CHAPTER 5: Identifying and Selecting Systems Development Projects

1. MSIS 5653Advanced Systems DevelopmentDursun Delen, Ph.D.Department of ManagementOklahoma State University CHAPTER 5: Identifying and Selecting Systems Development Projects 1.1

2. Learning Objectives • Describe the project identification and selection process • Describe the corporate strategic planning and information systems planning process • Explain the relationship between corporate strategic planning and information systems planning • Describe how information systems planning can be used to assist in identifying and selecting systems development projects • Describe the three classes of Internet electronic commerce applications: • Internet, Intranets and Extranets 5.2

3. Project Identification and Selection in SDLC 5.3

4. Identifying and Selecting IS Development Projects • What derives IS development projects? • Who identifies the potential development projects? 5.4

5. Identifying and Selecting IS Development Projects • Top-Down Identification • Senior management or steering committee • Focus is on global needs of organization • Bottom-up Identification • Business unit or IS group • Don’t reflect overall goals of the organization 5.5

6. Classifying and Ranking IS Development Projects • Performed by top management, steering committee, business units or IS development group 5.6

7. Classifying and Ranking IS Development Projects Organizational Value Chain

8. Selecting IS Development Projects • Process of considering short and long-term projects • Projects most likely to achieve business objectives are selected 5.8

9. Deliverables and Outcomes • Incremental commitment? • Knowledge of overall organizational business strategy… • Improves project selection and identification process • Provides sound guidance throughout the SDLC 5.9

10. Traditional Project Identification and Selection Solves isolated problems Focuses on business processes Does not allow for organizational change Planning-Based Approach to Project Identification and Selection Focuses on present and future information needs Information needs change slower than business processes Corporate and Information Systems Planning Improperly planned projects would result in systems that cannot be shared across an organization. 5.10

11. Corporate and Information Systems Planning • Corporate Strategic Planning • Process of developing and refining models of the current and future enterprise as well as a transition strategy • Planning results in several outcomes • Mission Statement • Objective Statement • Competitive Strategy 5.11

12. Corporate and Information Systems Planning • Corporate Strategic Planning • Mission Statement • A statement that makes it clear what business a company is in • Objective Statement • A series of statements that express an organization’s qualitative and quantitative goals for reaching a desired future position • Objectives are critical success factors • Competitive Strategy • The method by which an organization attempts to achieve its mission and objectives 5.12

13. Corporate Strategic Planning

14. Information Systems Planning (ISP) • An orderly means of assessing the information needs of an organization and defining the systems and technologies that will best satisfy those needs 5.14

15. Information Systems Planning Step 1: Describing the Current Situation • Top-down Planning • Generic methodology that attempts to gain a broad understanding of the information system needs of the entire organization • Bottom-up Planning • Generic methodology that identifies and defines IS development projects based upon solving operational business problems or taking advantage of some business opportunities 5.15

16. Information Systems Planning Step 1: Describing the Current Situation (Cont.) • Planning team is chartered to model existing situation • Identification of Organizational: • Locations • Units • Functions • Processes • Data • Information Systems 5.16

17. Information Systems Planning Step 1: Describing the Current Situation (Cont.) • Matrices are developed to cross-reference units • Location-to-Function • Location-to-Unit • Unit-to-Function • Function-to-Objective • Function-to-Process • Function-to-Data Entity • Process-to-Data Entity • Process-to-Information System • Data Entity-to-Information System • Information System-to-Objective 5.17

18. Information Systems Planning Step 1: Describing the Current Situation (Cont.) • Analysis of Matrices: Affinity clustering Data Entity-to-Function matrix 5.18

19. Information Systems Planning Step 2: Describing the Target Situation • Update list of organizational locations, units, functions, etc. to reflect desired locations, units, functions, etc. • Matrices are updated to reflect future states • Planners focus on differences between current lists and matrices and future lists and matrices 5.19

20. Corporate and Information Systems Planning Step 3: Developing a Transition Strategy • Broad, comprehensive document that looks at both short and long-term organizational development needs • Consists of a series of projects 5.20

21. Electronic Commerce Applications • Development process for Internet projects is no different than other projects • Electronic Commerce (e-Commerce) vs. Electronic Business (e-Business) • Internet based communication designed to support business activities • Means to execute business transactions without the traditional paper-based systems • Includes EDI, email, electronic publishing, electronic bulletin boards, shared data bases, etc. • Internet-based retailing (e.g., Amazon.com) • Catalog shopping vs. Web-based retailing • B-to-C vs. B-to-B 5.21

22. Internet Development • Internet • Worldwide network of networks used for electronic commerce • Intranet • Internet-based communication to support business activities within a single organization • Extranet • Internet-based communication to support business-to-business activities 5.22

23. Internet Development • Internet vs. Intranet/Extranet Apps • Intranet/Extranet – Developer knows how application will be run and used • Internet – Developer faces various unknowns • EDI vs. Web-based Transaction Processing 5.23

24. Summary • Project Identification and Selection • Identifying Potential Development Projects • Classifying and Ranking Projects • Selecting Projects for Development • Corporate strategic planning • Process of identifying the mission, objectives and strategies of an organization • Information Systems Planning • Orderly means for assessing the information needs of an organization and defining the systems and databases that will best satisfy those needs • Electronic Commerce • Internet, Intranets, Extranets, and EDI 5.24

