The Feasibility Study

The Feasibility study is an analysis of possible alternative solutions to a problem and a

recommendation on the best alternative. It can decide whether a process be carried out
by a new system more efficiently than the existing one.
The feasibility study should examine three main areas; - market issues, - technical and
organizational requirements, - financial overview. The results of this study are used to
make a decision whether to proceed with the project, or table it. If it indeed leads to a
project being approved, it will - before the real work of the proposed project starts - be
used to ascertain the likelihood of the project's success.

A feasibility study should provide management with enough information to

decide:
1.
Whether the project can be done;
2.
Whether the final product will benefit its intended users;
3.
What are the alternatives among which a solution will be chosen (during
subsequent phases)?
4.
Is there a preferred alternative?
Content of a feasibility study
Things to be studied in the feasibility study:

The present organizational system

Stakeholders, users, policies, functions, objectives...

Problems with the present system

Inconsistencies, inadequacies in functionality, performance

Possible solution alternatives

Sticking with the current system is always an alternative

Different business processes for solving the problems

Different levels/types of computerization for the solutions

Advantages and disadvantages of the alternatives

Needs Analysis
A needs analysis should be the first undertaking of a feasibility study as it clearly defines
the project outline and the clients' requirements. Once these questions have been
answered the person/s undertaking the feasibility study will have outlined the project
needs definition. The following questions need to be asked to define the project needs
definition: What is the end deliverable? What purpose will it serve? What are the
environmental effects? What are the rules and regulations? What standards will we be
measured against? What are the quality requirements? What is the minimal quality
requirements allowed? What sustainability can we expect? What carry over work can we
expect? What are the penalty clauses? How much do we need to outsource? How much
do we need to insource?

Types of Feasibility
The feasibility study includes complete initial analysis of all related system. Therefore
the study must be conducted in a manner that will reflect the operational, economic as
well as technical and scheduling feasibility of the system proposal. These are the four
main types of feasibility study.
Operational
This aspect defines the urgency of the problem and the acceptability of any solution. It
shows if the system is developed, will it be used. The operational study includes peopleoriented and social issues: internal issues, such as manpower problems, labor objections,
manager resistance, organizational conflicts and policies; also external issues, including
social acceptability, legal aspects and government regulations. It takes in consideration
whether the current work practices and procedures support a new system and social
factors of how the organizational changes will affect the working lives of those affected
by the system.
Operational -The PIECES Framework
The PIECES framework can help in identifying operational problems to be solved, and
their urgency:
Performance -- Does current mode of operation provide adequate throughput and
response time?
Information -- Does current mode provide end users and managers with timely, pertinent,
accurate and usefully formatted information?
Economy -- Does current mode of operation provide cost-effective information
services to the business? Could there be a reduction in costs and/or an increase in
benefits?
Control -Does current mode of operation offer effective controls to protect against
fraud and to guarantee accuracy and security of data and information?
Efficiency - Does current mode of operation make maximum use of available
resources, including people, time, flow of forms,...?
Services -Does current mode of operation provide reliable service? Is it flexible and
expandable?
Technical
The technical aspect exploresif the project feasibility is within the limits of current
technology and does the technology exist at all, or if it is available within given resource
constraints (i.e., budget, schedule,...). In the technical feasibility the system analyst look
between the requirements of the organization, such as, (I) input device which can enter a

large amount of data in the effective time (II) Output devices which can produce output
in a bulk in an effective time (III) The choice of processing unit depends upon the type of
processing required in the organization.
The analyst will ask:

Is the proposed technology or solution practical?

Do we currently possess the necessary technology?
Do we possess the necessary technical expertise, and is the schedule reasonable?
Is relevant technology mature enough to be easily applied to our problem?

Some firms like to use state-of-the-art technology, but most firms prefer to use mature
and proven technology. A mature technology has a larger customer base for obtaining
advice concerning problems and improvements.

Assuming that required technology is practical, is it available in the information

systems shop?

If the technology is available, does it have the capacity to handle the solution.

If the technology is not available in, can it be acquired

Schedule Feasibility
Given his technical expertise, the analyst should determine if the project deadlines are
reasonable whether constraints placed on the project schedule can be reasonably met.
Some projects are initiated with specific deadlines. You need to determine whether the
deadlines are mandatory or desirable. If the deadlines are desirable rather than
mandatory, the analyst can propose alternative schedules. It is preferable (unless the
deadline is absolutely mandatory) to deliver a properly functioning information system
two months late than to deliver an error-prone, useless information system on time!
Missed schedules are bad, but inadequate systems are worse!
We may have the technology, but that doesn't mean we have the skills required to
properly apply that technology. True, all information systems professionals can learn new
technologies. However, that learning curve will impact the technical feasibility of the
project, specifically, it will impact the schedule.

Economic Feasibility
The bottom line in many projects is economic feasibility. During the early phases of the
project, economic feasibility analysis amounts to little more than judging whether the
possible benefits of solving the problem are worthwhile. As soon as specific
requirements and solutions have been identified, the analyst can weigh the costs and
benefits of each alternative. This is called a cost-benefit analysis.

Cost/Benefit Analysis
The purpose of a cost/benefit analysis is to answer questions such as:

Is the project justified (because benefits outweigh costs)?

Can the project be done, within given cost constraints?

What is the minimal cost to attain a certain system?

What is the preferred alternative, among candidate solutions?

Examples of things to consider:

Hardware/software selection

How to convince management to develop the new system

Selection among alternative financing arrangements (rent/lease/purchase)

Difficulties -- discovering and assessing benefits and costs; they can both be intangible,
hidden and/or hard to estimate, it's also hard to rank multi-criteria alternatives
Examples of particular benefits: cost reductions, error reductions, increased flexibility of
operation, improved operation, better (e.g., more accurate) and more timely information.
Benefits may be classified into one of the following categories:

Monetary : when $-values can be calculated e.g. Increased sales through

increased production.

Tangible (Quantified) : when benefits can be quantified, but $-values can't be

calculated e.g. cost/error reductions, increased throughput/efficiency, increased
margin on sales, more effective use of staff

Intangible: when neither of the above applies, it is difficult to quantify, but

maybe more important! -- business analysts help estimate $ values. e.g., increased
flexibility of operation, higher quality products/services, better customer relations,
improved staff morale.
The analyst report will also show how will the benefits accrue, when and over what
timescale and how to identify benefits. (Benefits are identified at organizational level
(operational, lower/middle/higher management) and by department (production,
purchasing, sales)
Costs are classified as:

Project-related costs

Development and purchasing costs: who builds the system (internally or

contracted out)? software used (buy or build)? hardware (what to buy, buy/lease)?
facilities (site, communications, power,...)

Installation and conversion costs: installing the system, training of personnel, file
conversion,....

Operational costs (on-going)

Maintenance: hardware (maintenance, lease, materials,...), software (maintenance

fees and contracts), facilities


Personnel: operation, maintenance

For a small business that wants to introduce a PC-based information system, these
cost categories translate to the following:

Project costs: purchasing (hardware, software, office furniture), customizing

software, training, system installation and file conversion

On-going costs: operating the system (data entry, backups, helping users, vendors
etc.), maintenance (software) and user support, hardware and software maintenance,
supplies,...
Determine Cash Flow

Project the costs and benefits over time, e.g. 3-5 years

Calculate Net Present Value for all future costs/benefits

determines future costs/benefits of the project in terms of today's dollar values

o
A dollar earned today is worth more than a (potential) dollar earned next year
Do cost/benefit analysis

Calculate Return on Investment:

Allows comparison of lifetime profitability of alternative solutions.

o
ROI = Total Profit - Lifetime benefits - Lifetime costs
Total Cost
Lifetime Costs
Calculate Break-Even point:

how long will it take (in years) to pay back the accrued costs:
@ (Accrued Benefit > Accrued Cost)

EVALUATING THE FEASIBILITY STUDY

The feasibility study is germane to the determination of whether there should be any
further plans: The conclusion might be, Weve looked at the proposal thoroughly, and
have concluded that it does not profitably serve our needs in the foreseeable future. But
if the conclusions of the study are positive, it should provide you with a clear
understanding of what the implementation plan entails in terms of change, cost, benefit,
risk, and time. The feasibility study them serves two functions:

The study makes the case for funding the implementation project

The outputs of the study provide the inputs for the implementation plan