McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 8 Moving from Analysis to Design

8-2 Learning Objectives Understand the process of moving from the logical design stages of the SDLC to the physical phases Discuss the various components of making the decision to adopt a particular design strategy Describe the concept of a feasible solution

8-3 Learning Objectives Understand the role of facts, faith, and fear in the development of a system proposal Describe the various categories of feasibility assessment Identify and describe the four general categories of project risk

8-4 Figure 8-1. Project Flow Model – From “What” to “How”

8-5 Selection of the Design Strategy Key issues –Method of acquisition –System functionality –Software development –Implementations schedule

8-6 Do Nothing One possible alternative among available solutions to the problem is doing nothing We must assess the cost and consequences associated with not implementing the proposed solution

8-7 Non-Automated solutions Develop better policies and procedures Redesign of paper-based data capture forms Improve or eliminate some procedures Education and training of personnel

8-8 Buy versus Make Buy a commercial off-the-shelf (COTS) solution Develop a customer software application in-house Outsource the project to external application service provides (ASP)

8-9COTSCOTS Provide software that is well-tested, proven, and readily available Integrating the COTS solution with other existing software application could be a problem

8-10 Table 8-1. Guidelines for Evaluating a proposed COTS Solution

8-11 Customer Software Development Build the software application from scratch Have complete control over the look, feel, and functionality of the new system Provide flexibility and contingency for future needs

8-12OutsourcingOutsourcing Pro: –Technical expertise, development tools, and resources from outsourced firms Con: –Risk associated with putting a mission- critical project in the hands of a third party –Can actually increase the responsibility of the organization

8-13 Table 8-2. General Guidelines and Activities for Evaluating Outsourcing Design Strategies

8-14OutsourcingOutsourcing Application Service Provider –Operates a sophisticated computer facility that houses several specialized software application –Applications could reside on the Web and organizations pay a fee to use them

8-15 Hardware Design Strategy Organization’s existing hardware platform and its support for the new applications Upgrade to a platform that allow for both current and future functionality

8-16 Three Perspectives for Making a Business Case Facts Faith Fear

8-17 Figure 8-3. The Three Perspectives for Making a Business Case  “The system will have a net present value of $753,000.”  “The system will yield a minimum reduction in operating cost of $193,000 annually.”  “The estimated increase in market share is 14.7%.” within the first 24 months of operation.”  “IT is part of the infrastructure, we can’t cost justify it like a new fleet of trucks.”  “It seems reasonable to assume that this new system will reduce our costs of servicing this market sector.”  “Trust me. This is why you hired me as the IT Director.”  “Our competitors are doing this even as we speak.”  “Our shareholders will view us as technologically behind if we don’t do this now.”  “We have a small window of opportunity here and we are wasting precious time trying to decide.”

8-18 System Feasibility Technical Operational Human factors Legal and political Economic

8-19 Technical Feasibility The practicality of a specific technical solution and the availability of the technology necessary to implement it

8-20 Technical Feasibility Is the technology necessary for the proposed solution practical to obtain? Do we currently possess the technology necessary to implement the proposed solution? Is the technology necessary to implement the proposed solution available now and has it been tested and proven?

8-21 Operational Feasibility How well the proposed solution works within the organization How the end users feel about the new system –Organizational IS plan –Implementation schedule –Impact on organization

8-22 Human Factor Feasibility Ease of use Perceived usefulness Overall satisfaction End-user training

8-23 Legal and Political Feasibility Possible legal issues –Violations of patent or copyright, infringement of nondisclosure agreements, antitrust and labor-related laws, etc. Political issues –Change management

8-24 Economic Feasibility Identifies the financial and net economic impacts to the organization of the proposed system Performed last

8-25 Identifying the Cost and Benefits Tangible Benefits –Benefits that can be identified with certainty and an be expressed in dollars and cents Intangible Benefits –Cannot be identified with certainty

8-26 Table 8-4. Typical Tangible Benefits Associated With a New Information System

8-27 Table 8-5. Typical Intangible Benefits Associated With a New Information System

8-28 Table 8-6. Typical Costs Associated With a New Information System

8-29 Figure 8-4a. Example of Tangible Costs Analysis

8-30 Figure 8-4b. Example of Intangible Costs Analysis

8-31 Figure 8-4c. Example of Tangible Benefits Analysis

8-32 Figure 8-4d. Example of Intangible Benefits Analysis

8-33 Economic Feasibility Measures Net Present Value (NPV) Internal Rate of Return (IRR) Return on Investment (ROI) Break-even Analysis

8-34 Net Present Value Calculates the present value of a series of cash outflows and expected future cash inflows If the cost of capital or rate of return (discount rate) is positive, then the investment is a good one.

8-35 Figure 8-5. Typical NPV Project Analysis

8-36 Net Present Value Present Value

8-37 Net Present Value The present value of a dollar three years from now, assuming a discount rate of 10 percent, is:

8-38 Figure 8-6. Example of Graphical Break-even Analysis

8-39 Table 8-7. Partial Table of Values for the Present Value of a Dollar

8-40 Internal Rate of Return Largest number d that satisfies the equation:

8-41 Return on Investment Example:

8-42 Break-even Analysis Pay-Back Period NPV Cash Flow — Overall NPV Cash Flow —————————————————————————— Pay-Back Period NPV Cash Flow

8-43 Risk Assessment Project Risk –Project Size –Project Structure –Analysts –End-users

8-44 Table 8-8. Categories and Examples of Project Risk

8-45 Chapter Summary The development and adoption of a successful design strategy is predicated on the outcome of a detailed feasibility and risk assessment process.

McGraw-Hill/Irwin Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 8 End of Chapter