Selecting the Best Alternative Design Strategy Feasibility Study Selecting the Best Alternative Design Strategy Despite the availability of improved tools and methodologies, many information systems projects still fail due to breakdowns in communications. Information systems projects are frequently plagued by communications barriers between the analyst and the system users. The business world has its own language to describe forms, methods, procedures, financial data, and the like. And the information systems industry has its own language of acronyms, terms, buzzwords, and procedures. A communications gap has developed between the system users and the system designers. The systems analyst is supposed to bridge this communications gap. A typical project requires the participation of a diverse audience, both technical and non-technical. In this module you will receive a few of interpersonal skills, the cornerstone of successful systems development, namely written report and formal presentations.

Feasibility analysis Feasibility is the measure of how beneficial or practical the development of an information system will be to an organization Feasibility analysis is the process by which feasibility is measured. In today’s business world, it is becoming more and more apparent that analysts must learn to think like business managers. Computer applications are expanding at a record pace. Now more than ever, management expects information systems to pay for themselves. Information is a major capital investment that must be justified, just as marketing must justify a new product and manufacturing must justify a new plant or equipment. Systems Analysts are called on more than ever to help answer the following questions: Will the investment pay for itself? Are there other investments that will return even more on their expenditure? This module deals with cost-benefit analysis and other feasibility issues of interest to the systems analyst and users of information systems. Few topics are more important. Feasibility analysis isn't really systems analysis, and it isn't systems design either. Instead, feasibility analysis is a cross life cycle activity and should be continuously performed throughout a systems project. If you study your company's project standards or systems development life cycle (SDLC), you'll probably see a feasibility study phase or deliverable, but not an explicit ongoing process. But look more closely! Upon deeper examination, you'll probably identify various go/no-go checkpoints or management reviews. These checkpoints and reviews identify specific times during the life cycle when feasibility is reevaluated. A project can be canceled or revised in scope, schedule, or budget at any of these checkpoints. Thus, an explicit feasibility analysis phase in any life cycle should be considered to be only an initial feasibility assessment. 3

Configuration Phase Checkpoint Alternative solutions are defined in terms of their IS building blocks (hardware, software, data, network, etc.). After defining these options, each option is analyzed for operational, technical, schedule, and economic feasibility. The configuration phase represents a major feasibility analysis activity since it charts one of many possible implementations as the target for systems design. During the configuration phase, alternative solutions are defined in terms of their input/output methods, data storage methods, computer hardware and software requirements, processing methods, and people implications. 5

Four Tests for Feasibility Operational feasibility Technical feasibility Schedule feasibility Economic feasibility (cost-benefit analysis) Operational feasibility is a measure of how well the solution of problems or a specific solution will work in the organization. It is also a measure of how people feel about the system/project. Technical feasibility is a measure of the practicality of a specific technical solution and the availability of technical resources and expertise. Schedule feasibility is a measure of how reasonable the project timetable is. Economic feasibility is a measure of the cost-effectiveness of a project or solution. This is often called a cost-benefit analysis. Operational and technical feasibility criteria measure the worthiness of a problem or solution. Operational feasibility is people oriented. Technical feasibility is computer oriented. Economic feasibility deals with the costs and benefits of the information system. Actually, few systems are infeasible. Instead, different options tend to be more or less feasible than others. Let's take a closer look at the four feasibility criteria. 6

Operational Feasibility Is the problem worth solving, or will the solution to the problem work? How well would the candidate solution be received from management, system users, and organization perspective? (political) Is the solution compliant with laws and regulations? (legal) When determining operational feasibility in the later stages of the development life cycle, usability analysis is often performed with a working prototype of the proposed system. Many large corporations, software consultant agencies and software development companies employ user interface specialists who specialize in designing and testing system user interfaces. They have special rooms equipped with video cameras, tape recorders, microphones and two-way mirrors in order to observe and record a user working with the system. Their goal is to identify the areas of the system where the users are prone to make mistakes, processes which may be confusing or too complicated, and also observe the reactions of the user and assess their productivity. 7

