SDLC Guide Feasibility Analysis

UNITED STATES MINT
Office of the Chief Information Officer (OCIO) DRAFT – June 29, 2003

Version: Date:

0 Revision History Description Initial publication.SDLC Guide – Feasibility Analysis Date mm/dd/yyyy Version 1. Custodian/Organization / OCIO SDLC Guide – Feasibility Analysis 2 5/27/2013 .

.....................5 Affected organizations...............................7 Economic Feasibility ....................................................................................................................................................................................13 Trends in profitability ........................................................................................7 Financial Feasibility .......................................9 Needs Analysis ...................................................................................................................................................................................8 Scope of Feasibility Analysis .....................................................................................................................5 Ability of the current systems and procedures to address the requirement or opportunity..............................................................................................................................................................................................................10 Alternative Descriptions ..................13 Life cycle stage of industry? ..............................................................................................................................................................................9 Engineering & Design ...........................................................................................................................................................................................SDLC Guide – Feasibility Analysis Table of Contents Overview...........................12 Price ...............................................................7 Safety Feasibility ...........................................5 High-level information processing capabilities............................................................................8 Technical Feasibility ............13 Quality .........................................13 Innovations ..........................................................................................................5 Types of information needed..................................) ...........................................................7 Cultural Feasibility ..........................................................................................................................................................................10 Project Impacts ..................................................10 Evaluation Criteria .............................................................................................13 Market share ..............................13 SDLC Guide – Feasibility Analysis 3 5/27/2013 .....................................................................................................11 Conclusions and Recommendations .............................................8 Social Feasibility ......................................................................................5 Programmatic or other causes and symptoms of the requirement or opportunity......................13 Who is profitable ...................................10 Financial Analysis ........................ etc............................................................................................................................................................................................................9 Cost Estimate ............................................................................................................................................................................................................................13 Implicit marketing strategy (aggressive....................................................................................................................................................................................................................................................................................... etc...................................................................................................................................................................................... Feasibility Analysis Checklist.5 Areas for Feasibility Analysis..........................................................................................................................13 Weaknesses/strengths ...........................................11 A.................................5 Timeframes within which the requirement or opportunity must be resolved................13 Market position (leader...................................................9 Process Work ..................................................................................................................................................................................................................................................................13 Growth of market share ................7 Managerial Feasibility ...............) ..............7 Political Feasibility ....................................................................

......SDLC Guide – Feasibility Analysis Resulting implications on marketing strategies? ........................13 SDLC Guide – Feasibility Analysis 4 5/27/2013 .....................................

economic. and will be done You assess the requirement or opportunity in terms of technical. you should address the following key decisions. Before conducting the analysis. changes to regulations. and a proposed program (solution). identify objectives. Address characteristics of the requirement such as: o Programmatic or other causes and symptoms of the requirement or opportunity o Affected organizations o Types of information needed o High-level information processing capabilities o Ability of the current systems and procedures to address the requirement or opportunity o Timeframes within which the requirement or opportunity must be resolved What new information needs are associated with the problem? State whether a new information will be needed to support the proposed solution. • SDLC Guide – Feasibility Analysis 5 5/27/2013 . technology-independent terms on which all affected organizations can agree. An information management requirement or opportunity can be prompted by such factors as new legislation.SDLC Guide – Feasibility Analysis Overview Feasibility is a measure of how beneficial or practical the development of an information system will be to an organization. or the growth of a program beyond the support capability of existing systems. The feasibility study describes the information management or business requirement or opportunity in clear. The study contains decision criteria. should be done. and operational feasibility. Describe the scope of the effort entailed in providing the needed information in terms of affected missions and organizations. • What is the specific requirement? State the requirement and establish the broad objectives of the feasibility analysis. and aid in the selection of the best solution Improve confidence that the recommended action is the most viable solution to the problem Assure that projects requiring information systems resources can be done. comparisons of general solution possibilities. evaluate alternatives. The purpose of a feasibility analysis is to: • • • • Determine whether feasible solutions to defined concepts exist before full life cycle resources are committed Provide a structured method to focus on problems.

and a proposed solution. to ensure that you have performed all steps. The feasibility study contains decision criteria. SDLC Guide – Feasibility Analysis 6 5/27/2013 . comparisons of general solution possibilities. Ensure that the solution focuses on the major priority areas.SDLC Guide – Feasibility Analysis • How broad a scope should the proposed solution cover? Provide an overall context or environment within which the potential solution is defined. provided in Appendix A. Use the Feasibility Analysis Checklist.

