Feasibility Analysis for a Software

Project
Dr. Pedro Mejia Alvarez
Seccion de Computacion, CINVESTAV-IPN
 Feasibility Analysis

“A measure of how beneficial or practical the

development of a software system will be to an
organization. This analysis recurs throughout
the life cycle.”
 Feasibility Checkpoints
“creeping commitment approach”

Existing System Planned Project

Planning

Support Analysis

Production Business
System Requirements

Implementation Design
Technical
Design
 Existing System Planned Project
Planning

Support Analysis

Production
System

Implementation
Technical
Design
Design
Business
Requirements

Feasibility Checkpoints

• systems analysis -- study

– urgency? rough cost estimate
• systems analysis -- definition
– clearer scope, refined cost estimate
• systems design -- selection
– adjust scope, schedule, costs
• systems design -- procurement
– option check before letting contracts
• systems design -- detail design
– one last chance to cancel or downsize
 Existing System Planned Project
Planning

Support Analysis

Production
System

Implementation
Technical
Design
Design
Business
Requirements

Feasibility Analysis

• Technical
– can system be developed?
• Operational
– can organization absorb the change?
• Economic
– what is business justification?
• Schedule
– can system be implemented in time available?
 People
People

Technology
Technology Technical Feasibility

• Is the technology or solution practical?

• Do we currently possess the necessary
technology?
• Do we possess the necessary technical
expertise?
People
People
Operational Feasibility

• Is the problem worth solving?

• Will the solution to the problem work?
• How do the end-users and managers feel
about the problem (or solution)?
People
People
Schedule Feasibility

• Can the project deadlines be met?

• What will it cost to accelerate development?
 Economic Analysis

• Cost estimates
– acquisition or development costs
– operation and maintenance costs
• Benefit estimates
– tangible benefits
– intangible benefits
 Estimating Costs

• acquisition or development (one time)

• operation and support (ongoing)

• in these expense categories

– personnel hours
– computer usage
– media and supplies
– equipment and software
 Estimating Acquisition Cost

• Shop the Vendors (informal)

• Request for Proposal (RFP)
• Request for Quote (RFQ)
 Estimating Development Cost
• break project up into tasks
– estimate SDLC tasks independently
• use life cycle cost model
– e.g., 1-3-3-3 model
• take advantage of analogy/experience
– how much have similar projects cost?
• calculate function point metric
– estimate “size” of project from inputs, outputs, etc.
– apply productivity rate
 Estimating Operation and Support

• client/user personnel
• technical personnel
• media and supplies
• equipment and software support
– repair
– enhancement
 Estimating Tangible Benefits
• reduced costs
– manual operations
– computer operations
– programmed decisions
• increased revenue
– new services
– differentiated product
– faster delivery
– better quality
– larger market share
 Estimating Intangible Benefits
• information quality
– precision
– timeliness
– integration
– presentation
• job satisfaction
– participative design
– job enrichment
– improved tools
• external standing
– responsiveness
– corporate image
 Economic Analysis (continued)

• traditional capital planning techniques apply

– payback analysis
– return on investment
– net present value
 January1996

Payback Analysis

• determines how long it will take for accrued

benefits to overtake accrued and continuing
costs
– most companies want quick payback
– 3-5 years is typical
 Return on Investment (ROI)
%
• determines the lifetime profitability of different
investments
– ROI = (benefits - costs) / costs)
– Annual ROI is common measure
 Net Present Value (NPV)

• determines the lifetime profitability of different

investments
– NPV = discounted benefits - discounted costs
– Preferred technique in many organizations
 Feasibility Matrix

Characteristics Option 1 Option 2 Option 3

(mainframe) (surround) (client server)
Technical Low risk, Moderate risk, High risk,
No problems Some IS staff IS staff needs
are ready more training
Operational Strong user High user High user
resistence acceptance acceptance

Economic (NPV) $220,000 $180,000 $320,000

(Payback) 2.5 years 3.2 years 3 years

Schedule Jun 95 Aug 95 Oct 95

 Benefit Profile Chart
(for documenting intangibles)
Some Significant New Benefit
Improvement Improvement
Better x
Communication
Current Market x
Information
Better x
Teamwork
Higher User x
Satisfaction