Planning: Part IEvaluation of Necessity and Feasibility

PROJECT IDENTIFICATION AND INITIATION

• A project is identified when someone in the organization identifies a business need to build a system.

• A need may surface when an organization identifies unique and competitive ways of using IT.

• To leverage the capabilities of emerging technologies such as cloud computing, mobile apps, Big Data analytics

• Initiated by Business Process Management (BPM) activities

Project sponsor• Person (or group) who has an interest in

the system’s success • Determines tangible and intangible

business value of the project for the organization

System Request• Business reasons for building a system • Business value that system is expected to

provide• Business requirements of the project • Other special issues• Submitted to the approval committee for

consideration

FEASIBILITY ANALYSIS• Is it a GO!• If it is a GO, what are the risks that needs to be

managed?• Components of the feasibility analysis:• Technical feasibility• Economic feasibility• Organizational feasibility

• A feasibility study deliverable that is submitted to the approval committee at the end of project initiation.

• Continuous review and revision of the initial feasibility assessment

Technical Feasibility• Evaluating if the IT group is capable of

carrying out the development and/or implementation

• Technical risk analysis: Can our IT build and/or implement it?

• Considerations:• Users’ and analysts’ familiarity with the

application• Familiarity with the technology• Project size• Compatibility of the new system with the

technology that already exists

Economic Feasibility• Analysis of cost and benefit: “Should we build the

system?”• Usually, benefits of IT projects are not immediate• Techniques to estimate cost-benefit over-time• Simple Cash Flow• Discounted Cash Flow

• Measures to determine economic feasibility• Return on Investment (ROI)• Break-Even Point (BEP)• Net Present Value (NPV)

• Steps of Economic Feasibility Analysis

Simple and discounted cash flow projection

Common Measures• Return on Investment (ROI)• ROI = (Total Benefits – Total Costs) / Total Costs

• Break - Even Point (BEP)• Based on the year in which Cumulative Cash

Flow turns positive (Break Even Point Year - BEPY)

• BEP = (BEPY-1) + (Net Cash Flow in BEPY – Cumulative Cash Flow in BEPY) / Net Cash Flow in BEPY

• Net Present Value (NPV)• NPV = PV of Total Benefits – PV of Total Costs

Steps of Economic Feasibility Analysis• Identify Costs and Benefits

• Development costs• Operational costs• Tangible benefits• Intangible benefits

• Assign Values to Costs and Benefits

• Determine Cash Flow• Assess Project’s Economic Value

• ROI• BEP• NPV

Cost-Benefit AnalysisDiscounted cash flow method and NPV preferred

Organizational Feasibility• If we build it, will the users use it?• Compare project goals to business objectives of

the organization• Stakeholder analysis• Project champion(s)• Organizational management • System users• Other stakeholders