1. Chapter 5 Initiating and Planning Systems Development Projects
Modern Systems Analysis and Design
Chapter 5
Initiating and Planning Systems Development Projects

2. The Process of Initiating and Planning IS Development Projects
The key activity of project initiation is the development of the project charter.
A short document that is prepared for both internal and external stakeholders
Provides a high-level overview of the project
Useful communication tool that helps to assure that the organizations and other stakeholders understand the initiation of a project
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3. The Process of Initiating and Planning IS Development Projects (Cont.)
The key activity of project planning is the process of defining clear, discrete activities and the work needed to complete each activity within a single project.
The objective of the project planning process is the development of a Baseline Project Plan (BPP) and the Project Scope Statement (PSS).
Chapter 5
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4. Deliverables and Outcomes
Business Case
Justification for an information system
Presented in terms of the tangible and intangible economic benefits and costs
The technical and organizational feasibility of the proposed system
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5. Deliverables and Outcomes (Cont.)
Baseline Project Plan (BPP)
A major outcome and deliverable from the PIP phase
Contains the best estimate of a project’s scope, benefits, costs, risks, and resource requirements
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6. Deliverables and Outcomes (Cont.)
Project Scope Statement (PSS)
A document prepared for the customer
Describes what the project will deliver
Outlines at a high level all work required to complete the project
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7. Assessing Project Feasibility
Economic
Technical
Operational
Scheduling
Legal and contractual
Political
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8. Assessing Project Feasibility (Cont.)
Economic feasibility: a process of identifying the financial benefits and costs associated with a development project
Often referred to as a cost-benefit analysis
Project is reviewed after each SDLC phase in order to decide whether to continue, redirect, or kill a project
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9. Determining Project Benefits
Tangible benefits refer to items that can be measured in dollars and with certainty.
Examples include:
reduced personnel expenses,
lower transaction costs, or
higher profit margins.
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10. Determining Project Benefits (Cont.)
Most tangible benefits will fit within the following 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
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11. Determining Project Benefits (Cont.)
Intangible benefits are benefits derived from the creation of an information system that cannot be easily measured in dollars or with certainty.
May have direct organizational benefits, such as the improvement of employee morale.
May have broader societal implications, such as the reduction of waste creation or resource consumption.
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12. Determining Project Costs
Tangible cost: a cost associated with an information system that can be measured in dollars and with certainty
IS development tangible costs include:
Hardware costs,
Labor costs, or
Operational costs including employee training and building renovations.
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13. Determining Project Costs (Cont.)
Intangible cost: a cost associated with an information system that cannot be easily measured in terms of dollars or with certainty
Intangible costs can include:
Loss of customer goodwill,
Employee morale, or
Operational inefficiency.
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14. Determining Project Costs (Cont.)
One-time cost: a cost associated with project start-up and development or system start-up
These costs encompass activities such as:
Systems development,
New hardware and software purchases,
User training,
Site preparation, and
Data or system conversion.
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15. Determining Project Costs (Cont.)
Recurring cost: a cost resulting from the ongoing evolution and use of a system
Examples of these costs include:
Application software maintenance,
Incremental data storage expenses,
Incremental communications,
New software and hardware leases, and
Supplies and other expenses (i.e. paper, forms, data center personnel).
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16. Determining Project Costs (Cont.)
Both one-time and recurring costs can consist of items that are fixed or variable in nature.
Fixed costs are billed or incurred at a regular interval and usually at a fixed rate.
Variable costs are items that vary in relation to usage.
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17. Determining Project Costs (Cont.)
Procurement
Consulting, equipment, site preparation, capital, management time
Start-up
Operating systems, communications installation, personnel hiring, organizational disruption
Project-related
Application software, software modification, personnel overhead, training, data analysis, documentation
Operating
System maintenance, rental, asset depreciation, operation and planning
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18. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
The Time Value of Money
Net Present Value (NPV)
Use discount rate to determine present value of cash outlays and receipts
Return on Investment (ROI)
Ratio of cash receipts to cash outlays
Break-Even Analysis (BEA)
Amount of time required for cumulative cash flow to equal initial and ongoing investment
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19. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
The Time Value of Money
Time value of money (TVM): the concept that money available today is worth more than the same amount tomorrow
Discount rate: the rate of return used to compute the present value of future cash flows (the cost of capital)
Present value: the current value of a future cash flow
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20. The Time Value of Money (Cont.)
Net Present Value
PVn = present value of Y dollars n years from now based on a discount rate of i.
NPV = sum of PVs across years.
Calculates time value of money
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21. The Time Value of Money (Cont.)
Break-even analysis: a type of cost-benefit analysis to identify at what point (if ever) benefits equal costs
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4/8/2019Chapter 5
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23. Copyright © 2011 Pearson Education, Inc. Publishing as Prentice Hall
4/8/2019Chapter 5
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24. SA410 Cost/Benefits Analysis
Cost Terms
Total Cost of Ownership (TCO): The total cost of acquiring, installing, maintaining, changing, and getting rid of something across an extended period of time
TCO is a life cycle estimate
TCO supports decision making when it is likely that all options come with the same benefits and the only differences are on the cost side.
TCO analysis shows what an acquisition implies for future spending or budgetary planning
Five year TCO for computing equipment can be 3 – 10 times the original purchase price
The Gartner Group* reports that nearly 80% of total IT costs occur after purchase and nearly half of these costs are outside the IT budget
*Gartner is an information technology research and advisory company providing technology related insight. Research provided by Gartner is targeted at CIOs and senior IT leaders in industry
© The KTP Company, 2005 24

