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Systems Analysis and Systems Analysis and DesignDesignwith UML Version 2.0with UML Version 2.0An Object-Oriented Approach, An Object-Oriented Approach, Second EditionSecond Edition

Chapter 3: Project InitiationAlan Dennis, Barbara Wixom, and David Tegarden

John Wiley & Sons, Inc.

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Copyright © 2005John Wiley & Sons, Inc.

All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for redistribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.

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PROJECT INITIATION

Chapter 3

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Key Ideas

Projects being 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.

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Key Ideas

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 to commit to developing.

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IDENTIFYING BUSINESS VALUE

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Business Value

Business value is determined by weighing the cost against the benefits – both tangible and intangible.

Tangible benefits are quantifiable and measurable. --save 500,000 dollars in services, etc.Intangible benefits are improvements that are suspected to be able to give tangible benefits but are not as measurable. -- improve customer service.

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System Request

Lists key elements of the projectProject nameProject sponsorBusiness needFunctionalityExpected valueSpecial issues or constraints

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FEASIBILITY ANALYSIS

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Feasibility Analysis

Detailing Expected Costs and Benefits

Technical feasibilityEconomic feasibilityOrganizational feasibility

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Technical Feasibility:Can We Build It?

Familiarity with applicationKnowledge of business domain

Familiarity with technologyExtension of existing firm technologies

Project sizeNumber of people, time, and features

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Economic FeasibilityShould We Build It?

Development costsAnnual operational costsAnnual benefitsIntangible costs and benefit

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Economic Feasibility Process

1. Identify Costs and Benefits2. Assign Values 3. Determine Cash Flow4. Determine New Present Value5. Determine Return on Investment6. Calculate Break-Even Point7. Graph Break-Even Point

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Cost–Benefit Analysis

Way of determining whether a possible course of action would be profitableCompare estimated future benefits against projected future costsFundamental technique in deciding whether a client should computerize his/her business and in what way

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Cost–Benefit Analysis

Compare estimated future benefits against costs

Estimate costsEstimate benefitsState all assumptions explicitly

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Cost–Benefit Analysis

Possible costsProcurement costs

Consulting costs Actual equipment purchase or lease costs Equipment installation costs Costs for modifying equipment site (air

conditioning, security, etc,) Cost of management and staff dealing with

procurement

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Cost–Benefit Analysis

Possible costsStart-up costs

Cost of operating system software Cost of personnel searches and hiring

activities Cost of disruption to the rest of the

organization Cost of management required to direct

start-up activity

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Cost–Benefit Analysis

Possible costsProject-related costs

Cost of applications software purchased Cost of software modifications to fit local

systems Cost of personnel from in-house application

development Cost of training user personnel in application

use Cost of data collection and installing data

collection procedures Cost of preparing documentation Cost of development management

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Cost–Benefit Analysis

Possible costsOngoing costs

System maintenance costs (hardware, software, and facilities)

Depreciation costs on hardware Cost of staff involved in ITS management,

operation, and planning activities

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1. Identify Costs and Benefits2. Assign Values

Costs Benefits

Tangible

Intangible

***

***

***

***

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3. Determine Cash Flow Cash Flow Method for Cost Benefit Analysis

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Total (benefits - costs)

4. Determine New Present Value Return on Investment Calculation

Total costs

RETURN ON INVESTMENT EQUALS

Divided by

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Net Present Value Calculation

(1 + interest rate)n

Some amount of money

NET PRESENT VALUE EQUALS

Divided by

Where “n” equals the number of periods

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Organizational FeasibilityIf we build it, will they come?

Stakeholder analysis considersProject champion(s)Organizational managementSystem users

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SummaryProject initiation involves creating and assessing goals and expectations for a new system

Identifying the business value of the new project is a key to successThe 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

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Expanding the Domain

For an excellent source of information on IT management see:www.cio.com