25. CHAPTER 6: Initiating and Planning Systems Development Projects 2.25

26. Learning Objectives • Describe steps involved in the project initiation and planning process • Explain the need for and the contents of a Statement of Work and Baseline Project Plan • List and describe various methods for accessing project feasibility • Describe the differences between intangible and tangible costs and benefits and between recurring and one-time costs and benefits • Detail various methods of cost/benefit analysis • Describe the activities and participant roles within a structured walkthrough 6.26

27. Project Initiation and Planning in SDLC 5.27

28. Initiating and Planning System Development Projects • Project Initiation • Establishment of project team • Development of relationship with customer • Project Initiation Plan • Establishment of Management Procedures • Establishment of Project Workbook and Project Management Environment • Project Planning • Defining clear, discrete activities and the work needed to complete each activity 6.28

29. Initiating and Planning System Development Projects • Deliverables and Outcomes • Baseline Project Plan (BPP) • Scope • Benefits • Costs • Risks • Resources • Statement of Work (SOW) • Describes deliverables • Outlines work needed to be performed • Prepared for the customer 6.29

30. PVF Statement of Work

31. Assessing Project Feasibility • Six Categories • Economic • Technical • Operational • Schedule • Legal and contractual • Political 6.31

32. Assessing Economic Feasibility • Cost – Benefit Analysis • Determine Benefits • Tangible Benefits • Can be measured easily • Examples • Cost reduction and avoidance • Error reduction • Increased flexibility • Increased speed of activity • Improved management planning and control • Opening new markets and increasing sales opportunities 6.32

33. Assessing Economic Feasibility • Determine Benefits (Cont.) • Intangible Benefits • Cannot be measured easily • Examples • Increased employee morale • Competitive necessity • More timely information • Promotion of organizational learning and understanding 6.33

34. Assessing Economic Feasibility • Determine Costs • Tangible Costs • Can easily be measured in dollars • Example: Hardware • Intangible Costs • Cannot be easily measured in dollars • Examples: • Loss of customer goodwill • Loss of employee morale 6.34

35. Assessing Economic Feasibility • Determine Costs (Cont.) • One-Time Costs • Associated with project startup, initiation and development • Includes • System Development • New hardware and software purchases • User training • Site preparation • Data or system conversion 6.35

36. Assessing Economic Feasibility • Determine Costs (Cont.) • Recurring Costs • Associated with ongoing use of the system • Includes: • Application software maintenance • Incremental data storage expense • New software and hardware releases • Consumable supplies • Incremental communications 6.36

37. Recurring and One-time Costs at PVF

38. Time Value of Money (TVM) • The method of comparing present cash flow to future expected returns • Discount rate: The rate of return used to compute the present value and future cash flows • Present Value Calculations: PVn = Y * [ 1/(1 + i)n] Where PV: Present value of future cash flow Y: Future cash flow n: Number of years from present time i: Discount rate

39. TVM Calculations - Example • What is the present value of three yearly payments of $1500 each for the next three consecutive years? Time 0 1 2 3 |-------------|-------------|-------------|------- Cash Flow 0 $1500 $1500 $1500 i = 10% PV1 = 1500 * [ 1/(1 + 0.10)1] = 1500 * 0.9091 = 1363.65 PV2 = 1500 * [ 1/(1 + 0.10)2] = 1500 * 0.8264 = 1239.60 PV3 = 1500 * [ 1/(1 + 0.10)3] = 1500 * 0.7513 = 1126.95 NPV = PV1 + PV2 + PV3 = $3730.20

40. Cost Benefit Calculations for PVF Net Present Value NPV is the current value of all costs and benefits associated with the project Return on Investment ROI is the ratio of the net benefits divided by total cost of the project Break-Even Analysis BEA is method used to calculate the amount of time required to recover the project cost.

41. Assessing Technical Feasibility • Technical Feasibility • Assessment of the development organization’s ability to construct the proposed system • Project risk can be assessed based upon: 6.41

42. Assessing Technical Feasibility • Effects of degree of project structure, project size, and familiarity with the application area on project implementation risk 6.42

43. Assessing Other Project Feasibility Concerns • 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 • Legal and Contractual Feasibility • Assessment of legal and contractual ramifications of the new information system • Political Feasibility • Assessment of key stakeholders in the organization’s view toward proposed system 6.43

44. Building the Baseline Project Plan • Objectives • Assures that the customer and the development group have a complete understanding of the proposed system and the requirements • Provides sponsoring organization with a clear idea of scope, costs, benefits and duration of the project • Four Sections • Introduction • System Description • Feasibility Assessment • Management Issues 6.44

45. Baseline Project Plan Report

46. Building the Baseline Project Plan • Introduction • Brief overview • Project scope defined • Units affected • Who inside and outside the organization would be involved • Interaction with other systems • Range of system capabilities • Recommended course of action 6.46

47. Building the Baseline Project Plan • System Description • Outline of possible alternative solutions • Description of the selected solution in a narrative format • Feasibility Assessment • Project costs and benefits • Technical, operational, legal, contractual and political assessments • Project schedule, timeline and resource analysis 6.47

48. Building the Baseline Project Plan • Management Issues • Outlines concerns that management may have about the project • Team composition • Communication plan • Project standards and procedures 6.48

49. Reviewing the Baseline Project Plan • Objectives • Assure conformity to organizational standards • All parties agree to continue with the project • Walkthrough • Peer group review • Participants • Coordinator • Presenter • User • Secretary • Standards Bearer • Maintenance Oracle 6.49

50. Reviewing the Baseline Project Plan • Walkthrough (continued) • Assignment of coordinator • Assignment of individuals to roles using the walkthrough review form • Presentation • Individualsare polled for their opinions (good/minor/major revision) Walkthrough Review Form 6.50