1
BY
Introduction of Feasibility studies
2
A feasibility study decides whether or not the proposed
system is worthwhile.
A short focused study that checks
If the system contributes to organisational objectives.
If the system can be engineered using current technology
and within budget.
If the system can be integrated with other systems that are
used.
Feasibility Analysis
3
Feasibility is the measure of how beneficial or practical
an information system will be to an organization.
Feasibility analysis is the process by which feasibility is
measured.
Creeping Commitment is an approach to feasibility that
proposes that feasibility should be measured throughout
the life cycle.
Feasibility Study
4
A feasibility study is a study made before committing to
a project.
A feasibility study leads to a decision:
go ahead
do not go ahead
think again
In production projects, the feasibility study often leads to
a budget request.
A feasibility study may be in the form of a proposal.
Importance of Feasibility Studies
5
List in detail all the things you need to make the
business work.
Identify business related problems and solutions.
Develop marketing strategies to convince investor
that your business is worth considering as an
investment.
Even if you have a great business idea you still
have to find a cost-effective way to market and sell
your products and services.
Why are Feasibility Studies Difficult?
Uncertainty
6
Client may unsure of the scope of the project
Benefits are usually very hard to quantify.
Approach is usually weak-defined. Estimates of
resources and timetable are very rough.
Organizational changes may be needed.
Therefore, feasibility studies rely heavily on the
judgment of experienced people.
Mistakes made at the beginning are the most difficult
to correct.
The Decision Maker's Viewpoint
7
Senior member(s) of an organization will decide whether to begin a
major software project. What information is needed?
Client: Who is this project for?
Scope: What are the boundaries of the project?
Benefits: What are the benefits? Can they be quantified?
Technical: Is the project possible. Is there at least one technical
way to carry out the project?
Resources: What are the estimates of staff, time, equipment, etc?
Alternatives: What are the options if the project is not done?
Feasibility Study: Scope
8
Scope expresses the boundaries of the system:
• It will include a list of included functions
• It will exclude a list of excluded functions
• It includes a list of dependencies
• It has a list of current systems to be replaced
Confusion over scope is a common reason for clients to be
dissatisfied with a system.
Feasibility Study: Benefits
9
Why is this project proposed? Can you quantify the
benefits?
Organization benefits
• Create a marketable product
• Improve the efficiency of an organization (e.g., save staff)
• Control a system that is too complex to control manually
• New or improved service (e.g., faster response to customers)
• Safety or security
Professional benefits are not the reason for doing a project
Feasibility Study: Technical
10
A feasibility study needs to explain that the proposed system is
technically feasible. This requires:
a rough outline of the requirements
a possible system design (e.g., database, distributed, etc.)
a possible choices of software to be acquired or developed
estimates of numbers of users, data, transactions, etc.
The technical approach actually followed may be very different.
Feasibility Study: Planning and Resources
11
The feasibility study must include an outline plan:
Estimate the staffing and equipment needs, and the
introductory timetable.
Identify interactions with and dependences on
external systems.
Provide a introductory list of deliverables and
delivery dates.
Feasibility Study: Alternatives and Risks
12
A feasibility study should identify alternatives and risks.
Alternatives
Continue with current system, enhance it, or create new one?
Develop in-house, or contract out? (How will a contract be
managed?)
Phases of delivery and possible points for revising or review
plan.
Risks
What can go wrong?
How will problems be identified (visibility)?
What are the fall-back options?
Feasibility Study: Check list
13
Team: How many hours per week? What skills do people have?
Time: Must be completed by end of semester, including operational
system, documentation, presentation.
Equipment and software: What special needs are there?
Client: Will the client be sufficiently available and helpful?
Start-up time. Creating a team, scheduling meetings, acquiring
software, learning new systems, ...
Business considerations. Licenses, trade-secrets, ...
Assessing Project Feasibility
14
Six Categories
Economic
Operational
Technical
Schedule
Legal and contractual
Political
Economic feasibility
15
During Scope Definition
During Problem Analysis
After a detailed study of the current system
Better estimates of development costs and benefits
During Decision Analysis
Requirements now defined
Development costs can be better estimated
Cost-benefit analysis
identify all the financial benefits and costs associated with a
project.
Economic feasibility
16
Tangible vs. Intangible benefits
Tangible vs. Intangible costs
One-time vs. recurring costs
Assessing Economic Feasibility
17
We perform Cost - Benefit Analysis
Determine Benefits according to Tangible and Intangible
Tangible benefits
Can be measured easily
Examples
Cost reduction and avoidance
Error reduction
Increased speed of activity
Increased management planning and control
Tangible Benefits
18
Benefits that can be
measured in dollars
and with certainty
Assessing Economic Feasibility Cont…
19
Intangible Benefits
Cannot be measured easily in money.
Examples
Increased organizational flexibility
Increased employee morale or spirits.
Competitive necessity
More timely information
Enhancement of organizational learning and
understanding.
Intangible Benefits
20
Types of Costs
21
Tangible Costs: can be measured in dollars and with
certainty
Intangible Costs: cannot easily be measured in dollars
or with certainty
One-time Costs: often Recurring: a cost associated
associated with project start-up with ongoing evolution and use
and development or systems of a system
start-up
Assessing Economic Feasibility CONT…..
22
Determine Costs
Tangible Costs
Can easily be measured in dollars
Determine Costs
Intangible costs
Cannot be easily measured in dollars
Examples:
Loss of customer goodwill
Loss of employee morale
One-Time Costs
Associated with project start-up, initiation and development
Includes
System development
New hardware and software purchases
User training
Site preparation
Data or system conversion
Assessing Economic Feasibility CONT…..
23
Recurring Costs
Associated with on-going use of the system
Includes:
Application software maintenance
Incremental data storage expense
Incremental communications
New software and hardware releases
Consumable supplies
One-time Costs
24
Recurring Costs
25
Three Popular Techniques to Assess Economic
Feasibility
26
Payback Analysis
Return On Investment(ROI)
Net Present Value(NPV)
Payback Analysis
27
Determines how long it will take for
accrued benefits to overtake accrued and
continuing costs
most companies want quick payback
3-5 years is typical
January 1996
Return On Investment(ROI)
28
Determines the lifetime profitability of
different investments
ROI = (benefits - costs) / costs)
Annual ROI is common measure
%
Net Present Value (NPV)
29
Determines the lifetime profitability of
different investments
NPV = discounted benefits - discounted costs
Preferred technique in many organizations
TVM And Present Value Formula
30
Time value of money (TVM)
The process of comparing present cash outlays to future expected returns
Present value: the current value of a dollar at any time in
the future.
PVn = 1/(1 + i)n
Where n is the number of years and i is discount rate
Discount rate – a percentage similar to interest rates that you
earn on your savings.
In most cases the discount rate for a business is the opportunity cost of
being able to invest money in other projects or investments
Assessing Other Feasibility Concerns
31
Operational Feasibility
Assessment of how a proposed system solves business problems or
takes advantage of opportunities
Technical Feasibility
Assessment of the development organization’s ability to
construct a proposed system
Project risk can be assessed based upon:
o Project size
o Project structure
o Development group’s experiences with the
application
o User group’s experience with development project
and the application area.
Assessing Other Feasibility Concerns
32
Schedule Feasibility
Assessment of time-frame and project completion dates
with respect to organization constraints for affecting
change
Legal and Contractual Feasibility
Assessment of legal and contractual ramifications of
new system
Political Feasibility
Assessment of key stakeholders’ view in organization
toward proposed system
