Initiating and Planning Systems Development Projects

1. Initiating and Planning Systems Development Projects

2. Contemplative Questions • What deliverables are produced in early stages of a project? • What is the scope of this project? What should the scope be? • If I were a member of the steering committee or an investor… would I invest in this project? • If I were a project manager… would I stake my reputation on this project? Is it feasible? • If I were an analyst… what is the problem being solved here? Is this really the problem, or just a symptom? What is the real problem the proposed system is trying to address?

3. Initiation vs. Planning • For any single project… • When is it initiated? • When does planning start? • “Formal” Project Initiation • A project team is established. • The project is given a number for tracking purposes. • The project may be given a name. • A relationship with a customer may be developed, or an existing relationship may continue. • “Formal” Project Initiation Plan • Procedures are established for management, decision-making, communication. • Milestones are identified and possibly negotiated.

4. What are the deliverables and outcomes during this stage? • Baseline Project Plan (BPP) • A comprehensive plan containing all work associated with a project. Sections of this deliverable may describe • The Scope of the new system • Benefits anticipated from the new system • Costs to be incurred, both developmental (one-time) and operational (recurring) • Risks • Resources required • Statement of Work (SOW) • A much simpler document that describes the work to be performed

5. Scope, risk, etc. • For whose benefit is the BPP created? • Why do we want to know these things? Have we forgotten anything? • The scope of the new system • Benefits anticipated from the new system • Costs to be incurred, both developmental (one-time) and operational (recurring) • Risks • Resources required

6. Assessing Risk • For any project, we need to understand the degree of associated risk. A measure of risk is feasibility. • Feasibility (defn): The capability of being accomplished, doable or brought about. • Six Categories of feasibility: • Technical • Operational • Schedule • Legal and contractual • Political • Economic Which category is most important? Which one is the most likely predictor of the feasibility of a project?

7. Technical Feasibility • Assessment of the organization’s ability to construct a proposed system. Technical feasibility is a function of: • Development group’s experience with hardware and software • Development group’s experience with the application, i.e. the business rules • Project size • Project structure • User group’s experience with development projects and the application area • Is the correlation (+) or (-) for each factor? • e.g. As project size increases, risk will ____ . (increase, decrease).

8. Risk Factors

9. Other Types of Feasibility • Assessing Technical Feasibility is like asking “Can we build it?” or “Are we capable of building the system?”. • What questions are being asked for these? • Operational Feasibility • Assessment of how a proposed system solves business problems or takes advantage of opportunities • Schedule Feasibility • Assessment of time frame and project completion dates with respect to organization constraints for affecting change

10. Still More Types of Feasibility • What questions are being asked for these? • Legal and Contractual Feasibility • Assessment of legal and contractual ramifications of new system • Political Feasibility • Assessment of key stakeholders in organization’s view toward proposed system

11. Economic Feasibility • Assessing the financial benefits and costs for a project • Consider • Tangible benefits • Intangible benefits • Tangible costs • Intangible costs

12. Economic Feasibility • Four common measures of economic feasibility • Payback Period (the book refers to this as a break-even ratio) • IRR (Internal rate of return) • NPV (Net present value) • ROI (Return on investment) For each of the above, what is the unit of measure? Is “more” of the UOM better or worse?

13. Cookbook approach • e.g. P&E 6.4, 6.10 (perhaps quiz questions?) • Create a matrix: a) Create a column for each year of the project b) Create a row (section) for the following: i) Cash inflows (benefits) ii) Cash outflows (costs) - Development (one-time) costs in early year(s) • Operating (recurring) costs each year after, for the life of the project • Discount everything based on the Time Value of Money

14. Cookbook approach (cont.) 2. Do the calculations • Payback Period. Find the point where cash in-flows exceed cash outflows. Use interpolation to find the remainder of the final year. • IRR • ROI • NPV

15. Definitions • Payback Period: • The length of time required to recover the cost of an investment (e.g. purchase of computer software or hardware), usually measured in years • IRR (Internal rate of return): • The discount rate for which the total present value of future cash flows equals the cost of the investment • NPV (Net present value): • The arithmetic sum ofdiscounted cash flows(all inflows and outflows) that will result from an investment decision or income stream • ROI (Return on investment): • The "Return" (incremental gain) from an action, divided by the cost of that action

16. Question • Are projects with a negative return ever adopted? • Is there a cost of “doing nothing”? • What is the real comparison to be made?

17. Important Considerations • Steering committees usually prefer more analysis rather than less. • They also prefer quality over quantity. * • Additional analyses can be performed: • The best case scenario • The worst case scenario • The most likely case scenario • Weight the probability of each to obtain a single number. * So does your instructor.