ZEIT2301 Design of Information Systems Project Initiation

1. ZEIT2301Design of Information SystemsProject Initiation School of Engineering and Information Technology UNSW@ADFA Dr Kathryn Merrick

2. 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

3. The Goal: Successful Projects • Cost At project completion, no more money has been spent than was originally allocated • Schedule The project is delivered no later than the original delivery date • Performance When delivered, the project has all features and functionality that were originally required of it

4. 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

5. 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)

6. 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

7. 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

8. 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 feasibility • Technical • Economic • Organizational and cultural • Schedule and resource

9. 1. Technical Feasibility • Bleedingedge 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?

10. 2. Economic Feasibility Should we build it? • Development costs • One-off costs • Annual operating costs • Recurring costs • Annual benefits • recurring cost savings and revenues • Intangible costs and benefits

11. 3(a) Organizational Feasibility If we build it, will they come? • Stakeholders • Project champion(s) • Senior management • Users • Others • Is the project strategically aligned with the business?

12. 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)

13. 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?

14. 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

15. 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?

16. Economic Measures • Cost-Benefit Analysis • Shows costs and benefits over a particular time • Net Present Value (NPV) • Takes into account the future value of money over the life of the system • Return on Investment (ROI) • The difference between benefits and costs • Break-even point • The time point where the costs of the project equal the value of the benefits received

17. Simple Cash Flow Method for Cost Benefit Analysis

18. 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

19. 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

20. 3. Break-Even Point Break-even point is the time at which benefits exceed costs

21. 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

23. 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

24. CBA Formulae Summary

25. 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

26. Ranking and Classifying Projects

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

28. 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

29. 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.