ZEIT2301Design of Information Systems

Project Initiation

School of Engineering and Information TechnologyUNSW@ADFA

Dr Kathryn Merrick

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Topic 02: Project Initiation

Objectives

To appreciate the importance of linking the information system to business needs

To describe project initiation To describe the elements of a feasibility analysis (aka Advisability

report)

Reference: Text Ch 2

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The Goal: Successful Projects

CostAt project completion, no more money has been spent than was originally allocated

ScheduleThe project is delivered no later than the original delivery date

PerformanceWhen delivered, the project has all features and functionality that were originally required of it

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Project Identification

Projects are driven by business needs Identified by business people Identified by IT people (better yet) identified jointly by business and IT

The project sponsor believes in the system and wants to see it succeed

Normally this is a business person Should have the authority to move the project forward

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Reasons for Project Initiation

Respond to opportunity

Resolve problem

Conform to directive (Eg: government legislation)

Implementing long-term IS strategic plan

Responding to issues from department managers or

process managers

Response to outside forces (Eg: competitors)

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A System Request

A system request lists the key elements of the proposed project:

Project sponsor Primary point of contact for the project

Business need Reason prompting the project (a key criterion for success)

Business requirements Business capabilities the system will need to have

Business value Benefits the organization can expect from the project

Special issues Anything else that should be considered

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Planning Phase of SDLC

Planning begins once a project has been approved. Define problem (more precisely) Confirm project feasibility Produce project schedule Staff the project Launch the project

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Project Feasibility (aka Advisability)

Feasibility analysis is used to aid in the decision of whether or not to proceed with the IS project.

Helps identify potential risks that must be addressed

Aspects of project feasibility1. Technical

2. Economic

3. Organizational and cultural

4. Schedule and resource

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1. Technical Feasibility

Bleeding edge technology?

Do we have the appropriate expertise within the

company?

Project size?

Familiarity with the particular application

Familiarity with the overall technology

Compatibility with other systems Can we build it?

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2. Economic Feasibility

Development costs One-off costs

Annual operating costs Recurring costs

Annual benefits recurring cost savings and revenues

Intangible costs and benefitsShould we

build it?

Sessin 2, 2010 11

3(a) Organizational Feasibility

Stakeholders Project champion(s) Senior management Users Others

Is the project strategically aligned with the business?

If we build it, will they

come?

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3(b) Cultural Feasibility

Each organizations has its own culture New system must fit into culture or have a determined “champion”

who is able to drive change

Project failure is often more a result of organizational issues

(personnel, management style/support, etc)

than the technical issues (development methodologies, h/w and s/w, etc)

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Stakeholder Analysis

Considers:

Organizational management Are they committed to the project?

System users Who are they and what is their attitude to the project?

Do we have a project champion capable of supporting the project through the rough times?

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Organizational and Cultural Risks

Computer competency

Computer phobia

Perceived loss of control by some staff

Shifts in organizational power

Fear of changing job responsibilities

Fear of employment loss

Reversal of longstanding procedures

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4. Schedule and Resource Feasibility

Developing a project schedule inevitably involves some assumptions and therefore risk

Requirements, and therefore scope, of the system might be unclear

A fixed deadline increases risk (eg must be ready for Christmas shopping period)

Need for sufficient skilled staff Need for adequate resources for systems development and for

testing

Can we build it?

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Economic Measures

Cost-Benefit Analysis Shows costs and benefits over a particular time

1. Net Present Value (NPV) Takes into account the future value of money over the life

of the system

2. Return on Investment (ROI) The difference between benefits and costs

3. Break-even point The time point where the costs of the project equal the

value of the benefits received

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Simple Cash Flow Method for Cost Benefit Analysis

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1. Net Present Value

Present Value $amount / (1 + interest rate)n

where “n” is the number of time periods Considers the time value of money

$1 today does not have the same value as $1 in 5 years time

Net Present Value

The present value of benefits less the present value of costs

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2. Return on Investment (ROI)

The amount of money an organization receives in return for what it spends

Total (benefits – costs) / total costs As a percentage

High ROI means benefits far outweigh costs

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3. Break-Even Point

Break-even point is the time at which benefits exceed costs

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3. Break-Even Point

Examines the cash flow over time Identifies the year in which the benefits are larger than the costs

The longer it takes to break even, the higher the project’s risk.

Often represented graphically Plot the cumulative present value of the costs and of the benefits

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Intangible benefits / costs

But costs and benefits cannot always be measured in economic terms

May be intangible but still an important criteria of project success

Intangible Benefits Increased levels of service Customer satisfaction Business survival Need to develop in-house expertise

Intangible Costs Reduced employee moral Lost productivity Lost customers or sales

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CBA Formulae Summary

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Project Selection

Project portfolio management A process that optimizes project selection and sequencing in order

to best support business goals Business goals are expressed in terms of

Quantitative economic measures Business strategy goals IT strategy goals

Once selected, projects enter the project management process

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Ranking and Classifying Projects

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How Not to Select a Project

First in, first out

Political clout of project inventor/proposer

Squeaky wheel getting the grease

Any other method that does not involve a deliberate

analysis

A recent analysis found that between 2% and 15% of projects taken on by IT departments are not strategic to the business.

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Classic Risks in IS development

Unclear objectives Incomplete or changing requirements

Limited user involvement Lack of executive support Poor planning Overly optimistic schedule

Failing to monitor or update schedule Adding people to a late project Lack of required resources

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Summary

A new IS project may be initiated when an opportunity or a problem is identified.

A System Request highlights the business value of the proposed new information system.

The feasibility study (aka advisability study) considers aspects such as the technical, economic and organizational feasibility.

The overall portfolio of proposed projects is evaluated before a particular project is selected for development.