1. Systems Analysis and Design with UML Version 2
Systems Analysis and Design with UML Version 2.0 An Object-Oriented Approach, Second Edition
Chapter 3: Project Initiation
Alan Dennis, Barbara Wixom, and David Tegarden
John Wiley & Sons, Inc.

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3. PROJECT INITIATION Chapter 3
This chapter was not done in order since our project has already been decided to be done. Chapter 3 and chapter 4 are business and management processes that must be done in an organization to make sure people do not try to implement BRIGHT IDEAS that are not feasible, economically sound or technically impossible. The chapters also present the project management of a project.

4. 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.
Projects are usually initiated because someone has a BRIGHT IDEA of how to improve the business and technology is involved. The people who have the ideas are not software developers and do not have much of an idea of how much things cost and how much time they may take. So there are certainly issues when these ideas come up. So there is a phase in the SDLC for project initiation to assure that these BRIGHT IDEAS as indeed BRIGHT. One of the debates is on the definition of project. For this course a project is defined above. Once a project is defined project initiation begins. Project initiation is a process step clearly defined by the Project Management Body of Knowledge (PMBOK). It requires that all projects have a project sponsor(s). A proposal is developed that very briefly defines what is needed and request to make an initial investigation to determine the technical, economic and organizational pros and cons for doing this project. This initial investigation, often called initial analysis, should not take more than 1 week. It is not a requirements document. Guesstimates are made on how much the software will cost and what the benefits will be. The SRS will clarify more of this. During this time a feasibility analysis is used to aid in the decision of whether or not to proceed.

5. 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.
The project sponsor (there may be more than one but ONE AND ONLY ONE must be in charge is the champion of this project. Usually some committee in the organization, often called the steering committee, makes the decision by weighing the pros and cons as well as prioritizing their needs..

6. IDENTIFYING BUSINESS VALUE

7. 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.
There are various techniques for determining business value….These are typically not taught in an undergraduate course but rather in a graduate course.

8. System Request Lists key elements of the project Project name
Project sponsor
Business need
Functionality
Expected value
Special issues or constraints
The system request made to the committee to decide whether a project should be done or not contains the elements listed. The project sponsor is the person who initiates the request and serves as the primary point of contact from the business side… he/she is the champion of this project.
The business need is expressed precisely and briefly telling what the actual need is in the organization. This wording is done usually by the sponsor or their delegates. The Functionality or Business Requirements are the high level functions the system will perform. Depending on the size of the project this list may be large or small. The expected value (business value) is a brief description of the tangible and intangible benefits. Any special issues are documented here. These might include things like a polity change must take place before we can do the project or an organizational change might need to occur that reassigns personnel. Any constraints must be documented such as the new software will have to be run at non-peak times or the system can not run over 80,000 dollars, etc.

9. FEASIBILITY ANALYSIS

10. Feasibility Analysis Detailing Expected Costs and Benefits
Technical feasibility
Economic feasibility
Organizational feasibility
The feasibility analysis guides the organization in whether to continue with the project or not. Three items are typically evaluated in these analysis processes.

11. Technical Feasibility: Can We Build It?
Familiarity with application
Knowledge of business domain
Familiarity with technology
Extension of existing firm technologies
Project size
Number of people, time, and features
The first items is the technical feasibility of the proposal. CAN WE BUILD IT. This is not can it be built but can our organization build it or hire someone to build it. Here you are measuring the RISK of the proposal. If everything is new to the world – new hardware, new software, new language, new operating system, new type of system, then it is VERY risky. The more familiarity your team has with the hardware, software language, domain the less risky.

12. Economic Feasibility Should We Build It?
Development costs
Annual operational costs
Annual benefits
Intangible costs and benefit
The next item is the economic feasibility. Everything has a price, we can build it but should we. There are many costs NOT just the development costs. There is hardware/additional software, time to run this application in the windows you have available in your current hardware….more and more costs.
But there is also benefits that must be weighed against these costs.

13. Economic Feasibility Process
1. Identify Costs and Benefits
2. Assign Values
3. Determine Cash Flow
4. Determine New Present Value
5. Determine Return on Investment
6. Calculate Break-Even Point
7. Graph Break-Even Point
The next item is the economic feasibility. Everything has a price, we can build it but should we. There are many costs NOT just the development costs. There is hardware/additional software, time to run this application in the windows you have available in your current hardware….more and more costs.
But there is also benefits that must be weighed against these costs.

