Initiating and Planning Systems Development Projects Contemplative Questions

Initiating and Planning Systems Development Projects

Contemplative Questions n n n 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?

Initiation vs. Planning n n n For any single project… – – When is it initiated? When does planning start? – – 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, decisionmaking, communication. – Milestones are identified and possibly negotiated.

What are the deliverables and outcomes during this stage? n Baseline Project Plan (BPP) n 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 n Statement of Work (SOW) n A much simpler document that describes the work to be performed

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

Assessing Risk n 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. n 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?

Technical Feasibility n 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 n Is the correlation (+) or (-) for each factor? – e. g. As project size increases, risk will ____. (increase, decrease).

Risk Factors

Other Types of Feasibility n n 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 n Assessment of how a proposed system solves business problems or takes advantage of opportunities – Schedule Feasibility n Assessment of time frame and project completion dates with respect to organization constraints for affecting change

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

Economic Feasibility Assessing the financial benefits and costs for a project n Consider n – Tangible benefits – Intangible benefits – Tangible costs – Intangible costs

Economic Feasibility n 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?

Cookbook approach n 1. 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 c) Discount everything based on the Time Value of Money

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

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

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

Important Considerations n Steering committees usually prefer more analysis rather than less. – They also prefer quality over quantity. * n 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.