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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?
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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.