Modern Systems Analysis

and Design
Sixth Edition

Jeffrey A. Hoffer
Joey F. George
Joseph S. Valacich

Chapter 5
Initiating and Planning
Systems Development Projects
Learning Outcomes
 Describe the steps involved in the project
initiation and planning process.
 Explain the need for and the contents of a
Project Scope Statement and Baseline Project
Plan.
 List and describe various methods for assessing
project feasibility.
 Describe the differences between tangible and
intangible benefits and costs and between one-
time vs. recurring benefits and costs.

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Learning Outcomes(Cont.)
 Perform cost-benefit analysis and describe what
is meant by the time value of money, present
value, discount rate, net present value, return
on investment, and break-even analysis.
 Describe the general rules for evaluating
technical risks associated with a systems
development project.
 Describe the activities and participant roles
within a structured walkthrough.

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Initiating and Planning Systems
Development Projects
 What must be considered when making the
decision on the division between project
initiation and planning (PIP) and analysis?
 How much effort should be expended on the PIP
process?
 Who is responsible for performing the PIP
process?
 Why is PIP such a challenging activity?

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The Process of Initiating and
Planning IS Development Projects

FIGURE 5-1
Systems development life cycle
with project initiation and
planning highlighted

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The Process of Initiating and Planning IS
Development Projects (Cont.)
 Project initiation focuses on activities
designed to assist in organizing a team to
conduct project planning.

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The Process of Initiating and Planning IS
Development Projects (Cont.)
 Establishing the Project Initiation Team.
 Establishing a Relationship with the Customer.
 Establishing the Project Initiation Plan.
 Establishing Management Procedures.
 Establishing the Project Management
Environment and Project Workbook.
 Developing the Project Charter.

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The Process of Initiating and Planning IS
Development Projects (Cont.)
 The key activity of project initiation is the
development of the project charter.
A short document that is prepared for both internal
and external stakeholders
 Provides a high-level overview of the project
 Useful communication tool that helps to assure that
the organizations and other stakeholders understand
the initiation of a project

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The Process of Initiating and Planning IS
Development Projects (Cont.)
 A project charter typically contains:
 Project title and date of authorization
 Project manager name and contact information
 Customer name and contact information
 Projected start and completion dates
 Key stakeholders, project role, and responsibilities
 Project objectives and description
 Key assumptions or approach
 Signature section for key stakeholders

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The Process of Initiating and Planning IS
Development Projects (Cont.)
 The key activity of project planning is the
process of defining clear, discrete
activities and the work needed to complete
each activity within a single project.
 The objective of the project planning
process is the development of a Baseline
Project Plan (BPP) and the Project Scope
Statement (PSS).

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Elements of Project Planning
 Describe project scope, alternatives,
feasibility.
 Divide project into tasks.
 Estimate resource requirements and
create resource plan.
 Develop preliminary schedule.
 Develop communication plan.

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Elements of Project Planning
(Cont.)
 Determine standards and
procedures.
 Identify and assess risk.
 Create preliminary budget.
 Develop a statement of work.
 Set baseline project plan.

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Deliverables and Outcomes
 Business Case
 Justificationfor an information system
 Presented in terms of the tangible and
intangible economic benefits and costs
 The technical and organizational feasibility of
the proposed system

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Deliverables and Outcomes (Cont.)

 Baseline Project Plan (BPP)

A major outcome and deliverable from the PIP
phase
 Contains the best estimate of a project’s
scope, benefits, costs, risks, and resource
requirements

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Deliverables and Outcomes (Cont.)

 Project Scope Statement (PSS)

A document prepared for the customer
 Describes what the project will deliver
 Outlines at a high level all work required to
complete the project

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Assessing Project Feasibility
 Economic
 Technical
 Operational
 Scheduling
 Legal and contractual
 Political

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Assessing Project Feasibility (Cont.)

FIGURE 5-2
System Service Request for Customer
Tracking System (Pine Valley Furniture).