or both. you use a report showing all the ramifications of the project. Political Feasibility You could refer to a politically feasible project as a "politically correct project. which can include the areas listed below. Financial feasibility involves the capability of the project organization to raise the appropriate funds needed to implement the proposed project. For example.SDLC Guide – Feasibility Analysis Areas for Feasibility Analysis You can determine the feasibility of a project in terms of technical factors. You should translate the tangible and intangible aspects of a project into economic terms to provide a consistent basis for evaluation. projects that are well-accepted at Headquarters might not be as wellaccepted at remote sites. Managerial Feasibility This area involves the capability of the infrastructure of a process to achieve and sustain process improvement. Management support. Cultural Feasibility This area deals with the compatibility of the proposed project with the corporate and project culture. political necessity may be a source of support for a project regardless of the project's merits. employee involvement. This is particularly true for large projects with national visibility that may have significant government inputs and political implications. Political feasibility analysis requires an evaluation of the compatibility of project goals with the prevailing goals of the political system. worthy projects may face insurmountable opposition simply because of political factors. On the other hand. A costbenefit analysis and a breakeven analysis are important aspects of evaluating the economic feasibility of new projects." Political considerations often dictate direction for a proposed project. for example. and commitment are key elements required to gauge managerial feasibility. To document the feasibility study. Financial Feasibility Financial feasibility is not the same as economic feasibility. Economic Feasibility This area involves the feasibility of the proposed project to generate economic benefits. economic factors. SDLC Guide – Feasibility Analysis 7 5/27/2013 . Project financing can be a major obstacle in large projects because of the level of capital required.

and Mexico was temporarily suspended in 1993 because of the legal consideration of the potential environmental impacts of the projects to be undertaken under the agreement. The ambient social structure may be such that certain categories of workers may be in short supply or nonexistent. you must assess the effect of the project on the social status of the project participants to ensure compatibility. Social Feasibility This area addresses the influences that a proposed project may have on the social system in the project environment. Canada. You should consider the technical capability of the personnel as well as the capability of the available technology.S. You also need to analyze technology transfer between geographical areas and cultures to understand productivity loss (or gain) due to differences (see Cultural Feasibility). SDLC Guide – Feasibility Analysis 8 5/27/2013 ..SDLC Guide – Feasibility Analysis Safety Feasibility Safety feasibility refers to an analysis of whether the project is capable of being implemented and operated safely with minimal adverse effects on the environment. the North America Free Trade Agreement (NAFTA) between the U. Unfortunately. environmental impact assessment is often not adequately addressed in complex projects. As an example. Technical Feasibility Technical feasibility refers to the ability of the process to take advantage of the current state of the technology in pursuing further improvement.

SDLC Guide – Feasibility Analysis Scope of Feasibility Analysis In general terms. Engineering & Design This involves a detailed technical study of the proposed project. You can also create a simulation of the proposed system to predict the outcome before the actual project starts. you should: • • • Get written quotations from suppliers and subcontractors Evaluate technology capabilities Perform product design SDLC Guide – Feasibility Analysis 9 5/27/2013 . Needs Analysis This indicates a recognition of a need for the project. alternative evaluation. and develop a proposal of how the need can be satisfied. alternative descriptions. For technologyoriented projects. The preliminary study often involves system models or prototypes. The need may affect the organization itself. Pertinent questions that you should ask include: • • • • Is the need significant enough to justify the proposed project? Will the need still exist by the time the project is completed? What are the alternate means of satisfying the need? What are the economic. or other government entities. another organization. the public. You then conduct a preliminary study to confirm and evaluate the need. environmental. project impact. financial analysis. social. the sections you should include in a feasibility analysis document are: needs analysis. process work. you can use conceptual drawings and scaled-down models to illustrate the general characteristics of a process. cost estimate. As appropriate for your project. engineering and design. and conclusions and recommendations. and political impacts of the need? Process Work This is the preliminary analysis you perform to determine what will be required to satisfy the need.

In the cost estimate document. Project Impacts This portion of the feasibility study provides an assessment of the impact of the proposed project. Financial Analysis This involves analyzing the cash flow profile of the project. breakeven point. SDLC Guide – Feasibility Analysis 10 5/27/2013 . technology used. system architecture. residual values. Include both the initial and operating costs in the cost estimation. and economic impacts may be some of the factors that will determine how the public perceives a project. operational. Alternative Descriptions This part of the document states the required and desirable features. if possible. and the manual process flow for each alternative. cultural.SDLC Guide – Feasibility Analysis Cost Estimate This involves estimating project cost to an acceptable level of accuracy. payback periods. A high-level data flow diagram and logical data model. The project cash flow profile helps to support the economic and financial feasibility of the project. and provides a concise narrative of the effects of implementing this alternative. • The section should state at least two alternatives for each feasibility study—including the alternative of doing nothing. associated risk. The analysis should consider rates of return. inflation. sources of capital. You should also assess the value-added potential of the project. if appropriate—and predict the anticipated benefits of each alternative and the likely effects of not taking action on the alternative. and economic feasibility. and sensitivity. It should describe the resources required. Environmental. you should also include estimates of capital investment and of recurring and nonrecurring costs. from current physical processes and data for the proposed system alternative. political. You can also perform a sensitivity analysis on the estimated cost values to see how sensitive the project plan is to the estimated cost values. Levels of around -5% to +15% are common at this level of a project plan. This is a critical analysis since it determines whether and when funds will be available to the project. This part of the document should also state the benefits in terms of technical. It provides: • A description for each alternative proposed to handle the defined problem. social.

and may indicate an endorsement or disapproval of the project SDLC Guide – Feasibility Analysis 11 5/27/2013 . In this section of the feasibility report. and document potential problems resulting from the implementation of each. You should also include recommendations on what action should be taken. The criteria should make a distinction among characteristics that must be present in the system for it to be acceptable. you should provide a systematic comparison of the alternatives. Conclusions and Recommendations The feasibility analysis document should end with the overall outcome of the project analysis.SDLC Guide – Feasibility Analysis Evaluation Criteria This section states the criteria by which the alternatives will be evaluated.

Include competing ways potential customers can fulfill the specific needs being addressed by the business' product. and hard to interpret. and best estimates for sales in terms of 'dollars' and 'units' for target market segment(s). If data is sketchy. Specifically identify direct competition for target • • Assessment of competition • • SDLC Guide – Feasibility Analysis 12 5/27/2013 . contradictory. admit it! Identify assumptions being made about the marketplace. present. Feasibility Analysis Checklist Feasibility Analysis Checklist The Business • • • • • The Product • What is the business going to sell? To whom it will be sold? What will product or service be used for? Why will prospects in target market buy product? What is the anticipated price? Ready for sale? Debugging a prototype? Paper dream? What product weaknesses cause a disadvantage in the market place? How to compensate for weaknesses? How to overcome any technological obsolescence? Development status Strengths and weaknesses • • • First Checkpoint The Market: A Preliminary Evaluation Are the type and level of critical resources available? Total market size and trends • Identify past.SDLC Guide – Feasibility Analysis A.

price. Promotional mix • • • Market share • • Market tactics • • • • • SDLC Guide – Feasibility Analysis 13 5/27/2013 .SDLC Guide – Feasibility Analysis market segments(s). second.) o Who is profitable o Trends in profitability o Weaknesses/strengths How to leverage competitor weaknesses? Overcome strengths? Trends in industry profitability? o Life cycle stage of industry? o Resulting implications on marketing strategies? What marketing mix variables are critical for decisions to purchase? (product. First estimate of venture's market share and target sales for the first. place). etc. promotion. How to sell? How to distribute? Service and warranty issues. and third operating year. Are estimates realistic. etc. but still challenging and worthy of anticipated resource allocation? Outline product delivery system.) o Market position (leader. • Provide data about all reasonable competitors: o Price o Quality o Innovations o Market share o Growth of market share o Implicit marketing strategy (aggressive.

custom-made production equipment? Are the solutions to production and operation issues within grasp? Are there any serious doubts to the viability of a solution? Are no solutions obvious? List know-how and skills needed for the new business. The proposed product can be priced to sell at a profit in the marketplace. A small share of the market will produce significant sales. Show evidence of demonstrated skills and availability and commitment to the project. Identify gaps and indicate how to fill. Can venture make product to specifications and deliver it on-time within competitive target cost levels? Does venture have sufficient knowledge about its suppliers and the local labor market to ensure that it will not face major operational problems? Will materials be accessible in sufficient quantity and quality? Is material acquisition probable within budgeted prices and time constraints for venture? Is special skills training necessary for successful operations? Will you have to rely on any unproven.SDLC Guide – Feasibility Analysis Second Checkpoint It should be clear that: • • • The potential market is large. Is the venture being built upon strengths and experience? Production and Operations • • • • • • Third Checkpoint • • • Entrepreneurs • • • Fourth Checkpoint • SDLC Guide – Feasibility Analysis 14 5/27/2013 . List skills available.

All risks and problems should not be insurmountable. Major Risks and Problems • • • Final Checkpoint • • • SDLC Guide – Feasibility Analysis 15 5/27/2013 . Evaluate the risks on both the probability of occurrence and its magnitude of negative results. All risks should be reasonable relative to the potential opportunity and rewards. Indicate a contingency solution for overcoming each major risk. • • Is the level of financing within the range acceptable by the various resource allocators? Are the financial requirements reasonable with respect to the venture’s potential and risks? Identify the most important risks to the success of the venture. All reasonable risks should be apparent.SDLC Guide – Feasibility Analysis • Financing Required Fifth Checkpoint Is the critical experience required by the venture now on-line? Indicate the magnitude of financing required.

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