1. ISMT221 Information Systems Analysis and Design
Feasibility & Cost Analysis Tools
Lab 2
Tony Tam

2. Feasibility Analysis
Feasibility Analysis provides shared assessment of a project between sponsors and project team
Technical Feasibility
Economic Feasibility
Organizational Feasibility
With the Baseline Project Plan and Statement of Project Scope, decide Go/Not Go.

3. Economic Feasibility – Project Benefits
Tangible benefits
Reduce and avoid cost
Reduce error
More flexible
Faster activities
Improve control and planning
New market niche and increasing sales opportunities
Intangible benefits
Maintain competitiveness
Increase organizational flexibility
Raise morale
Promote learning and understanding
Timely information

4. Economic Feasibility – Project Costs
Tangible Costs
System development
Hardware and software procurement
Users and staff training
Site preparation
Data or system conversion
Intangible Costs
Maintenance and support
Incremental data storage expense
Incremental communications
New software and hardware leases
Consumables

5. Some terminology Sunk Cost The capital that was paid in the past
E.g. existing Application Server; hiring cost of existing staff
Once-time/ Once-off Cost
The capital invested only once (usually at the beginning of the project)
E.g. New hardware, software licenses; new storage facilities; hiring new staff
Recurring Cost
Continuous capital investment that need to pay periodically
E.g. Staff compensation; advertising expenses; depreciation PPE; goodwill of brand

6. How do we estimate economical benefits
Economical benefits are usually estimated with
Historical information of similar projects
Future taxation and inflation estimates
Scale and scope of the project
Anticipation of other competing projects

7. Present Value of future cash flow
The money you have today worth more than the money you have in future
Discount rate = the best interest rate that you are willing to invest your money of today = the maximum amount of risk that you are willing to tolerate for the uncertainty in future

8. Economic Feasibility Analysis
Net Present Value (NPV)
Sum of all the Present Value of Benefits minus Costs
Return On Investment (ROI)
How much your return on each dollar invested
Break-even analysis
When is the break-even point (benefits just offset the costs)
So you know when your payback period and when to throw away the system (again)
Sensitivity analysis
How sensitive is your project against the change in environment?