Planning: Part IEvaluation of Necessity and Feasibility
PROJECT IDENTIFICATION AND INITIATION
• A project is identified when someone in the organization identifies a business need to build a system.
• A need may surface when an organization identifies unique and competitive ways of using IT.
• To leverage the capabilities of emerging technologies such as cloud computing, mobile apps, Big Data analytics
• Initiated by Business Process Management (BPM) activities
Project sponsor• Person (or group) who has an interest in
the system’s success • Determines tangible and intangible
business value of the project for the organization
System Request• Business reasons for building a system • Business value that system is expected to
provide• Business requirements of the project • Other special issues• Submitted to the approval committee for
consideration
FEASIBILITY ANALYSIS• Is it a GO!• If it is a GO, what are the risks that needs to be
managed?• Components of the feasibility analysis:• Technical feasibility• Economic feasibility• Organizational feasibility
• A feasibility study deliverable that is submitted to the approval committee at the end of project initiation.
• Continuous review and revision of the initial feasibility assessment
Technical Feasibility• Evaluating if the IT group is capable of
carrying out the development and/or implementation
• Technical risk analysis: Can our IT build and/or implement it?
• Considerations:• Users’ and analysts’ familiarity with the
application• Familiarity with the technology• Project size• Compatibility of the new system with the
technology that already exists
Economic Feasibility• Analysis of cost and benefit: “Should we build the
system?”• Usually, benefits of IT projects are not immediate• Techniques to estimate cost-benefit over-time• Simple Cash Flow• Discounted Cash Flow
• Measures to determine economic feasibility• Return on Investment (ROI)• Break-Even Point (BEP)• Net Present Value (NPV)
• Steps of Economic Feasibility Analysis
Simple and discounted cash flow projection
Common Measures• Return on Investment (ROI)• ROI = (Total Benefits – Total Costs) / Total Costs
• Break - Even Point (BEP)• Based on the year in which Cumulative Cash
Flow turns positive (Break Even Point Year - BEPY)
• BEP = (BEPY-1) + (Net Cash Flow in BEPY – Cumulative Cash Flow in BEPY) / Net Cash Flow in BEPY
• Net Present Value (NPV)• NPV = PV of Total Benefits – PV of Total Costs
Steps of Economic Feasibility Analysis• Identify Costs and Benefits
• Development costs• Operational costs• Tangible benefits• Intangible benefits
• Assign Values to Costs and Benefits
• Determine Cash Flow• Assess Project’s Economic Value
• ROI• BEP• NPV
Cost-Benefit AnalysisDiscounted cash flow method and NPV preferred
Organizational Feasibility• If we build it, will the users use it?• Compare project goals to business objectives of
the organization• Stakeholder analysis• Project champion(s)• Organizational management • System users• Other stakeholders