Chapter 2b

Initiating and Planning

Systems Development
Projects
Initiation and Planning Projects

• When does project initiation and planning (PIP) end and

analysis begin?
• Three important questions must be considered when making
this decision:
– How much effort should be expended on the project
initiation and planning phase?
– Who is responsible for performing the project initiation and
planning process?
– Why is project initiation and planning such a challenging
activity?

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Deliverables and Outcomes (1 of 2)

• Business case – justification for an information system,

presented in terms of the tangible and intangible economic
benefits and costs and the technical and organizational
feasibility of the proposed system
• Baseline Project Plan (BPP) – major outcome and
deliverable from the project initiation and planning phase
that contains the best estimate of a project’s scope,
benefits, costs, risks, and resource requirements

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Deliverables and Outcomes (2 of 2)

• Project Scope Statement (PSS) – document prepared for

the customer that describes what the project will deliver and
outlines generally at a high level all work required to
complete the project

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Assessing Project Feasibility

• Most feasibility factors are represented by the following

categories:
– Economic
– Technical
– Operational
– Scheduling
– Legal and contractual
– Political
Refer to next slides for further explanations
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Assessing Economic Feasibility (1 of 2)

• Economic feasibility – process of identifying the financial benefits

and costs associated with a development project
• Tangible benefit – benefit from the creation of an information system
that can be measured in dollars and with certainty
• Most tangible benefits:
– 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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Figure 5-3: Tangible Benefits for Customer
Tracking System (Pine Valley Furniture)

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Assessing Economic Feasibility (2 of 2)

• Intangible benefit – benefit derived from the creation of

an information system that cannot be easily measured in
dollars or with certainty (See Table 5-3)

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Table 5-3: Intangible Benefits from the
Development of an Information System
Intangible Benefits from the Development of Intangible Benefits from the Development of
an IS an IS
• Competitive necessity • More confidence in decision quality
• More timely information • Improved processing efficiency
• Improved organizational planning • Improved asset utilization
• Increased organizational flexibility • Improved resource control
• Promotion of organizational learning and • Increased accuracy in clerical operations
understanding
• Availability of new, better, or more information • Improved work process that can improve
employee moral or customer satisfaction
• Ability to investigate more alternatives • Positive impacts on society
• Faster decision making • Improved social responsibility
• Better usage of resources (“greener”) Blank

(Source: Based on Parker & Benson, 1988; Brynjolfsson & Yang, 1997; Keen, 2003; Cresswell, 2004)

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Determining Project Costs (1 of 3)

• Tangible costs – costs associated with an information

system that can be measured in dollars and with certainty
• Intangible costs – costs associated with an information
system that cannot be easily measured in terms of dollars
or with certainty

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Table 5-4: Possible Information
Systems Costs
Type of Cost Examples Type of Cost Examples
Procurement Hardware, software, Project Infrastructure
facilities infrastructure replacement/improvements
Management and staff Project personnel
Consulting and services Training
Development activities
Services and procurement
Organizational disruptions
Management and staff
Start-Up Initial operating costs Operating Infrastructure
Management and staff replacement/improvements
Personnel recruiting System maintenance
Management and staff
User training and support

(Source: Based on King & Schrems, 1978; Sonje, 2008)

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Table 5-5: Guidelines for Better Cost
Estimating
Guidelines for Better Cost Estimating
1. Have clear guidelines for creating estimates.
2. Use experienced developers and/or project managers for making estimates.
3. Develop a culture where all project participants are responsible for defining accurate
estimates.
4. Use historical data to help in establishing better estimates of costs, risks, schedules,
and resources.
5. Update estimates as the project progresses.
6. Monitor progress and record discrepancies to improve future estimates.

(Source: Based on Lederer & Prasad, 1992; Hubbard, 2007; Sonje, 2008)

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Determining Project Costs (2 of 3)

• Total cost of ownership (TCO) – cost of owning and

operating a system, including the total cost of acquisition,
as well as all costs associated with its ongoing use and
maintenance
• One-time costs – costs associated with project start-up
and development or system start-up
• Recurring cost – costs resulting from the ongoing
evolution and use of a system

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Determining Project Costs (3 of 3)

• Examples of recurring costs include:

– Application software maintenance
– Incremental data storage expenses
– Incremental communications
– New software and hardware leases
– Supplies and other expenses (e.g., paper, forms, data
center personnel)

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Figure 5-4: One-Time Costs for Customer
Tracking System (Pine Valley System)

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Figure 5-5: Recurring Costs for Customer
Tracking System (Pine Valley Furniture)

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Time Value of Money (3 of 3)

• Break-even analysis – type of cost-benefit analysis to

identify at what point (if ever) benefits equal costs
• Breakeven ratio:

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Figure 5-7: Break-Even Analysis for
Customer Tracking System (Pine Valley
Furniture)

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Table 5-6: Commonly Used Economic
Cost-Benefit Analysis Techniques

Analysis Technique Description

Net Present Value (NPV) NPV uses a discount rate determined from the company’s
e.G cost of capital to establish the present value of a project.
https://www.accountingform The discount rate is used to determine the present value of
anagement.org/net-present- both cash receipts and outlays
value-method/
Return on Investment (ROI) ROI is the ratio of the net cash receipts of the project
divided by the cash outlays of the project. Trade-off
analysis can be made among projects competing for
investment by comparing their representative R OI ratios.
Break-Even Analysis (B EA) BEA finds the amount of time required for the cumulative
cash flow from a project to equal its initial and ongoing
investment.

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Assessing Technical Feasibility

• Technical feasibility – process of assessing the development

organization’s ability to construct a proposed system
• Potential consequences of not accessing and managing risks can
include the following:
– Failure to attain expected benefits from the project
– Inaccurate project cost estimates
– Inaccurate project duration estimates
– Failure to achieve adequate system performance levels
– Failure to adequately integrate the new system with existing
hardware, software, organizational procedures
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Table 5-7: Project Risk Assessment
Factors
Risk Factor Examples
Project Size Number of members on the project team
Project duration time
Number of organizational departments involved in project
Size of programming effort (e.g., hours, function points)
Number of outsourcing partners
Project Structure New systems or renovation of existing system(s)
Organizational, procedural, structural, or personnel changes resulting from
system
User perceptions and willingness to participate in effort
Management commitment to system
Amount of user information in system development effort
Development Familiarity with target hardware, software development environment, tools, and
Group operating system
Familiarity with building similar systems of similar size
User Group Familiarity with information systems development process
Familiarity with proposed application area
Familiarity with using similar systems

(Source: Based on Applegate, Austin, & Soule, 2009; Fuller et al., 2018)

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Figure 5-8: Effects of Degree of Project
Structure, Project Size, and Familiarity with
Application Area on Project Implementation Risk

(Source: Based on Applegate, Austin, & Soule, 2009; Fuller et al., 2018)

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Assessing Other Feasibility Concerns

• Operational feasibility – process of assessing the degree to which a

proposed system solves business problems or takes advantage of
business opportunities
• Schedule feasibility – process of assessing the degree to which the
potential time frame and completion dates for all major activities within
a project meet organizational deadlines and constraints for affecting
change
• Legal and contractual feasibility – process of assessing potential
legal and contractual ramifications due to the construction of a system
• Political feasibility – process of evaluating how key stakeholders
within the organization view the proposed system

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