Chapter 5

Initiating and Planning Systems

Development Projects

Systems Analysis & Design

Learning Objectives
 Describe steps involved in project initiation and planning.
 Explain the need for and contents of Statement of Work and Baseline
Project Plan.
 List and describe methods for assessing project feasibility.
 Describe tangible vs. intangible costs and benefits, and one-time vs.
recurring costs and benefits.
 Perform cost-benefit analysis, and understand time value of money,
present value, discount rate, return on investment, and break-even
analysis.
 Describe rules for evaluating technical risk of systems development
projects.
 Describe activities and roles of structured walkthroughs.

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Project Initiation and Planning

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Project Initiation Tasks

 Establish:
 Initiation team
 Relationship with customer
 Project initiation plan
 Management procedures
 Project management environment
 Project workbook

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Project Planning Tasks
 Describe project scope, alternatives, feasibility.
 Divide project into tasks.
 Estimate resource requirements and create resource plan.
 Develop preliminary schedule.
 Develop communication plan.
 Determine standards and procedures.
 Identify and assess risk.
 Create preliminary budget.
 Develop a statement of work.
 Set baseline project plan.

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Deliverables and Outcomes

 Business Case
 Justification
for an information system, expressed as tangible and
intangible costs and benefits, and technical/organizational
feasibility
 Baseline Project Plan (BPP)
 Scope
 Benefits
 Costs
 Risks
 Resources
 Statement of Work (SOW)
 Describes deliverables
 Outlines work needed to be performed

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Statement of Work
(SOW) is a “contract”
between the IS staff
and the customer
regarding
deliverables and time
estimates for a
system development
project.

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System Service
Request (SSR) is a
form requesting
development or
maintenance of an
information system. It
includes the contact
person, a problem
statement, a service
request statement, and
liaison contact
information.

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Assessing Project Feasibility

 Economic feasibility
 Technical feasibility
 Operational feasibility
 Schedule feasibility
 Legal and contractual feasibility
 Political feasibility

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Economic Feasibility

 Cost-benefit analysis: identify all the financial

benefits and costs associated with a project

 Tangible vs. intangible benefits

 Tangible vs. intangible costs
 One-time vs. recurring costs

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Tangible Benefits

 Can be measured easily

 Examples
 Cost reduction and avoidance
 Error reduction
 Increased flexibility
 Increased speed of activity
 Improved management planning and control
 Opening new markets and increasing sales opportunities

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Tangible Benefits (cont.)

Benefits
that can be
measured
in dollars
and with
certainty

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Intangible Benefits
 Cannot be measured easily
 Examples
 Increased employee morale
 Competitive necessity
 More timely information
 Promotion of organizational learning and understanding

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Benefits that cannot easily be measured in dollars or with certainty

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Types of Costs
 Tangible: can be measured in dollars and with certainty
 Example: Hardware

 Intangible: cannot easily be measured in dollars or with

certainty
 Examples:
 Loss of customer goodwill

 Loss of employee morale

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Types of Costs (cont.)

 One-time: a cost associated with project start-up

and development or systems start-up
 Includes
 System Development
 New hardware and software purchases

 User training

 Site preparation

 Data or system conversion

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One-time Costs

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Types of Costs (cont.)

 Recurring: a cost associated with ongoing evolution

and use of a system
 Includes:
 Application software maintenance
 Incremental data storage expense

 New software and hardware releases

 Consumable supplies

 Incremental communications

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Recurring Costs

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Three Financial Measurements
for Economic Feasibility
 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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Definitions of Terms

 Present value: current value of a future cash flow

 Discount rate: rate of return used to calculate the
present value of future cash flows
 Time value of money (TVM): comparing present
cash outlays to future expected returns

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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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Break-Even Analysis

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Technical Feasibility

 Assessing the organization’s ability to construct the

proposed system

 Takes into account various project risk factors

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Project Risk Factors
 Project size
 Large projects re riskier than small projects.

 Project structure
A system in which the requirements are easily obtained
and highly structured will be less risky than one in
which requirements are messy, ill defined, or subject to
the judgment of an individual.

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Project Risk Factors
 Development group
 The development of a system employing commonly
used or standard technology will be less risky than one
employing novel or nonstandard technology.
 User group
A project is less risky when the user group is familiar
with the systems development process and application
are than if unfamiliar.

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Other Feasibility Concerns
 Operational
 The process of assessing the degree to which a proposed
system solves business problems or takes advantage of
business opportunities.
 Does the proposed system solve problems or take advantage of
opportunities?
 Schedule
 The process of assessing the degree to which the potential time
frame and completion dates for all major activities within a
project meet organizational dedalines and constraints for
affecting change.
 Can the project time frame and completion dates meet
organizational deadlines?

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Other Feasibility Concerns
 Legal and Contractual
 The process of assessing the potential legal and
contractual ramifications due to the construction of a
system.
 What are legal and contractual ramifications of the
proposed system development project?
 Political
 The process of evaluating how key stakeholders within
the organization view the proposed system.

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Baseline Project Plan
(BPP) is a document
intended primarily to
guide the
development team.

Sections:
1) Introduction
2) System description
3) Feasibility
assessment
4) Management issues

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Project Scope statement
is part of the BPP
introduction.

Sections:
1) Problem statement
2) Project objectives
3) Project description
4) Business benefits
5) Deliverables
6) Expected duration

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Factors in Determining Scope
 Organizational units (business functions and
divisions) might be affected by or use the 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

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Structured Walkthroughs
(Walkthrough)
 A peer-group review of any product created during the
system development process
 Roles: coordinator, presenter, user, secretary,
standard-bearer, maintenance oracle
 Can be applied to BPP, system specifications, logical
and physical designs, program code, test procedures
and results, manuals and documentation

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Structured
walkthrough form

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Summary
 In this chapter you learned how to:
 Describe steps involved in project initiation and planning.
 Explain the need for and contents of Statement of Work and
Baseline Project Plan.
 List and describe methods for assessing project feasibility.
 Describe tangible vs. intangible costs and benefits, and
one-time vs. recurring costs.
 Perform cost-benefit analysis, and understand time value
of money, present value, discount rate, return on
investment, and break-even analysis.
 Describe rules for evaluating technical risk of systems
development projects.
 Describe activities and roles of structured walkthroughs.

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