Economical Feasibility
Economic Feasibility means ,the project benefit of the proposed system outweigh .
The estimated cost usually considered the whole cost of ownership(TOC) Which
must includes :
1 - Ongoing support
2 - Maintenance cost
3-Acquisition cost
To determine TCO , the analyst must estimated cost in each following areas:
People, include IT staff and user, Hardware and equipment ,Sofware, house
development, purchase from vendors, Formal and informal training ,Licenses and
feeds ,Consulting expenses, Facility costs,Tangible benefits and intangible
benefits .
Iidentify the financial benefits and costs associated with a development project
–
–
Benefits (Return)
• Tangible or intangible
Costs (Investment)
• Tangible or intangible
Cost Analyses
• Tangible cost
– Cost associated with an information system that can be measured in dollars and
with certainty
• Intangible cost
– Cost associated with an information system that cannot be easily measured in
terms of dollars or with certainty
• Recurring cost
– Cost resulting from the ongoing evolution and use of a system
• One-Time cost
– Cost associated with project start-up and development or system start-up
Benefit Analysis
 Tangible benefits can be easily quantified.
 Measured in terms of monthly or annual savings, or of profit to organization
 Intangible benefits more difficult to quantify.
Tangible Benefits
•
Tangible benefit derived from the creation of an information system that can be
measured in dollars and with certainty.
•
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.
•
Fewer processing errors
•
Increased throughput
•
Decreased response time
•
Elimination of job steps
•
Increased sales
•
Reduced credit losses
•
Reduced expenses
Intangible Benefits
•
Intangible – benefit derived from the creation of an information system that
cannot be easily measured in dollars or with certainty.
•
Competitive necessity; increased organizational flexibility; increased
employee morale; promotion of organizational learning and understanding;
more timely information.
•
Improved customer goodwill
•
Improved employee morale
•
Better service to community
•
Better decision-making
Cost – Benefit Analyses
•
•
The use of a variety of analysis techniques for determining the financial
feasibility of a project
It uses financial analysis tools