25. Total Cost of Ownership Cost Components
SA410 Cost/Benefits Analysis
Total Cost of Ownership Cost Components
Hardware acquisition
Purchase price of hardware including computers, terminals, storage and printers
Software acquisition
Purchase or license of software for each user
Installation
Cost to install hardware and software
Training
Cost to train IT staff and end-users
Support
Cost to provide ongoing technical support; help desks, documentation etc
Infrastructure
Cost to acquire, maintain and support related infrastructure such as networks and specialized equipment (including storage and backup units)
Downtime
Lost productivity if hardware or software failures cause the system to unavailable for processing user tasks
Space and energy
Real estate and utility costs for hosing and providing power for the technology
© The KTP Company, 2005 25

26. SA410 Cost/Benefits Analysis
Cost Terms (cont’d)
Cost Item: A spending category for something the company spends money on, including assets, goods, services, and resources of all kinds
Examples: Staff salaries, security service fees, the purchase of computer hardware or software
Cost items are line items in budgets and spending plans
Most business cases have many cost items and just a few benefit items
Typically 80% or more of business case development goes into finding cost items, identifying cost impacts, and measuring and valuing them
Cash Flow: Cash that actually flows into or out of the company
© The KTP Company, 2005 26

27. Overview of the Cost Model
SA410 Cost/Benefits Analysis
Overview of the Cost Model
Organizes the cost items that belong in the case by category
The cost model for a business case dealing with an IT system proposal. Each cell holds cost line items.
© The KTP Company, 2005 27

28. Line Items for the IT Cost Model
SA410 Cost/Benefits Analysis
Line Items for the IT Cost Model
Use this model as a guide and for a“brainstorming” workshop with the project team
The same cost model should be applied to all scenarios in the case
© The KTP Company, 2005 28

29. Assessing Technical Feasibility
Technical feasibility: a process of assessing the development organization’s ability to construct a proposed system
Chapter 5
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30. Assessing Other Feasibility Concerns
Operational
Does the proposed system solve problems or take advantage of opportunities?
Scheduling
Can the project time frame and completion dates meet organizational deadlines?
Legal and Contractual
What are legal and contractual ramifications of the proposed system development project?
Political
How do key stakeholders view the proposed system?
Chapter 5
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31. Factors in Determining Scope
Organizational units affected by new system
Current systems that will interact with or change because of new system
People who are affected by new system
Range of potential system capabilities
Constraints on system
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32. Diagram Depiction of Project Scope
More on this later
DeMarco notation
FIGURE 5-11
Context-level data flow diagram showing project scope for Purchasing Fulfillment System
Chapter 5
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33. Reviewing the Baseline Project Plan
Structured Walkthroughs: a peer-group review of any product created during the system development process
Can be applied to BPP, system specifications, logical and physical designs, program code, test procedures, manuals and documentation
Chapter 5
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