ZEIT2301
Design of Information Systems
Project Initiation
School of Engineering and Information Technology
UNSW@ADFA
Dr Kathryn Merrick
Topic 02: Project Initiation

Objectives




To appreciate the importance of linking the information system to
business needs
To describe project initiation
To describe the elements of a feasibility analysis (aka Advisability
report)
Reference: Text Ch 2
2
The Goal: Successful Projects

Cost
At project completion, no more money has been spent than was
originally allocated

Schedule
The project is delivered no later than the original delivery date

Performance
When delivered, the project has all features and functionality that
were originally required of it
3
Project Identification

Projects are driven by business needs




Identified by business people
Identified by IT people
(better yet) identified jointly by business and IT
The project sponsor believes in the system and wants to
see it succeed


Normally this is a business person
Should have the authority to move the project forward
4
Reasons for Project Initiation

Respond to opportunity

Resolve problem

Conform to directive (Eg: government legislation)

Implementing long-term IS strategic plan

Responding to issues from department managers or
process managers

Response to outside forces (Eg: competitors)
5
A System Request

A system request lists the key elements of the proposed
project:

Project sponsor


Business need


Business capabilities the system will need to have
Business value


Reason prompting the project (a key criterion for success)
Business requirements


Primary point of contact for the project
Benefits the organization can expect from the project
Special issues

Anything else that should be considered
6
Planning Phase of SDLC

Planning begins once a project has been approved.





Define problem (more precisely)
Confirm project feasibility
Produce project schedule
Staff the project
Launch the project
7
Project Feasibility (aka Advisability)

Feasibility analysis is used to aid in the decision of
whether or not to proceed with the IS project.


Helps identify potential risks that must be addressed
Aspects of project feasibility
1.
2.
3.
4.
Technical
Economic
Organizational and cultural
Schedule and resource
8
1. Technical Feasibility

Bleeding edge technology?

Do we have the appropriate expertise within the
company?

Project size?

Familiarity with the particular application

Familiarity with the overall technology

Compatibility with other systems
Can we
build it?
9
2. Economic Feasibility

Development costs


Annual operating costs


Recurring costs
Annual benefits


One-off costs
recurring cost savings and revenues
Intangible costs and benefits
Should we
build it? 10
3(a) Organizational Feasibility

Stakeholders





Project champion(s)
Senior management
Users
Others
Is the project strategically aligned with the business?
Sessin 2, 2010
If we build
it, will they
come? 11
3(b) Cultural Feasibility

Each organizations has its own culture


New system must fit into culture or have a determined “champion”
who is able to drive change
Project failure is often more a result of organizational
issues

(personnel, management style/support, etc)
than the technical issues

(development methodologies, h/w and s/w, etc)
12
Stakeholder Analysis

Considers:

Organizational management
 Are they committed to the project?

System users
 Who are they and what is their attitude to the project?

Do we have a project champion capable of supporting the project
through the rough times?
13
Organizational and Cultural Risks

Computer competency

Computer phobia

Perceived loss of control by some staff

Shifts in organizational power

Fear of changing job responsibilities

Fear of employment loss

Reversal of longstanding procedures
14
4. Schedule and Resource Feasibility

Developing a project schedule inevitably involves some
assumptions and therefore risk




Requirements, and therefore scope, of the system might be
unclear
A fixed deadline increases risk (eg must be ready for Christmas
shopping period)
Need for sufficient skilled staff
Need for adequate resources for systems development and for
testing
Can we
build it? 15
Economic Measures

Cost-Benefit Analysis

1.
Shows costs and benefits over a particular time
Net Present Value (NPV)

2.
Return on Investment (ROI)

3.
Takes into account the future value of money over the life
of the system
The difference between benefits and costs
Break-even point

The time point where the costs of the project equal the
value of the benefits received
16
Simple Cash Flow Method for
Cost Benefit Analysis
17
1. Net Present Value

Present Value



$amount / (1 + interest rate)n
where “n” is the number of time periods
Considers the time value of money
 $1 today does not have the same value as $1 in 5 years time
Net Present Value

The present value of benefits less the present value of costs
18
2. Return on Investment (ROI)


The amount of money an organization receives in return
for what it spends
Total (benefits – costs) / total costs


As a percentage
High ROI means benefits far outweigh costs
19
3. Break-Even Point
Break-even point is the time at which
benefits exceed costs
20
3. Break-Even Point

Examines the cash flow over time



Identifies the year in which the benefits are larger than the costs
The longer it takes to break even, the higher the project’s
risk.
Often represented graphically

Plot the cumulative present value of the costs and of the benefits
21
22
Intangible benefits / costs

But costs and benefits cannot always be measured in
economic terms


Intangible Benefits





May be intangible but still an important criteria of project success
Increased levels of service
Customer satisfaction
Business survival
Need to develop in-house expertise
Intangible Costs



Reduced employee moral
Lost productivity
Lost customers or sales
23
CBA Formulae Summary
24
Project Selection

Project portfolio management



A process that optimizes project selection and sequencing in order
to best support business goals
Business goals are expressed in terms of
 Quantitative economic measures
 Business strategy goals
 IT strategy goals
Once selected, projects enter the project management
process
25
Ranking and Classifying Projects
26
How Not to Select a Project

First in, first out

Political clout of project inventor/proposer

Squeaky wheel getting the grease

Any other method that does not involve a deliberate
analysis
A recent analysis found that between 2% and
15% of projects taken on by IT departments
are not strategic to the business.
27
Classic Risks in IS development

Unclear objectives





Limited user involvement
Lack of executive support
Poor planning
Overly optimistic schedule



Incomplete or changing requirements
Failing to monitor or update schedule
Adding people to a late project
Lack of required resources
28
Summary

A new IS project may be initiated when an opportunity or a
problem is identified.

A System Request highlights the business value of the
proposed new information system.

The feasibility study (aka advisability study) considers
aspects such as the technical, economic and
organizational feasibility.

The overall portfolio of proposed projects is evaluated
before a particular project is selected for development.
29