Feasibility
By Garrett Jones and Ryan Butler
All projects are feasible given unlimited resources and infinite time.
Unfortunately, most projects must be developed within a tight budget and
with time constraints.
This means that assessing project feasibility is a required activity for all
information systems projects and is a potentially large undertaking.
It requires that you, as a systems analyst, evaluate a wide range of factors.
Most feasibility factors are represented by the following categories.
•Economic
•Technical
•Operational
•Scheduling
•Legal and contractual
•Political
Economic
The purpose of assessing economic feasibility is to identify the financial benefits and
costs associated with the development project.
It is often referred to as cost-benefit analysis.
Determining Project Benefits- Tangible and Intangible
• Tangible benefits which refers to items that can be measured in dollars and with
certainty. ex) reduced personnel expenses, lower transaction costs, or higher profit
margins.
• Most tangible benefits will fit within the these categories:
– Cost reduction and avoidance
– Error reduction
– Increased flexibility
– Increased speed of activity
– Improvement of management planning and control
– Opening new markets and increasing sales opportunities
• Intangible benefits refer to items that cannot be easily measured in
dollars or with certainty.
ex) improvement of employee morale, reduction of waste creation or
resource consumption.
Intangible benefits can become tangible benefits as you better understand
ramifications of the system (items can now be measured)
After determining project benefits, project costs must be identified.
Types of tangible, intangible, one-time costs, recurring costs.
• Tangible costs- hardware costs, labor costs, and operational costs.
• Intangible costs- employee morale, operational inefficiency.
• One-time costs-system development, new hardware and software,
user training, and data or system conversion.
• Recurring costs-ongoing evolution and use of system: software
maintenance, data storage expenses, supplies
Time Value of Money
– The concept that money available today is worth more than the same
amount tomorrow.
– Ex. Suppose you are going to buy a used car from someone and they
ask that you make 3 payments of $1,500 for 3 yrs, beginning next year,
for a total of $4,500. If they agree to a single lump-sum payment at the
time of sale, what amount do you think they would agree to? Should the
single payment be $4,500? Should it be more or less? To answer this
question, we must consider the time value of money. Most of us would
gladly accept $4,500 today rather than 3 payments of $1,500, b/c a
dollar today is worth more than a dollar tomorrow or next year, given
that money can be invested. The rate at which money can be borrowed
or invested is referred to as the cost of capital, and is called the discount
rate for TVM calculations.
Let’s suppose that the seller could put the money received for the sale of
the car in the bank and receive a 10% return on her investment. Here is
a formula that can be used when figuring out the present value of the
three $1,500 payments:
PVn = Y * 1/(1+i)ⁿ
Where PVn is the present value of Y dollars n years from now when i is the
discount rate.
The present value of the three payments of $1,500 can be calculated as
PV1 = 1,500 * 1/(1+.10)^1 = 1,500 * .9091 = 1,363.65
PV2 = 1,500 * 1/(1+.10)^2 = 1,500 * .8264 = 1,239.60
PV3 = 1,500 * 1/(1+.10)^3 = 1,500 * .7513 = 1,126.95
To calculate the net present value (NPV) of the three $1,500, given a
discount rate of 10 percent, just add the present values of each year
NPV = 1,363.65 + 1,239.60 + 1,126.95 = $3,730.20
So the seller could accept a lump-sum payment of $3,730.20 as equivalent
to the three payments of $1,500, given a discount rate of 10 percent.
Technical Feasibility
• Its purpose is to gain an understanding of the organizations ability to
construct the proposed system.
• This analysis should include an assessment of the development
group’s understanding of the possible target hardware, software,
and operating environments to be used, as well as system size,
complexity, and the group’s experience with similar systems.
• It is important in this step to assess the risk involved in the project.
• Risks need to be managed in order to be minimized; therefore,
identifying potential risks as early as possible in a project is
important.
• Consequences of Not assessing risks:
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Failure to attain expected benefits from the project.
Inaccurate project cost estimates
Inaccurate project duration estimates
Failure to achieve adequate system performance levels
Failure to adequately integrate the new system with existing hardware,
software, or organizational procedures.
Matrix for assessing the relative risk
Low Structure
High familiarity
with technology
or Application
Area
Low familiarity
with technology
or application
area
High Structure
Large Project
(1)
Low risk
(2)
Low risk
Small Project
(3)
Very low risk
(4)
Very low risk
Large Project
(5)
Very high risk
(6)
Medium risk
Small Project
(7)
High risk
(8)
Medium-low risk
Operational Feasibility
• Its purpose is to gain an understanding of the degree to which the
proposed system will likely solve the business problems or take
advantage of the opportunities outlined in the System Service
Request or project identification study.
• Includes justifying the project on the basis of being consistent with or
necessary for accomplishing the IS plan.
• Also should include an analysis of how the proposed system will
affect organizational structures and procedures.
– Systems with widespread impact on organization’s structure or
procedures are typically riskier projects.
Schedule Feasibility
• Process of assessing the degree to which the potential time frame
and completion dates for all major activities within a project meet all
organizational deadlines and constraints for affecting change.
• Purpose is to gain an understanding of the likelihood that all
potential time frames and completion date schedules can be met
and that meeting these dates will satisfy the needs of the
organization.
• Basically it is a timeline which states when a project needs to be
completed
– Gov’t deadline, point in business cycle, when competitor is done
• Very detailed and precise for analysis phase.
• Need to account for scheduling trade-offs.
– Project team size, availibility of key personnel, subcontracting or
outsourcing
Legal and Contractual Feasibility
• Assessing potential legal and contractual ramifications due to
construction of a system
• It is necessary to look at:
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Copyright or nondisclosure infringements
Labor laws
Antitrust legislations
Foreign trade regulations
Financial reporting standards
Current or pending contractual obligations
• Development of new applications for use on new computers may
require new or expanded and more costly system software licenses
• Important to know who owns program source code. (You or the
party who wrote it?)
Political Feasibility
• Attempt to gain an understanding of how key stakeholders within the
organization view the proposed system
• IS can affect the distribution of information within an organization
thus affecting the distribution of power
– Those feeling threatened that they may lose power can take steps to
block, disrupt or change the focus of the project.
In Closing
• Many feasibility issues must be considered when planning a project
but they are not the only things looked at.
• Project selection may be a necessity and so some high risk high
cost projects will be pursued because the organization views the
project as being critical to the survival of the organization.
• The only thing you can do as a systems analyst is give as much
information as possible to whoever makes the final decision.