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Systems Analysis and DesignSystems Analysis and Design
Alan Dennis, Barbara Haley Wixom, and Roberta RothJohn Wiley & Sons, Inc.
Slides by Candace S. Garrod Red Rocks Community College
Project InitiationProject Initiation
Chapter 2
PowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd EditionCopyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 3
Key IdeasAn opportunity to create businessvalue from using informationtechnology initiates a project.Feasibility analysis helps determinewhether or not to proceed with theIS project.Projects are selected based onbusiness needs and project risks.
PowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd EditionCopyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 4
Key IdeasThe project sponsor is a key person whoidentifies business value to be gainedfrom using information technology.The approval committee reviews systemrequests from groups throughout theorganization and selects projects for thebenefit of the business.
IDENTIFYING PROJECTSIDENTIFYING PROJECTSWITH BUSINESS VALUEWITH BUSINESS VALUE
PowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd EditionCopyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 6
How Do Projects Begin?
Business needs should drive projects.Project sponsor recognizes businessneed for new system and desires to seeit implemented.Business needs determine the system’sfunctionality (what it will do).The project’s business value should beclear.
PowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd EditionCopyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 7
System Request
A document describing businessreasons for project and system’sexpected value.Lists project’s key elements
Project sponsorBusiness needBusiness requirementsBusiness valueSpecial issues or constraints
PowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd EditionCopyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 8
System Request Examples
Project sponsor – VP of MarketingBusiness need – Reach new customers andimprove service to existing customersBusiness requirements – Provide web-basedshopping capabilityBusiness value - $750,000 in new customersales; $1.8M in existing customer salesSpecial issues or constraints – System mustbe operational by holiday shopping season
PowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd EditionCopyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 9
Preliminary Project Acceptance
System request is reviewed byapproval committeeBased on information provided,project merits are assessed.Worthy projects are accepted andundergo additional investigation –the feasibility analysis.
PowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd EditionCopyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 10
Your TurnIf you were building a web-based systemfor course registration,
What is the business need?What would be the business requirements?What would be the business value (tangibleand intangible)?What special issues or constraints wouldyou foresee?
FEASIBILITY ANALYSISFEASIBILITY ANALYSIS
PowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd EditionCopyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 12
Feasibility Analysis
Detailed business case for the projectTechnical feasibilityEconomic feasibilityOrganizational feasibility
Compiled into a feasibility studyFeasibility is reassessed throughoutthe project
PowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd EditionCopyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 13
Technical Feasibility:
Users’ and analysts’ familiarity withthe business application areaFamiliarity with technology
Have we used it before? How new isit?
Project sizeNumber of people, time, and features
Compatibility with existing systemsPowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd Edition
Copyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 14
Economic FeasibilityShould We Build It?
Identify costs and benefitsAssign values to costs and benefitsDetermine cash flowAssess financial viability
Net present value (NPV)Return on investment (ROI)Break even point (BEP)
PowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd EditionCopyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 15
Example Costs and Benefits forEconomic Feasibility
PowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd EditionCopyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 16
PowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd EditionCopyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 17
Assign Cost and Benefit Values
Difficult, but essential to estimateWork with people who are mostfamiliar with the area to developestimatesIntangibles should also be quantifiedIf intangibles cannot be quantified,list and include as part of supportingmaterial
PowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd EditionCopyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 18
Determine Cash Flow:Assign Values to Costs and Benefits –
Simple Cash Flow Method
PowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd EditionCopyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 19
Assess Financial Viability – Net Present Value
NPV = ∑ PV(future cash inflows) – ∑ PV(future cash outflows)
PV = Cash flow amount (1 + interest rate)n , where
interest rate = required return n = number of years in future
PowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd EditionCopyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 20
Determine NPV
If NPV >= 0,
Project is OK
If NPV < 0,
Project is unacceptable
PowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd EditionCopyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 21
Assess Financial Viability –Return on Investment
ROI = NPV ∑PV(cash outflows)
PowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd EditionCopyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 22
Assess Financial Viability –Break Even Point
How long before the project’sreturns match the amount investedThe longer it takes to break even,the higher the project’s risk.
PowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd EditionCopyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 23
Organizational FeasibilityIf we build it, will they come?
Strategic alignmentHow well do the project goals alignwith business objectives?
Stakeholder analysisProject champion(s)Organizational managementSystem users
PROJECT SELECTIONPROJECT SELECTION
PowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd EditionCopyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 25
Project Selection Issues
Approval committee works from thesystem request and the feasibility study
Project portfolio – how does the project fitwithin the entire portfolio of projects?Trade-offs must be made to select projectsthat will form a balanced project portfolioViable projects may be rejected or deferredbecause of project portfolio issues.
PowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd EditionCopyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 26
SummaryProject initiation involves creating andassessing goals and expectations for a newsystemIdentifying the business value of the newproject is a key to successFeasibility study is concerned with insuringthat technical, economic, and organizationalbenefits outweigh costs and risksProject selection involves viewing the projectwithin the context of the entire projectportfolio, and selecting those projects thatcontribute to balance in the portfolio
PowerPoint Presentation for Dennis, W ixom & Roth Systems Analysis and Design, 3rd EditionCopyright 2006 © John Wiley & Sons, Inc. A ll rights reserved..2 - 27
Copyright © 2006John Wiley & Sons, Inc.
All rights reserved. Reproduction or translation of thiswork beyond that permitted in Section 117 of the 1976United States Copyright Act without the expresswritten permission of the copyright owner is unlawful.Request for further information should be addressed tothe Permissions Department, John Wiley & Sons, Inc.The purchaser may make back-up copies for his/herown use only and not for redistribution or resale.The Publisher assumes no responsibility for errors,omissions, or damages, caused by the use of theseprograms or from the use of the information containedherein.