14. Cost–Benefit Analysis
Way of determining whether a possible course of action would be profitable
Compare estimated future benefits against projected future costs
Fundamental technique in deciding whether a client should computerize his/her business and in what way
Cost-benefit analysis
2nd analytical tool used by software engineers
Another fundamental theoretical software engineering technique used throughout the software life cycle
3) And in what way
Cost and benefits of various alternative strategies are compared
Can implement something in a number of different ways; look at the cost and benefits of each way to determine the optimal strategy

15. Cost–Benefit Analysis
Compare estimated future benefits against costs
Estimate costs
Estimate benefits
State all assumptions explicitly
Cost-benefit analysis
How much does it cost us to do “it” manually (current salaries, current profit, etc.) vs. how much to switch to computerized version
Must decide if the costs of switching and the benefits to be obtained OUT WEIGH the current costs of operation
1) Costs – see following slides
2) Benefits
Always determined relative to the existing mode of operation
Tangible benefits are easy to measure
Less manual work; therefore, fewer employees; therefore, lower salary costs
Bills faster to customers so payments received more often or more quickly
Intangible benefits can be hard to quantify directly SO we make ASSUMPTIONS
3) Assumptions
Always must be stated in conjunction with the resulting estimates of the benefits

16. Cost–Benefit Analysis
Possible costs
Procurement 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
Cost-benefit analysis

17. Cost–Benefit Analysis
Possible costs
Start-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
Cost-benefit analysis

18. Cost–Benefit Analysis
Possible costs
Project-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
Cost-benefit analysis

19. Cost–Benefit Analysis
Possible costs
Ongoing costs
System maintenance costs (hardware, software, and facilities)
Depreciation costs on hardware
Cost of staff involved in ITS management, operation, and planning activities
Cost-benefit analysis

20. 1. Identify Costs and Benefits 2. Assign Values
Tangible
Intangible *
Using this table, we can itemize the costs and benefits
Costs include hardware, software, developmental, operational (maintenance) costs, any support staff costs, materials needed, etc.
Benefits are defined and estimated on their value to the organization.

21. 3. Determine Cash Flow Cash Flow Method for Cost Benefit Analysis
Usually a cost and benefits summary contains those figures over a period of years (usually 5 years) Using this technique you can estimate the costs and benefits to show how over a period of time the benefits may outweigh the costs. It may take more than 5 years….This allows you to budget how much cash flow you will need to cover the cost of this project

22. 4. Determine New Present Value Return on Investment Calculation
RETURN ON INVESTMENT EQUALS
Total (benefits - costs)
Divided by
Adding the figures across the 5 year table can give you a ROI. This is a very simple calculation… ROI and NPV both have far more complex ways of calculation but these are subjects for the MIS program. This will do for us just to let us realize that BRIGHT IDEAS may not always be funded and that there is some process that makes that determination. We must be very aware of these items as software engineers. We are often ask to fill in the blanks for estimates on how much a project will cost. Our honesty helps the organization although they may not want to always here our high estimates.
Total costs

23. 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
The difference between the ROI and NPV is the cost of the money you are using. This adds that cost into the formula.

24. Organizational Feasibility If we build it, will they come?
Stakeholder analysis considers
Project champion(s)
Organizational management
System users
The next item, organizational feasibility, determines how easily this new process/system will be accepted within the organization. Many system fail because there is no BUY IN from the users that this indeed was a BRIGHT IDEA. It may cause more work for them… It may be more difficult, it may change their job description, it may require they have more skills that previously. Often large projects have what is called a separate contractor called an integration contractor. These people are responsible to assure that the organizational changes are implemented as the new system is installed. There is an area of MIS called “Change Control” and today with large systems that have huge organizational impacts as much money as is spent on the software may be spent on user organizational changes and training for new skills. It is am important step in software development to assure this is accomplished.

25. Summary
Project initiation involves creating and assessing goals and expectations for a new system
Identifying the business value of the new project is a key to success
The 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

26. Expanding the Domain
For an excellent source of information on IT management see: