political necessity may be a source of support for a projectregardless of the project's merits. On the other hand, worthy projects may face insurmountableopposition simply because of political factors. Political feasibility analysis requires anevaluation of the compatibility of project goals with the prevailing goals of the political system.



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Safety Feasibility

Safety feasibility refers to an analysis of whether the project is capable of being implementedand operated safely with minimal adverse effects on the environment. Unfortunately,environmental impact assessment is often not adequately addressed in complex projects. Asan example, the North America Free Trade Agreement (NAFTA) between the U.S., Canada,and Mexico was temporarily suspended in 1993 because of the legal consideration of thepotential environmental impacts of the projects to be undertaken under the agreement.

Social Feasibility

This area addresses the influences that a proposed project may have on the social system inthe project environment. The ambient social structure may be such that certain categories of

workers may be in short supply or nonexistent. you must assess the effect of the project on thesocial status of the project participants to ensure compatibility.

Technical Feasibility

Technical feasibility refers to the ability of the process to take advantage of the current state ofthe technology in pursuing further improvement. You should consider the technical capability ofthe personnel as well as the capability of the available technology. You also need to analyzetechnology transfer between geographical areas and cultures to understand productivity loss(or gain) due to differences (see Cultural Feasibility).



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Scope of Feasibility Analysis

In general terms, the sections you should include in a feasibility analysis document are: needsanalysis, process work, engineering and design, cost estimate, financial analysis, projectimpact, alternative descriptions, alternative evaluation, and conclusions and recommendations.

Needs Analysis

This indicates a recognition of a need for the project. The need may affect the organizationitself, another organization, the public, or other government entities. You then conduct apreliminary study to confirm and evaluate the need, and develop a proposal of how the needcan be satisfied. Pertinent questions that you should ask include:

Is the need significant enough to justify the proposed project?

Will the need still exist by the time the project is completed?

What are the alternate means of satisfying the need?

What are the economic, social, environmental, and political impacts of the need?

Process Work

This is the preliminary analysis you perform to determine what will be required to satisfy theneed. The preliminary study often involves system models or prototypes. For technology-oriented projects, you can use conceptual drawings and scaled-down models to illustrate the

general characteristics of a process. You can also create a simulation of the proposed systemto predict the outcome before the actual project starts.

Engineering & Design

This involves a detailed technical study of the proposed project. As appropriate for yourproject, you should:

Get written quotations from suppliers and subcontractors

Evaluate technology capabilities

Perform product design



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Cost Estimate

This involves estimating project cost to an acceptable level of accuracy. Levels of around -5%to +15% are common at this level of a project plan. Include both the initial and operating costsin the cost estimation. In the cost estimate document, you should also include estimates ofcapital investment and of recurring and nonrecurring costs. You can also perform a sensitivityanalysis on the estimated cost values to see how sensitive the project plan is to the estimatedcost values.

Financial Analysis

This involves analyzing the cash flow profile of the project. The analysis should consider ratesof return, inflation, sources of capital, payback periods, breakeven point, residual values, and

sensitivity. This is a critical analysis since it determines whether and when funds will beavailable to the project. The project cash flow profile helps to support the economic andfinancial feasibility of the project.

Project Impacts

This portion of the feasibility study provides an assessment of the impact of the proposedproject. Environmental, social, cultural, political, and economic impacts may be some of thefactors that will determine how the public perceives a project. You should also assess thevalue-added potential of the project.

Alternative DescriptionsThis part of the document states the required and desirable features, and provides a concisenarrative of the effects of implementing this alternative. It provides:

A description for each alternative proposed to handle the defined problem. It should

describe the resources required, associated risk, system architecture, technology used,and the manual process flow for each alternative.

A high-level data flow diagram and logical data model, if possible, from current physical

processes and data for the proposed system alternative.

The section should state at least two alternatives for each feasibility studyincluding the

alternative of doing nothing, if appropriateand predict the anticipated benefits of eachalternative and the likely effects of not taking action on the alternative. This part of thedocument should also state the benefits in terms of technical, operational, and economicfeasibility.



