1. Lecture 2: Project Initiation Phase 1: Planning
Dr. Taysir Hassan Abdel Hamid

2. Outline
The project sponsor is a key person who identifies business value to be gained from using information technology.
The approval committee reviews system requests from groups throughout the organization and selects projects for the benefit of the business.

3. How do Projects Begin ? Business needs should drive projects.
Project sponsor recognizes business need for new system and desires to see it implemented.
Business needs determine the system’s functionality (what it will do).
The project’s business value should be clear.

4. System Request
A document describing business reasons for project and system’s expected value.
Lists project’s key elements
Project sponsor – the person who has an interest in seeing the system succeed, usually the person who initiated the project.
Business need – why the information system should be built.
Business requirements – what the information system will do.
Business value – the expected value from the system
Special issues or constraints – Any circumstances affecting the project

5. System Request Template
Project Name:
Project Sponsor:
Name:
Department:
Organization:
Phone:
Business Need:
Functionality:
Expected Value:
Tangible:
Intangible:
Special Issues or Constraints:

6. Example
A Multimedia company, located in Assiut (AssuitMult). Annual sales last year was 200,000 L.E. and they are growing every year by a 3% to 5% for the past few years.
Background: Eng. Osama Omar, vice president of marketing, has recently become both excited and concerned with the rise of Internet sites selling CDs. The Internet has the potential to enable AssiutMult to reach beyond its regional focus and increase sales internationally.

7. Example (Cont.)
AssuitMult currently has a simple web page that provides information about the company and about its stores that has opened.
System Request: At AssiutMult, new IS projects are reviewed and approved by IS steering committee that meets monthly.

8. System Request Examples
Project sponsor – VP of Marketing
Business need – Reach new customers and improve service to existing customers
Business requirements – Provide web-based shopping capability
Business value – 400,000 in new customer sales; 300,000 in existing customer sales
Special issues or constraints – System must be operational by holiday shopping season

9. System Request Example (how to fill in the template)
Project Name: Internet Sales
Project Sponsor: Vice President of Marketing
Name: Osama Omar
Department: Marketing
Phone:
Business Need: To increase sales by reaching a new market: Internet customers
Functionality:
Receive immediate credit approval
Search through a product
Place an order on one or more products
Expected Value:
Tangible: 300,000 L.E. increase in annual sales
Intangible:
Improved customer satisfaction
Improved recognition of AssiutMult brand name
Special Issues or Constraints:
The system must be in place within the next 3 months

10. Preliminary Project Acceptance
System request is reviewed by approval committee
Based on information provided, project merits are assessed.
Worthy projects are accepted and undergo additional investigation – the feasibility analysis.

11. Your Turn
If you were building a web-based system for course registration,
What is the business need?
What would be the business requirements?
What would be the business value (tangible and intangible)?
What special issues or constraints would you foresee?

12. FEASIBILITY ANALYSIS

13. Feasibility Analysis Detailed business case for the project:
a. Technical feasibility
b. Economic feasibility
c. Organizational feasibility
Compiled into a feasibility study
Feasibility is reassessed throughout the project

14. a. Technical Feasibility: Can We Build It?
Users’ and analysts’ familiarity with the business application area
Familiarity with technology
Have we used it before? How new is it?
Project size
Number of people, time, and features
Compatibility with existing systems

15. b. Economic Feasibility Should We Build It?
Identify costs and benefits
Assign values to costs and benefits
Determine cash flow
Assess financial viability (Fig. 1-8)
Return on investment (ROI)
Break even point (BEP)
Present Value (PV)
Net present value (NPV)

16. Assess Financial Viability – Net Present Value
NPV =  PV(future cash inflows) –
 PV(future cash outflows)
PV = Cash flow amount
(1 + interest rate)n ,
where
interest rate = required return
n = number of years in future

17. Definitions
Net Present Value - is defined as the difference between the present value project benefit and the value of the present value of the project cost.
NPV = PV Benefits – PV Costs
Return on Investment (ROI) - A measure of a corporation's profitability
ROI = (Total benefits – total costs)/ (Total costs)

18. Tangible vs. Intangible Costs
Tangible Costs – Includes revenue that the system enables the organization to collect, such as increased sales.
Intangible Costs – Are based on intuition and belief rather than “hard numbers.”

20. Definitions (Cont.)
Break-even point analysis - The break-even point technique is used in the analysis of the profit
The purpose of the break-even point analysis is to find out the level of sales (Quantity) or the selling price per unit at which the project will break even
If the projected sales volume or selling price is higher than the BEP then the project is expected to gain.

24. Assign Cost and Benefit Values
Difficult, but essential to estimate
Work with people who are most familiar with the area to develop estimates
Intangibles should also be quantified
If intangibles cannot be quantified, list and include as part of supporting material

25. Determine Cash Flow: Assign Values to Costs and Benefits – Simple Cash Flow Method

26. Determine NPV If NPV >= 0, Project is OK If NPV < 0, Project is
unacceptable

27. ROI Example
ROI

28. BPE BPE = (Yearly Net Cash Flow – Cumulative Net Cash Flow)

29. BPE Example
BPE

30. Assess Financial Viability – Break Even Point
How long before the project’s returns match the amount invested
The longer it takes to break even, the higher the project’s risk.

31. Summary of Economic Feasibility

32. c. Organizational Feasibility If we build it, will they come?
1. Strategic alignment
How well do the project goals align with business objectives?
2. Stakeholder analysis
Project champion(s)
Organizational management
System users

33. 1. Strategic Alignment
is the fit between the project and business strategy—
The greater the alignment, the less risky the project will be, from an organizational feasibility perspective.
For example, if the marketing department has decided to become more customer focused, then a CRM project that produces integrated customer information would have strong strategic alignment with marketing’s goal.

34. 1. Strategic Alignment (Cont…)
Many projects fail if the IT department alone initiates them and there is little or no alignment with business unit or organizational strategies.

35. 2. Stakeholder Analysis
A stakeholder is a person, group, or organization that can affect (or can be affected by) a new system.
In general, the most important stakeholders in the introduction of a new system are the project champion, system users, and organizational management, but systems sometimes affect other stakeholders as well.

36. For example, the IS department can be a stakeholder of a system because IS jobs or roles may be changed significantly after the system’s implementation.

43. PROJECT SELECTION

44. Project Selection Issues
Approval committee works from the system request and the feasibility study
Project portfolio – how does the project fit within the entire portfolio of projects?
Trade-offs must be made to select projects that will form a balanced project portfolio
Viable projects may be rejected or deferred because of project portfolio issues.

45. Summary
Project initiation involves creating and assessing goals and expectations for a new system
Identifying the business value of the new project is a key to success
Feasibility study is concerned with insuring that technical, economic, and organizational benefits outweigh costs and risks
Project selection involves viewing the project within the context of the entire project portfolio, and selecting those projects that contribute to balance in the portfolio

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