Preparing the System Proposal

Major Activities in Preparing the Systems Proposal Acquiring Hardware and Software Identifying and Forecasting Costs and Benefits Cost/Benefits Analysis

Acquiring Hardware and Software Inventory Computer Hardware Estimate Workloads between Current and Proposed System Evaluate Hardware Evaluate Software Choose the Vendor Acquire the Computer Equipment

Identifying and Forecasting Costs and Benefits Forecasting Costs and Benefits –Analysis of Time Series Data (when the historical data available); –Estimation of Trends: Graphical judgment; The methods of least squares; –Find the best fitting line from distribution. Moving averages; –Find the average from a periodic of time lag.

Identifying Benefits and Costs Tangible Benefits –Measurable Advantages, –Ex.: increasing the speed of processing, efficiency Intangible Benefits –Difficult to measure. –Include improving the decision-making process, enhancing accuracy, becoming more competitive in customer services, etc;

Identifying Benefits and Costs Tangible Costs –Ex.: Cost of equipment, cost of resources, costs of systems analysis’s time. Intangible Costs –Ex.: Cost of losing competitive; losing of reputation;

Comparing Cost and Benefits Break-even Analysis Unit Sold Break-even Point Cost of Current System Cost of Proposed System Cost

Comparing Cost and Benefits Years Cumulative benefits from Proposed system Cumulative Cost from current system Cost Payback Period Pay-back

Comparing Cost and Benefits Cash-flow Analysis Year 1 Quarter 1Quarter 2Quarter 3Quarter 4 Year 2 Quarter 1 Revenue5,00020,00024,96031,27039,020 Software Development10,0005,000 Personnel8,0008,4008,8009,2609,700 Training3,0006,000 Equipment Lease4,000 Supplies1,0002,0002,2002,4202,660 Total Cost26,00027,40017,37018,67020,090 Cash-Flow-21,000-7,4007,59012,60018,930 Cumulative Cash-Flow-21,000-28,400-20,810-8,21010,720

Comparing Cost and Benefits Present Value –1/(1+ i) n i = discount rate, n is period I =.12 N = Total Cost40,00042,00044,10046,30048,60051,000272,000 Multiplier Value of Costs35,60033,60031,31129,63227,70226,010183,855 Benefits25,00031,20039,00048,70060,80076,000280,700 Multiplier Value of Benefits22,25024,96027,69031,16834,65638,760179,484

Guidelines for Analysis Use break-even analysis if the project needs to be justified in terms of cost, not benefits; or if benefits do not substantially improve with the proposed system Use payback when the improved tangible benefits from a convincing argument for the proposed system. Use cash-flow analysis when the project is expensive, relative to the size of the company; or when the business would be significantly affected by a large drain (even if temporary) on funds. Use present value when the payback period is long, or when the cost of borrowing money is high.

Organizing the systems proposal Cover Letter Title page of proposal Table of Contents Executive summary (including recommendation) Outline of system study with appropriate documentation Detailed results of system study System Alternative System Analyst’s recommendation Summary Appendices