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COST BENEFIT ANALYSIS (CBA)

INTRODUCTION TO COST BENEFIT ANALYSIS

Cost–benefit analysis (CBA), sometimes called benefit–cost analysis (BCA), is a systematic

process for calculating and comparing benefits and costs of a project, decision or government
policy. CBA has two purposes:
 To determine if it is a sound investment/decision (justification/feasibility),
 To provide a basis for comparing projects. It involves comparing the total expected cost
of each option against the total expected benefits, to see whether the benefits outweigh
the costs, and by how much.
In CBA, benefits and costs are expressed in money terms, and are adjusted for the time value of
money, so that all flows of benefits and flows of project costs over time (which tend to occur at
different points in time) are expressed on a common basis in terms of their "net present value."

Costs are either one-off, or may be ongoing. Benefits are most often received over time. We
build this effect of time into our analysis by calculating a payback period. This is the time it
takes for the benefits of a change to repay its costs. Many companies look for payback over a
specified period of time – e.g. three years. In its simple form, cost-benefit analysis is carried out
using only financial costs and financial benefits. For example, a simple cost/benefit analysis of a
road scheme would measure the cost of building the road, and subtract this from the economic
benefit of improving transport links. It would not measure either the cost of environmental
damage or the benefit of quicker and easier travel to work.

5.1 Quantitative and Qualitative Aspects

Cost benefit Analysis present a picture of various costs and benefits associated with an
organization.

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Identification of Costs and Benefits: At the initial stage of cost and benefit, various costs and
benefits associated with different information systems are identified with a view to measure
comparative cost/benefits of all the systems so that the system which gives the maximum
benefits in relation to its cost is finally selected. Cost and benefits are categorized as tangible and
intangible, fixed and variable, direct and indirect.

Identification of Evaluation of Costs

Choice of System
Costs and Benefits and Benefits

Fig No. 1 Steps of Cost Benefit Analysis

Evaluation of Costs and Benefits: After identifying costs and benefits of various systems under
consideration, these benefits should be evaluated to have a comparative view. For this capital
budgeting model is used. Capital Budgeting is planning and deployment of available capital for
the purpose of maximizing the long term profitability of an organization. Capital budgeting may
be based on either discounted cash flow criteria or non-discounted cash flow criteria.

Choice of System: After the evaluation of cost and benefits of various computing system is
completed, the results obtained have to be interpreted to arrive at a final choice of system. The
interpretation and final choice are mostly subjective requiring judgment and intuition. These
become subjective because decision makers consider a number of factors that may not be
associated with cost/benefit analysis of various systems.

5.2 Capital Budgeting

Capital budgeting is a process used by companies for evaluating and ranking potential
expenditures or investments that are significant in amount. The large expenditures could include

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the purchase of new equipment, rebuilding existing equipment, purchasing delivery vehicles,
constructing additions to buildings, etc. The large amounts spent for these types of projects are
known as capital expenditures.
Capital budgeting usually involves the calculation of each project's future accounting profit by
period, the cash flow by period, the present value of the cash flows after considering the time
value of money, the number of years it takes for a project's cash flow to pay back the initial cash
investment, an assessment of risk, and other factors. Capital budgeting is a tool for maximizing a
company's future profits since most companies are able to manage only a limited number of large
projects at any one time.

Net Present
Value (NPV)

Internal Rate of
Return (IRR)
Discounted Cash
Flow
Discounted
Payback Period

Profitability Index
Capital Budgeting
(PI)

Simple Payback
Period
Non-Discounted
Cash Flow
Accounting Rate
of Return (ARR)

Fig No. 2 Capital Budgeting Types

Net Present Value (NPV): It refers to the difference between the present value of cash inflows
and the present value of cash outflows over a certain period of time. It is used in capital
budgeting to analyze whether to invest in a particular project or investment. A positive NPV
indicates that the investment will be profitable and a negative NPV indicates the net loss.

Internal Rate of Return (IRR): It is a metric used in capital budgeting to measure the
profitability in the potential investments. In other words we can say that it is the discounted rate

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that makes the NPV value of a project as zero. Once we have calculated the IRR, it is compared
with the cost of the project. A project having higher internal rate of return is preferred for
investment. Sometimes it is also called as economic rate of return.
Discounted Payback Period: It is a capital budgeting method that determines the number of
years it takes to break even from undertaking the initial expenditure by discounting the future
cash flows and recognizing the time value of money. The rule for calculating the discounted pay
period is to accept only those projects that have the payback period less than the target period.

Profitability Index (PI): It the ratio of payoff to an investment of a proposed project. In other
words we can say that it indicates the costs incurred and benefits to a business organization if
they invest in a particular project. It is also called as profit investment ratio or value investment
ratio. It is an investment appraisal technique calculated by dividing the present value of future
cash flows of a project by the initial investment required for the project.

Simple Payback Period: It refers to the time required to recover the cost of an investment. It is
an important determinant of whether or not to invest in a new project as business organizations
do not prefer to invest in long payback investments. This method ignores the time value of
money unlike other capital budgeting types.

Accounting Rate of Return (ARR): It measures the amount of profit expected on an

investment. It divides the average profit with the initial investment to obtain the results. Like
simple payback period, it also ignores time value of money.

5.3 Assessing Information Needs of the Organization

Decision making is an essential part of any organization. This is because a majority of operations
in an organization turn around decisions made by the management. In order to make decisions
more effectively, it is very important to have a good management information system since
decisions are based on information available. The effectiveness of every business information is
dependent on the timing and content of the business information presented and management
actions. The need for management information system is felt when the managers have to make a

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proper business decisions, the manager will have to rely on his judgment but must have
information on the basis which he arrives at business decisions. If an organization have a
significant management information system, it is easy for an organization to take decision on the
basis of available information. Good MIS ensures good decision making just in the same way
bad MIS drive the making of bad decisions.

The rise and fall of a company or corporation hinges on the real-time decision-making ability of
top-level and middle-level managers. To make good decisions, managers must have access to the
latest and most accurate corporate data. Management information systems are designed to deliver
this information to managers in a timely manner. MIS is considered of recent origin in
management but it had always been in existence in past as well. Of course, It was not in a refined
form then. Thus, what is new in MIS, is only its computerization which perhaps has become
necessary because of environmental pressures on modern business organizations. MIS is an
acronym of three letters i.e. M(Management), I(Information) and S(system).

Management is to plan, organize, staff , direct and control business resources to achieve
predetermined objectives. For performing all these functions, a manager has to take an array of
decisions. For taking rational decisions, information’s is an essential input.

Information, which is processed data becomes Information when it is used in decision-making

and follows certain characteristics, like it is timely, relevant, accurate, current, adequate without
superfluous data, clear in form and non repetitive.

System is a set of interrelated elements joined together to achieve a common objective and has
input, process, output, feedback and control elements. It gathers data from the internal and
external sources of an organization processes it and supplies Management Information to assist
decision-making by managers in an organization.

Management and organizations facing constantly changing problems, diverse managerial styles,
and ever present information needs offer a challenging context for developing computer based
information systems. MIS uses computer technology to provide information and decision support

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to managers, helping them becomes more effective. Developments in the young computer
industry are changing corporate management style. Managers at all levels use similar data.
Operating managers require data which is timely, precise, detailed, internal and historical. Upper
level managers need data which is aggregated, external as well as internal, future oriented as well
as historical and covering a longer span time. An effective MIS cannot be built without viable
data management tools. Such tools were not generally available previously. Moreover, most
organizations did not effectively use DBMS technology until two decades before. An important
key to a successful MIS is the effective management of an organization's data resources.

On the basis of the purpose of the decision making activities, Robert B.Anthony (1965) has
differentiated organizational decisions into three categories, namely,
 Strategic Planning decisions
 Management control decisions
 Operational control decisions

Top •Strategic Decisions

Management •Strategic Data

Middle •Tactical Decisions

Management •Tactical Data

Lower •Operational Decisions

Management •Operational Data

Fig No. 3 Information Needs

Strategic Planning Decisions are those decisions in which the decision maker develops
objectives and allocates resources to achieve these objectives. Decision in this category is of long
time period and usually involves a large investment and effort. Such decisions are taken by
strategic planning level (Top level) managers.

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Management Control Decisions are taken by management control level (middle level)
managers and deal with the use of resources in the organization.

Operational Control Decisions deal with the day- to- day problems that affect the operation of
the organization.

INTRODUCTION TO SYSTEM DEVELOPMENT

The role of an information system is to provide information to support decision making in an

organization. Simon’s model of decision making proposes three stages in the decision making
process. MIS plays its role in all three stages.
The word system is derived from the Greek word “system” which means an organized
relationship among the following unit or component. “A system is an orderly grouping of
interdependent components linked together according to a plan to achieve a specific goal.”
The word component may refer to physical parts (engine, wheels of cars), management steps
(planning, organizing, controlling) or a sub subsystem in a multi level structure. It is to be noted
that a system is not a randomly arranged set. It is arranged with some logic governed by rules,
regulation, principles and policies.
In MIS we are usually concerned with man-made system involving input, process and output, as
represented in figure. A system may have multiple inputs and multiple outputs. All systems
operate in an environment. The environment may influence the system in its design and
performance. When a system is designed to achieve certain objective, it automatically sets the
boundaries for itself. The understanding of boundaries of the system is essential to bring clarit y
in explaining the system components and their arrangement.

6.1 Meaning and Concept of System

System is defined as a set of elements arranged in an orderly manner to accomplish an objective.

Elements are arranged with same logic governed by rules, regulations, principles and policies.
Such an arrangement is also influenced by the objective of the system desire to achieve. A

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system is a set of interacting entities having inter-relationships or interconnections with each

other. A system can be defined as a group of components(functions, people, activities, events)
that interface with and complement one another to achieve one or more predefined goals.

Elements of a System
Following are considered as the elements of a system in terms of Information systems: -
 Inputs and Outputs: Inputs are the elements that enter the system for processing and
output is the result of processing.
 Processor: It is the element that involves the actual transformation of input into output.
 Control: The control element guides the system.
 Feedback: Output is compared against performance standards.
 Environment: It is the super system within which an organization operates.
 Boundaries and Interface: A system should be defined by its limits.

INPUT

Feedback Feedback Environment

CONTRO PROCESS OUTPUT

L

Fig No. 4 Elements of System

Characteristics of System
A system usually has following characteristics -
 Organization: Organization mainly refers to structure and order. It is the possible
arrangement of different components that provides help in meeting desired objectives. An
organization structure in hierarchical in nature. This type of relationship usually starts at

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the top and ends with the lowest level employee. The entire hierarchy represents the
organization structure.
 Interaction: Interaction means the way in which each component interacts with other
component of the system. In an organization, different departments organize with each
other like sales must interact with production, advertising with sales and payroll with
personnel.
 Interdependence: Interdependence relates to how different components of system
depends upon each other for their work. It is more than sharing a physical part or
location. A function which performs successful integration of different components will
surely produce better results as whole rather than if each component works
independently.
 Central Objective: Objective may be real or stated. Objective is determined by higher
management and user must be aware about the central objective well in advance.

6.2 Types of System

A system is defined and determined by its boundaries and objectives. A system is an

arrangement of smaller system in a logical order. When smaller system together make a larger
system, smaller systems are called the subsystem of the larger system and the larger system is
called the super system.
Systems can be classified in different categories based on the predictability of the output and the
degree of information exchange with the environment.

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Deterministic
Predictibility of
Output
Probabilistic

Types of System

Open
Degree of
Information
Exchange
Closed

Fig No. 5 Types of System

Deterministic System: A system is called deterministic when the inputs, process and the outputs
are known with certainty. It acts in a predictable manner where stepwise execution and the
output is already known. In this system the relationship between its components are fully known
and hence when an input is given the output is fully predictable. For example: program to find
factorial of entered number.

Probabilistic System: A system is called probabilistic when the output can only be predicted in
probabilistic forms. In this system the outcome is predictable according to the probability values.
It acts in an unpredictable manner and the outcome is not predictable. There is always some
degree of error present in such system. For example: Weather Forecasting

Open System: A system is said to be open when it interacts with the environment in which it
exists. It exchange inputs and outputs with the environment and is influenced by the
environment. Open system continuously interacts with its environment. It permits interaction
across boundary. It receives input from and delivers output to the outside world.

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Closed System: A system is said to be closed if it does not interact with the environment in
which it exist. It is isolated from the environment and completely self contained system which
does not have any exchange with the environment and a barrier exist between the environment
and the system to prevent the system from being affected

6.3 Software Development Life Cycle (SDLC)

The systems approach is a problem solving model in the development of the system. System
approach considers the attributes of the software which are used to solve the problem. It allows
the system designer to manage the complex structure of the system. System approach consist of
related and dependent attributes which when combined, forming a complex structure. The system
designer by using various system approaches to design and develop the software. Software
Development Life Cycle (SDLC) models are the most popular tool which is used by the designer
to develop information systems.

Preliminary
Investigation

Maintenance & System Analysis

Support

System Design
Testing

Coding

Fig No. 6 SDLC- Software Development Life Cycle

The System Development Life Cycle is the process of developing information systems through
investigation, analysis, design, implementation, and maintenance. The system developer may
progress from one stage to another methodologically solving the problem involved and achieving
the desired results. These steps have been isolated in sequence for learning purpose and in actual
practice they may overlap.

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Preliminary Investigation
The first step in the system development life cycle is preliminary investigation. It is the way by
which user’s request to change, improve or enhance an existing system should be handled. The
main objective of this step is to determine whether user’s request is valid and feasible for
improving, modifying or building as new system. It does not describe about the system design,
also it does not include the details to completely describe the business system. Preliminary
system investigation includes the following two sub-stages.
 Problem Definition: Problem definition talks about input, output, storage etc. It states
what the problem actually is. It defines the goal that is to be achieved. A problem
definition will consist of - Required Input, Required Output. Analysis of the problem
breaks it down into its parts and describes each one of them. It lays down the basic
requirements that the final solution must provide. It helps in making a logical design.
Customers only know what they want, but they do not know how to achieve that with
software. They mostly end up in providing incomplete, ambiguous or contradictory
requirements. These mistakes are recognized by skilled and experienced software
engineers. Regular internal live demos of the functionality may help in reducing the risk
that the requirements are incorrect. Similarly, a system analyst should provide a rough
estimate of the cost involved for the system development. This question usually comes
quite late in the system development process which makes the problem definition
uncertain.

 Feasibility Study: The feasibility study corresponds to system vitality. This is study to
find out about the proposed system’s usefulness in the organization. It is basically a high-
level representation of the entire process. It provides answers to basic questions like,
what is the problem? Is the problem even worth solving? The findings of this study
should be formally presented to the user management through documentation or
presentation. This presentation becomes critical in-order to approve the project by
management. This report represents an excellent model of the system analyst’s
understanding of the problem. It provides a clear sense of direction for the subsequent
development of the system. The aim of the feasibility study is to find out alternative

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systems and out of all such systems find out which one is the most feasible and desirable
system for development. It provides an overview of the problem and acts as an important
checkpoint that must be completed before investing further resources on the project.
The feasibility of a proposed system can be categorized in to four parts -
1. Organizational Feasibility: This deals with finding out whether the proposed
information system supports the objective of the organization’s strategic plan or
not. The proposed information system must be taken as a sub-set of the whole
organization.

2. Economic Feasibility: This deals with the ROI (Return on Investment) value for the
proposed information system. It focuses on whether returns justify the investment
cost incurred in the system project or not. During the preliminary investigation
phase this step try to answer few questions -

o What will be the cost of conducting a full system investigation?

o What will be the cost of hardware and software involved in creating
required application?
o What will be the benefits in terms of reduced costs, improved customer
service, improved resource utilization or fewer costly errors?

3. Technical Feasibility: The focus of technical feasibility is to find out about the
capability of involved hardware and software related to the needs of the proposed
system. It also focuses about the timeline in which this infrastructure should be met. It
includes questions like:
o Does the required technology really available to acquire the objective?
o Does the proposed equipment have enough capacity to capture the data required
to use in the new system?
o Will the proposed system respond to queries in timely manner, regardless of the
number of locations and users?
o Can the system be expanded?
o What is the technical surety of accuracy, reliability, ease of access and data
security?
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4. Operational Feasibility: This step deals with the willingness and acceptability of the
management, employees, customers, suppliers, etc., to operate, use and support a
proposed system. It focuses around how to make the system working after its
development and deployment. The following questions are asked in operational
feasibility.
o Whether enough support is available from the management, employees,
customers and suppliers?
o If current business methods are suitable to the users?
o Have the users been involved in the planning and development of the system
project? It makes sure that the system is developed as per rules, regulations,
laws, organizational culture, union agreements, etc., along with active
involvement of the users.

Apart from the above categories, the system should look for legal feasibility and schedule
feasibility. Legal feasibility means the viability if the system from the legal point of view, i.e. it
confirms the system should follow all supportive laws and regulations of the land. Schedule
feasibility checks the feasibility of completing the system in the prescribed time.

System Analysis
System analysis revolves around understanding the user’s needs and gathering all development
requirements. It also concerns about detailed study of the various operations of business activity
along with its boundaries. The main objective of this phase is to find out what must be done in
order to solve the problem. This phase also focuses on developing data flow diagrams, an
elementary data dictionary and rough descriptions of the required relevant algorithms. To
summarize, system analysis involves:
1. The information needs of the organization and its end users.
2. Existing information systems (their activities, resources and products)
3. The expected information system.

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The output of system analysis is a set of system requirements of a proposed information system.
It provides the analyst with a clear understanding of what is to be done. The next step in this
process will discuss about how to solve the problem. It involves activities like -
 Gathering Information
 Define Software requirement. SRS-Software requirement specification
 Prioritize requirements.
 Generate and Evaluate alternatives.
 Review recommendations with management.

System Design
System design provides the required details about how the system will accomplish required
objective. It includes following components:
 User Interface Design
 Data Design
 Process Design
 Technical System Specifications

During this phase, the system is designed to satisfy all the requirements identified in the previous
phases. The identified requirements are transformed into a System Design Document. This
document describes about the design of the system and act as an input to next phase. An interface
design activity defines about the interaction points between end users and proposed system. The
data design activity focuses on the design of the logical structure of database and files to be used
by the proposed information system. Process design activity focuses on the design of the
software procedures required by the proposed information system.

Design Objectives
 Practicality: The system design should be practical in nature and must focus on the ability
to learn and operate with ease by the users. It should be user-oriented.
 Flexibility: The system design should be flexible enough to meet the future changes
which are inevitably requested by its users and the business organization.

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 Efficiency: The system design should be enough efficient i.e. it should perform tasks
within their specified timeline. The efficiency of design can be measured in -
1. Throughput: Ability to handle a specified number of tasks per unit of time.
2. Response time: Ability to respond to a request made by the user within time limit.
3. Run time: Ability to complete task within time limit.
 Security: The system design should deal with hardware reliability and security of data. It
should be able to detect and prevent, frauds and abuses of data.

The system developer must analyze each requirement and determine how to convert system
requirements into system features. Two types of design exist:-

Logical Design: It identifies the records and relationship to be handled by the system. It focus on
the reasoning by breaking down the system into subsystem and each subsystem into smaller
subsystem, until the process cannot be further repeated or breakdown. It establishes relationship
among various subsystems, the records and variables in the subsystem and inter-relationships
among variables and subsystems.

Physical Design: It proceeds after logical design is complete. It addresses the physical aspects of
the system i.e. input and output devices, hardware configuration for network, memory and
storage etc. It also defines data structures, access methods, file organization, indexes, blocking,
pointers etc.

Coding
In coding phase software design is translated into source code using any suitable programming
language. Thus each designed module is coded.

Testing
After understanding the system specifications, the system should be physically created. The
required programs are coded, debugged, and documented. It is tested with associated test data to
ensure its accuracy and reliability. Entire construction of system takes place based on the system
design specifications.

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Types of Testing
 Unit Testing: In unit testing a system is viewed as a collection of programs or units and
each unit is individually tested.
 Integration Testing: In integration testing the different unit tested modules are combined
together and then the functionality of the combined modules are tested.
 System Testing: In system testing the entire system is tested to ensure that all its
components are functioning properly when they are combined into one system.

Maintenance and Support

System maintenance focuses on monitoring, evaluating and modification of system to make
desirable or necessary improvements. It includes enhancements, modifications or any change
done apart from the original specifications. Sometimes, it needs to be maintained not because
some of its modules or programs wear out and need to be replaced, but because there are some
bugs remaining in the system which should be removed after they are discovered. This is an on-
going process, until the system reaches stabilization. Generally system maintenance is performed
for three reasons:-
 To correct errors: Uncovering bugs in the program or weakness in the design that were
not detected during testing and correcting these weaknesses.
 To keep system updated: Over the time, changes occur in the system environment that
require modification in the system design and software.
 To improve the system: Continuous improvement in the system is required to meet user
requirements.

Advantages of SDLC
 It makes control and monitoring of large projects easier.
 It consists of well detailed steps.
 The orderly sequence of development steps and strict controls ensures the adequacy of
documentation.
 The design reviews help to ensure the quality, reliability, and maintainability of the
developed software or solution.

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 The progress and the cost of system development, completion targets are measurable.
Limitations of SDLC
 Increases the development time and cost
 Difficulty to estimate the cost of the project
 The performance of the system cannot be tested until it is almost fully coded.
 The system details have to be specified up front
 It increases the amount of documentation as time advances.

6.4 SDLC Models

Waterfall Model
The waterfall model is the classical model of software engineering. This model is one of the
oldest models. The pure waterfall lifecycle consists of several non-overlapping stages. The
waterfall model serves as a baseline for many other lifecycle models. The steps followed in the
waterfall model are:
 Requirement analysis and specification: The goal of this phase is to understand the exact
requirements of the customer and to document them properly in a natural language
contains a description of what the system will do without describing how it will be done.
The resultant document is known as software requirement specification (SRS) document.
 Design: The goal of this phase is to transform the requirements specification into a
structure that is suitable for implementation in some programming language. Overall
software architecture is defined and detailed design work is performed. This work is
documented and known as software design description (SDD) document.
 Implementation and Unit Testing: In this phase design is implemented. If the SDD is
complete, the implementation or coding phase proceeds smoothly. During testing, the
major activities are centered around the examination and modification of the code.
Initially, small modules are tested in isolation from the rest of the software product.
 Integration and System Testing: The objective of unit testing is to determine that each
independent module is correctly work. This gives little chance to determine that the
interface between modules is also correct and for this reason integration testing is
performed. And system testing involves the testing of the entire system, whereas software

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is a part of the system. This phase is essential to develop confidence in the developers
before software is delivered to the customer or released in the market.
 Operation and Maintenance: Software maintenance is a task that every development
group has to face, when the software is delivered to the customer’s site, installed and is
operational. Software maintenance is a broad activity that includes error correction,
enhancement of capabilities and deletion of obsolete.

Requirement Gathering and

Analysis

Design

Implementation and Unit

Testing

Integration and System

Testing

Maintenance and Support

Fig No. 7 Waterfall Model

Advantages
 Easy to understand and implement.
 Widely used and known
 Reinforces good habits: define-before- design, design-before-code.
 Identifies deliverables and milestones.
 Document driven
 Works well on mature products and weak teams.

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Disadvantages
 Real projects are rarely sequential.
 It is difficult to define all requirements at the beginning of a project.
 A working version of the system is not seen until late in the project’s life.
 Software is delivered late in project, delays discovery of serious errors.
 Difficult to integrate risk management.
 The biggest disadvantage of the waterfall model is that cannot go back a step; if the
design phase has gone wrong, things can get very complicated in the implementation
phase.
 Significant administrative overhead, costly for small teams and projects.

Iterative Enhancement Model

This model contains the following phases:
 Requirement analysis and specification
 Design
 Implementation and unit testing
 Integration and System Testing
 Operation and Maintenance

These phases are same as the waterfall model, but these may be conduct in several cycles in
Iterative enhancement model. A useable product is released at the end of the each cycle, with
each release providing additional functionality. This model does deliver an operational quality
product at each release. The complete product is divided into releases and the developer delivers
the product release by release. A typical product will usually have many releases. With this
model, first release may be available within few weeks or months whereas the customer
generally waits months or years to receive a product using other model.

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Fig No. 8 Iterative Enhancement Model

Advantages
 Divides project into smaller parts
 Creates working model early and provides valuable feedback
 Feedback from one phase provides design information for the next phase
 Very useful when more staffing is unavailable

Disadvantages
 User community needs to be actively involved in the project. This demands on time of
the staff and add project delay
 Communication and coordination skills take a center stage
 Informal requests for improvement for each phase may lead to confusion

Prototype Model
In this process model, firstly develop a working prototype (i.e., incomplete versions of the
software program being developed.) Of the software instead of developing the actual software.
The working prototype is developed as per current requirements. The developers use this

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prototype to refine the requirements and prepare the final specification document. When the
prototype is created, it is reviewed by the customer. Typically this review gives feedback to the
developer that helps to remove uncertainties in the requirements of the software.

Fig No. 9 Prototype Model

Advantages
 Early visibility of the prototype gives users an idea of what the final system looks like
Encourages active participation among users and producer.
 Enables a higher output for user.
 Cost effective
 Increases system development speed
 Assists to identify any problems with the efficacy of earlier design, requirements analysis
and coding activities.

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Disadvantages
 Possibility of causing systems to be left unfinished.
 Possibility of implementing systems before they are ready.
 Producer might produce a system inadequate for overall organization needs.
 Not suitable for large applications.
 Project management difficulties.

Spiral Model
Models do not deal with uncertainty which is inherent to software projects. Important software
projects have failed because project risks were neglected & nobody was prepared when
something unforeseen happened. Barry Boehm recognized this and tried to incorporate the
“project risk” factor into a life cycle model. The result is the spiral model, which was presented
in 1986.
The radial dimension of the model represents the cumulative costs. Each path around the spiral is
indicative of increased costs. The angular dimension represents the progress made in completing
each cycle. Each loop of the spiral from X-axis clockwise through 360 represents one phase. One
phase is split roughly into four sectors of major activities.
 Planning: Determination of objectives, alternatives & constraints.
 Risk Analysis: Analyze alternatives and attempts to identify and resolve the risks
involved.
 Development: Product development and testing product.
 Assessment: Customer Evaluation

An important feature of the spiral model is that each phase is completed with a review by the
people concerned with the project (customer,designers and programmers) The advantage of this
model is the wide range of options to accommodate the good features of other life cycle models.

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Fig No. 10 Spiral Model

Source: https://en.wikipedia.org/wiki/Spiral_model

Advantages of Spiral Model

 Spiral Life Cycle Model is one of the most flexible SDLC models in place. Development
phases can be determined by the project manager, according to the complexity of the
project.
 Project monitoring is very easy and effective. Each phase, as well as each loop, requires a
review from concerned people. This makes the model more transparent.
 Risk management is one of the in-built features of the model, which makes it extra
attractive compared to other models.
 Changes can be introduced later in the life cycle as well. And coping with these changes
isn’t a very big headache for the project manager.

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 Project estimates in terms of schedule, cost etc become more and more realistic as the
project moves forward and loops in spiral get completed.
 It is suitable for high risk projects, where business needs may be unstable.
 A highly customized product can be developed using this.

Disadvantages of Spiral Model

 Cost involved in this model is usually high.
 It is a complicated approach especially for projects with a clear SRS.
 Skills required for evaluating and reviewing project from time to time needs expertise.
 Rules and protocols should be followed properly to effectively implement this model.
Doing so, through-out the span of project is tough.
 Due to various customizations allowed from the client, using the same prototype in other
projects, in future, is difficult.
 It is not suitable for low risk projects.
 Meeting budgetary and scheduling requirements is tough if this development process is
followed.
 Amount of documentation required in intermediate stages makes management of project
very complex.

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