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Assessing Project Feasibility
(Cont.)
 Economic feasibility: a process of
identifying the financial benefits and costs
associated with a development project
 Often referred to as a cost-benefit analysis
 Project is reviewed after each SDLC phase in
order to decide whether to continue, redirect,
or kill a project

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Determining Project Benefits
 Tangible benefits refer to items that can
be measured in dollars and with certainty.
 Examples include:
 reduced personnel expenses,
 lower transaction costs, or
 higher profit margins.

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Determining Project Benefits
(Cont.)
 Most tangible benefits will fit within the following
categories:
 Cost reduction and avoidance
 Error reduction
 Increased flexibility
 Increased speed of activity
 Improvement of management planning and control
 Opening new markets and increasing sales
opportunities

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Determining Project Benefits
(Cont.)
 Intangible benefits are benefits derived from
the creation of an information system that cannot
be easily measured in dollars or with certainty.
 May have direct organizational benefits, such as the
improvement of employee morale.
 May have broader societal implications, such as the
reduction of waste creation or resource consumption.

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Determining Project Costs
 Tangible cost: a cost associated with an
information system that can be measured
in dollars and with certainty
 IS development tangible costs include:
 Hardware costs,
 Labor costs, or
 Operational costs including employee training
and building renovations.

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Determining Project Costs (Cont.)

 Intangible cost: a cost associated with an

information system that cannot be easily
measured in terms of dollars or with
certainty
 Intangible costs can include:
 Lossof customer goodwill,
 Employee morale, or
 Operational inefficiency.

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Determining Project Costs (Cont.)

 One-time cost: a cost associated with project

start-up and development or system start-up
 These costs encompass activities such as:
 Systems development,
 New hardware and software purchases,
 User training,
 Site preparation, and
 Data or system conversion.

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Determining Project Costs (Cont.)
 Recurring cost: a cost resulting from the
ongoing evolution and use of a system
 Examples of these costs include:
 Applicationsoftware maintenance,
 Incremental data storage expenses,
 Incremental communications,
 New software and hardware leases, and
 Supplies and other expenses (i.e. paper, forms, data
center personnel).

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Determining Project Costs (Cont.)

 Both one-time and recurring costs can

consist of items that are fixed or variable in
nature.
 Fixed costs are billed or incurred at a
regular interval and usually at a fixed rate.
 Variable costs are items that vary in
relation to usage.

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Determining Project Costs (Cont.)
 Procurement
 Consulting,
equipment, site preparation, capital,
management time
 Start-up
 Operating systems, communications installation,
personnel hiring, organizational disruption
 Project-related
 Applicationsoftware, software modification,
personnel overhead, training, data analysis,
documentation
 Operating
 System maintenance, rental, asset depreciation,
operation and planning
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The Time Value of Money
 Net Present Value (NPV)
 Use discount rate to determine present
value of cash outlays and receipts
 Return on Investment (ROI)
 Ratio of cash receipts to cash outlays
 Break-Even Analysis (BEA)
 Amount of time required for cumulative
cash flow to equal initial and ongoing
investment

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The Time Value of Money
 Time value of money (TVM): the concept
that money available today is worth more
than the same amount tomorrow
 Discount rate: the rate of return used to
compute the present value of future cash
flows (the cost of capital)
 Present value: the current value of a
future cash flow

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The Time Value of Money (Cont.)

 Net Present Value

 PVn = present value of Y dollars n years from
now based on a discount rate of i.
 NPV = sum of PVs across years.
 Calculates time value of money

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The Time Value of Money (Cont.)

 Break-even analysis: a type of cost-

benefit analysis to identify at what point (if
ever) benefits equal costs

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Assessing Technical Feasibility
 Technical feasibility: a process of
assessing the development organization’s
ability to construct a proposed system

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Assessing Technical Feasibility
 The potential consequences of not assessing
and managing risks can include the following:
 Failure to attain expected benefits from the project,
 Inaccurate project cost estimates,
 Inaccurate project duration estimates,
 Failure to achieve adequate system performance
levels, and
 Failure to adequately integrate the new system with
existing hardware, software, or organizational
procedures.