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Evaluation Criteria

This section states the criteria by which the alternatives will be evaluated. The criteria shouldmake a distinction among characteristics that must be present in the system for it to beacceptable.

Conclusions and Recommendations

The feasibility analysis document should end with the overall outcome of the project analysis.In this section of the feasibility report, you should provide a systematic comparison of thealternatives, and document potential problems resulting from the implementation of each. Youshould also include recommendations on what action should be taken, and may indicate anendorsement or disapproval of the project



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A. Feasibility Analysis Checklist

Feasibility Analysis Checklist

The Business What is the business going to sell?

To whom it will be sold?

What will product or service be used for?

Why will prospects in target market buy product?

What is the anticipated price?

The Product Development status

Ready for sale? Debugging a prototype? Paper

dream?

Strengths and weaknesses

What product weaknesses cause a disadvantage in

the market place?

How to compensate for weaknesses?

How to overcome any technological obsolescence?

First Checkpoint Are the type and level of critical resources available?

The Market:A Preliminary Evaluation

Total market size and trends

Identify past, present, and best estimates for sales in

terms of 'dollars' and 'units' for target marketsegment(s).

If data is sketchy, contradictory, and hard to interpret,

admit it!

Identify assumptions being made about the

marketplace.

Assessment of competition

Include competing ways potential customers can

fulfill the specific needs being addressed by thebusiness' product.

Specifically identify direct competition for target



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market segments(s).

Provide data about all reasonable competitors:

o Price

o Quality

o Innovations

o Market share

o Growth of market share

o Implicit marketing strategy (aggressive, etc.)

o Market position (leader, etc.)

o Who is profitableo Trends in profitability

o Weaknesses/strengths

How to leverage competitor weaknesses? Overcome

strengths?

Trends in industry profitability?

o Life cycle stage of industry?

o Resulting implications on marketing strategies?

What marketing mix variables are critical fordecisions to purchase? (product, price, promotion,place).

Market share

First estimate of venture's market share and target

sales for the first, second, and third operating year.

Are estimates realistic, but still challenging and

worthy of anticipated resource allocation?

Market tactics

Outline product delivery system.

How to sell?

How to distribute?

Service and warranty issues.

Promotional mix



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Second Checkpoint It should be clear that:

The potential market is large.

A small share of the market will produce significant

sales.

The proposed product can be priced to sell at a profit

in the marketplace.

Production and Operations Can venture make product to specifications and

deliver it on-time within competitive target costlevels?

Does venture have sufficient knowledge about itssuppliers and the local labor market to ensure that itwill not face major operational problems?

Will materials be accessible in sufficient quantity and

quality?

Is material acquisition probable within budgeted

prices and time constraints for venture?

Is special skills training necessary for successful

operations?

Will you have to rely on any unproven, custom-madeproduction equipment?

Third Checkpoint Are the solutions to production and operation issues

within grasp?

Are there any serious doubts to the viability of a

solution?

Are no solutions obvious?

Entrepreneurs List know-how and skills needed for the new

business. List skills available. Show evidence of demonstrated

skills and availability and commitment to the project.

Identify gaps and indicate how to fill.

Fourth Checkpoint Is the venture being built upon strengths and

experience?



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Is the critical experience required by the venture now

on-line?

Financing Required Indicate the magnitude of financing required.

Fifth Checkpoint Is the level of financing within the range acceptable

by the various resource allocators?

Are the financial requirements reasonable with

respect to the ventures potential and risks?

Major Risks and Problems Identify the most important risks to the success of the

venture.

Evaluate the risks on both the probability of

occurrence and its magnitude of negative results.

Indicate a contingency solution for overcoming each

major risk.

Final Checkpoint All reasonable risks should be apparent.

All risks and problems should not be insurmountable.

All risks should be reasonable relative to the

potential opportunity and rewards.


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