Feasibility Study: Economic feasibility Technical feasibility Operational feasibility Organizational feasibility Legal feasibility Schedule feasibilityFeasibility Analysis:“Once is not enough”(Creeping Commitment approach)
Feasibility Study Economic feasibility cost-benefit analysis Technical feasibility ability to construct system - risks greater returns from riskier projects - manage risks fail to attain benefits,cost/ time overrunsinadequate system performance levelsunable to integrate with existing hardware, software
Technical risk larger projects are riskier project team size, project duration, number of organizational units involved,programming effort structured and easily obtainable requirements less risky use of standard technology less risky than novel or non standardtechnology development team familiarity with hardware, software developmentenvironment, OS; application area; systems of similar scope less risk when user group is familiar with system development processand application area
Operational feasibility likelihood of project attaining desired objectives how new system will affect organizational structures and processes, how it fits into current day-to-day operations Organizational/political feasibility how key stakeholders in organization view system system can affect distribution of information, thus power
Schedule feasibility likelihood that timeframes can be met and that this is adequate tomeet organization’s needs resource availability to enable schedule Legal feasibility copyrights, anti-trust laws (systems that share data across organizations),financial reporting requirements, contractual obligations, softwareownership, outsourcing arrangements, etc.
WorkCompletedProject steps2%Project proposalwith FeasibilityEstimatingAccuracy80% 15%User RequirementsSystem DefinitionFeasibility Study 40%30% Preliminary DesignFeasibility Study 20%60%Detailed DesignProgram DesignFeasibility Study80%Program and TestImplementation PlanFeasibility Study 10% 10% System TestInstallation TrainingAcceptance /ChangeOver
Economic Feasibility: System Costs: Development Costs IS Personnel, consultantshardware, software procurementdata conversiondocumentation, user trgComputer room, etc Production Costs operation and maintenance manpower, software / hardware upgrading,supplies System Benefits: Tangible reduced operating costs, transaction costs errors
Increased transaction throughput Intangible improved customer relations better decision making, etcCost Benefit Analysis: Payback Point:(Years to payback)Development CostsBenefits per year Sensitivity Factors Possible variation in cost/benefit estimates1.1Cost can be higher by 10% Effect of Inflation
Time Value of Money Present Value (PV) amt * 1 / (1 c) nn : # of periods in timec : Cost of Money ( discount rate ) Profitability Index Earnings per dollar invested (Present value of total cash flow) (value of initial investment ) Yearly cash flow (Projected Annual Benefits) (Projected AnnualProduction Cost)
Calculation of Profitability Index (in last example):PV of Yearlycash flowYear1Year 240,918 38,632Year 336,480Year 434,428Year 532,480(eg. 63,818-22,900 40, 918)Total PV yearly Cash Flow 18,938PI Total PV of Yearly Cash Flow/Total Development Cost 182,938/107,250 1.71
Example of Cost Benefit analysis for Tri-County InsuranceNote that this example does not consider sensitivity factors or inflation.The discount rate used for calculations is 8%.Calculations in this example are done a little differently than in theearlier example – Present values are calculated for the cash-flowshere, whereas in the last example the PVs were calculated for thecosts and benefits separately.
Organizational feasibility Legal feasibility Schedule feasibility Feasibility Analysis: “Once is not enough” (Creeping Commitment approach) Feasibility Study Economic feasibility cost-benefit analysis Technical feasibility ability to construct system - risks greater returns from riskier projects - manage risks fail to attain benefits, cost/ time .