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Project Risk Factors
 Project size
 Team size, organizational departments, project duration,
programming effort
 Project structure
 New vs. renovated system, resulting organizational changes,
management commitment, user perceptions
 Development group
 Familiarity with platform, software, development method,
application area, development of similar systems
 User group
 Familiarity with IS development process, application area, use
of similar systems

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Assessing Technical Feasibility
(Cont.)
 Risk can be managed on a project by:
 Changing the project plan to avoid risky
factors.
 Assigning project team members to carefully
manage the risky aspects.
 Setting up monitoring methods to determine
whether or not potential risk is, in fact,
materializing.

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Assessing Technical Feasibility
(Cont.)
 The four primary factors associated with the
amount of technical risk on a given project are:
 Project size,
 Project structure,
 The development group’s experience with the
application and technology area, and
 The user group’s experience with systems
development projects and the application area (see
also Kirsch, 2000).

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Assessing Technical Feasibility
(Cont.)
 Four general rules emerged as technical
risk assessments:
 Larger projects are riskier than smaller
projects.
 A system in which the requirements are easily
obtained and highly structured will be less
risky than one in which requirements are
messy, ill structured, ill defined, or subject to
the judgment of an individual.

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Assessing Technical Feasibility
(Cont.)
 The development of a system employing
commonly used or standard technology will
be less risky than one employing novel or
nonstandard technology.
 A project is less risky when the user group is
familiar with the systems development
process and application area than if
unfamiliar.

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Assessing Technical Feasibility (Cont.)

FIGURE 5-8
Effects of degree of project structure, project size, and familiarity with
application area on project implementation risk (Source: Based on 7th Applegate,
Austin, and McFarlan. 2007; Tech Republic, 2005.)
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Assessing Other Feasibility
Concerns
 Operational
 Does the proposed system solve problems or take
advantage of opportunities?
 Scheduling
 Can the project time frame and completion dates
meet organizational deadlines?
 Legal and Contractual
 What are legal and contractual ramifications of the
proposed system development project?
 Political
 How do key stakeholders view the proposed
system?
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Building the Baseline Project
Plan
 Baseline Project Plan (BPP) is a
document intended primarily to guide the
development team.
 Sections:
 Introduction
 System description
 Feasibility assessment
 Management issues

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Building the Baseline Project
Plan (Cont.)
 Project Scope statement is part of the BPP
introduction.
 Sections:
 Problem statement
 Project objectives
 Project description
 Business benefits
 Deliverables
 Expected duration

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Factors in Determining Scope
 Organizational units affected by new
system
 Current systems that will interact with or
change because of new system
 People who are affected by new system
 Range of potential system capabilities

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Diagram Depiction of Project Scope

FIGURE 5-11
Context-level data flow diagram showing project scope for Purchasing
Fulfillment System (Pine Valley Furniture)
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Building the Baseline Project
Plan (Cont.)
 System description section outlines possible
alternative solutions.
 Feasibility assessment section outlines issues
related to project costs and benefits, technical
difficulties, and other such concerns.
 Management issues section outlines a number
of managerial concerns related to the project.

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Reviewing the Baseline Project
Plan
 Structured Walkthroughs: a peer-group
review of any product created during the
system development process
 Roles: coordinator, presenter, user,
secretary, standard-bearer, maintenance
oracle
 Can be applied to BPP, system
specifications, logical and physical designs,
program code, test procedures, manuals and
documentation

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Summary
 In this chapter you learned how to:
 Describe steps involved in project initiation and
planning.
 Explain the need for and contents of Statement of
Work and Baseline Project Plan.
 List and describe methods for assessing project
feasibility.
 Describe tangible vs. intangible costs and
benefits, and one-time vs. recurring costs and
benefits.

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Summary (Cont.)
 Perform cost-benefit analysis, and
understand time value of money, present
value, discount rate, return on investment,
and break-even analysis.
 Describe rules for evaluating technical risk
of systems development projects.
 Describe activities and roles of structured
walkthroughs.

Chapter 5 Copyright © 2011 Pearson Education, Inc. 48