Technical Feasibility Is the proposed technology or solution practical? Do we currently possess the necessary technology? Do we possess the necessary technical expertise, and is the schedule reasonable? Assuming the solution's required technology is practical, we must next ask ourselves, ``Is the technology available in our information systems shop?'' If the technology is available, we must ask if we have the capacity. For instance, ``Will our current printer be able to handle the new reports and forms required of a new system?'' If the answer to either of these questions is no, then we must ask ourselves, ``Can we get this technology?'' The technology may be practical and available, and, yes, we need it. But we simply may not be able to afford it at this time. Although this argument borders on economic feasibility, it is truly technical feasibility. If we can't afford the technology, then the alternative that requires the technology is not practical and is technically infeasible! For instance, we may have a database management system (DBMS). However, the analysts and programmers available for the project may not know that DBMS well enough to properly apply it. 8

Schedule Feasibility Given our technical expertise, are the project deadlines reasonable? For instance, a project to develop a system to meet new government reporting regulations may have a deadline that coincides with when the new reports must be initiated. Penalties associated with missing such a deadline may make meeting it mandatory. 9

Economic Feasibility How Much Will the System Cost? What Benefits Will the System Provide? Tangible benefits Intangible benefits Is the Proposed System Cost-Effective? For example, the solution that provides the best operational impact for the end-users may also be the most expensive and, therefore, the least economically feasible. Economic feasibility has been defined as a cost-benefit analysis. How do you estimate costs and benefits? And how do you compare those costs and benefits to determine economic feasibility? Most schools offer complete courses on these subjects — courses on Financial Management, Financial Decision Analysis, and Engineering Economics and Analysis. Such a course should be included in your plan of study. This section presents an overview of the techniques. Personnel costs — The salaries of systems analysts, programmers, consultants, data entry personnel, computer operators, secretaries, and the like who work on the project. Because many of these individuals spend time on many projects, their salaries should be prorated to reflect the time spent on the projects being estimated. Computer usage — Computer time will be used for one or more of the following activities: programming, testing, conversion, word processing, maintaining a project dictionary, prototyping, loading new data files, and the like. If a computing center charges for usage of computer resources such as disk storage or report printing, the cost should be estimated. Training — If computer personnel or end-users have to be trained, the training courses may incur expenses. Packaged training courses may be charged out on a flat fee per site, a student fee (such as $395 per student), or an hourly fee (such as $75 per class hour). 10

Cost-Benefit Analysis Techniques Brake-even analysis Payback period analysis Cash flow analysis Net Present Value (NPV) Return-on-Investment (ROI) Analysis The choice of techniques should take into consideration the audiences that will use them. Virtually all managers who have come through business schools are familiar with all three techniques. Break-even analysis is the point at which the cost of the current system and the proposed system intersect. Payback determines the number of years of operation that the system needs to pay back the cost of investing in it. Cash-flow analysis is used to examine the direction, size, and pattern of cash flow associated with the proposed information system. Net Present Value Method is a way to assess all the economic outlays and revenues of the information system over its economic life and to assess the value of project in terms of current value. ROI is to determine the rate of investment given the all benefits in present value divided by all the costs in present value. 11

Figure 2.2.2 Payback Period Analysis

Figure 2.2.3 Net Present Value Analysis

Selecting the Best Alternative Guidelines to select the method for comparing alternatives: Use break-even analysis if the project needs to be justified in terms of cost, not benefits. Use payback when the improved tangible benefits form a convincing argument for the proposed system.

Selecting the Best Alternative Guidelines to select the method for comparing alternatives (continued) Use cash-flow analysis when the project is expensive, relative to the size of the company. Use present value when the payback period is long or when the cost of borrowing money is high.

Selecting the Best Alternative Design Strategy Generate a comprehensive set of alternative design strategies -- Candidate Systems Matrix Select the one design strategy that is most likely to result in the desired information system – Feasibility Matrix Best to generate three alternatives Low-end Provides all required functionality users demand with a system that is minimally different from the current system High-end Solves problem in question and provides many extra features users desire Midrange Compromise of features of high-end alternative with frugality of low-end alternative Sources of Software Hardware manufacturers Packaged software producers Custom software producers Enterprise solution software Application Service Providers In-house development