Slide 1 Systems Analysis and Design with UML Version 2.0 An Object-Oriented Approach, Second Edition Chapter 3: Project Initiation

Slide 2 PROJECT INITIATION Chapter 3

Slide 3 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.

Slide 4 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.

Slide 5 IDENTIFYING BUSINESS VALUE

Slide 6 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.

Slide 7 System Request Lists key elements of the project Project name Project sponsor Business need Functionality Expected value Special issues or constraints

Slide 8 FEASIBILITY ANALYSIS

Slide 9 Feasibility Analysis Detailing Expected Costs and Benefits Technical feasibility Economic feasibility Organizational feasibility

Slide 10 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

Slide 11 Economic Feasibility Should We Build It? Development costs Annual operational costs Annual benefits Intangible costs and benefit

Slide 12 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

Slide 13 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

Slide 14 Cost–Benefit Analysis Compare estimated future benefits against costs Estimate costs Estimate benefits State all assumptions explicitly

Slide 15 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

Slide 16 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

Slide 17 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

Slide 18 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

Slide Identify Costs and Benefits 2. Assign Values CostsBenefits Tangible Intangible ************ ************

Slide Determine Cash Flow Cash Flow Method for Cost Benefit Analysis

Slide 21 Total (benefits - costs) 4. Determine New Present Value Return on Investment Calculation Total costs RETURN ON INVESTMENT EQUALS Divided by

Slide 22 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

Slide 23 Organizational Feasibility If we build it, will they come? Stakeholder analysis considers Project champion(s) Organizational management System users

Slide 24 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

Slide 25 Expanding the Domain For an excellent source of information on IT management see: