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Lecture 7- Feasibility Analysis

Information Systems Analysis
ITT 06104

Bakari Mashaka 1
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Outline

• System Planning
• Feasibility Study

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System Planning

• The first stage in SDLC

• Main tasks in planning of a system:

• System proposal/system request
• Conduct feasibility study

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Feasibility Study
What is it?
•A feasibility study is an attempt to
determine whether an information system is
achievable given organizational resources
and constraints.
•Is the measure of how beneficial or
practical ana information system will be to
an organization.

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Feasibility Study
• Objectives of a feasibility study are
1. To find out if an information system
project can be done (...is it possible?...is
it justified?) and
2. To suggest possible alternative solutions

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Why doing Feasibility Analysis
1. To find out if an system development project can
be done:
– ...is it possible?
– ...is it justified?
2. To suggest possible alternative solutions.
3. To provide management with enough information
to know:
– Whether the project can be done
– Whether the final product will benefit its intended
users
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Types of feasibility

• Technical feasibility

• Organizational feasibility

• Economic feasibility
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Technical feasibility
• Measure of the practicality of a technical
solution.
• Is the project possible with current
technology?
• What technical risk is there?
• Availability of the technology:
– Is it available locally?
– Can it be obtained?
– Will it be compatible with other systems?
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Organizational Feasibility

• If we build it, will they come?

– How well the system ultimately will be
accepted by its users and incorporated into
the ongoing operations of the organization
• Align with business objectives
• Stakeholder analysis considers
– Project champion(s)
– Organizational management
– System users
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Economic feasibility

• A measure of the cost-effectiveness of a

solution or a project.
• A process of identifying the financial benefits
and costs associated with a development
project
– Often referred to as cost-benefit analysis.
– Project is reviewed after each SDLC phase in
order to decide whether to continue, redirect,
or end a project.
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Economic feasibility

• Is the project possible, given resource

constraints?
• What are the benefits?
– Both tangible and intangible
– Quantify them!
• What are the development and operational
costs?
• Are the benefits worth the costs?

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Economic feasibility

• Development costs

• Annual operational costs

• Annual benefits

• Intangible costs and benefit

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Economic feasibility

• We need to understand financial tools for

evaluating information system projects

– Break even analysis

– Payback period
– Net Present Value-NPV

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Expected Value

Costs Benefits

Tangible * *
* *
* *

Intangible
* *
* *
* *

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Types of Costs

•An information system can have

– tangible costs and
– intangible costs

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Tangible Costs
• Tangible costs refer to items that you can easily
measure in terms of money and with certainty
• Examples:
– Hardware costs,
– Labor costs, or
– Supplies and other expenses
– Data or system conversion
– Operational costs including employee training
and building renovations

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Tangible Costs
• Examples:
– Hardware and equipment
– Software, including in-house development as
well as purchases from vendors
– Training Costs
– Licenses and fees
– Consulting expenses
– Facility costs

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Intangible costs

• Costs associated with an information system

that cannot be easily measured in terms of
money or with certainty.

• Intangible costs can include:

– Loss of customer goodwill,
– Employee morale, or
– Operational inefficiency

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Types of Benefits

• Benefits can either be

– Tangible benefits or
– Intangible benefits

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Tangible Benefits

• Tangible benefits refer to items that can be

measured in money and with certainty.
• Examples include:
– reduced personnel expenses,
– lower transaction costs, or
– higher profit margins.

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Tangible Benefits

• Examples include:
– A new scheduling system that reduces overtime

– An online training system that improves service

and decreases the need for face to face training

– Agency banking that reduces the costs of

running many bank branches

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Tangible Benefits
• Most tangible benefits will fit within the
following categories:
– Cost reduction and avoidance
– Error reduction
– Increased flexibility
– Increased speed of activity
– Improvement of management planning and
control
– Opening new markets and increasing sales
opportunities
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Intangible Benefits
• These are benefits derived from the system, but
cannot be measured in terms of money and with
certainty
• Examples of intangible benefits are
1. competitive necessity
2. Improved the organizational reputation,
3. Customer access to account details using mobile
phones
4. Faster decision making.
5. A new website that enhances the company's image
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Any Question???

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Homework-1
Assume you are put in charge of launching a
new Website for a local nonprofit organization
1.What costs would you need to account for?
2.Make a list of expected costs and benefits
for the project
3.Undertake costs-benefits analysis
Note
•Consider both tangible and intangible costs/benefits

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Homework-2

Contrast the following terms:

a. Economic feasibility; technical and
organizational feasibility
b. Intangible benefit; tangible benefit
c. Intangible cost; tangible cost

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Homework-3

What is the difference between intangible

value and tangible value? Give three
examples of each.

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Homework-4

Describe the three dimensions of

feasibility analysis.

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