Chapter 4 Systems Planning and Selection Chapter Overview This chapter introduces students to the first phase of the systems development life cycle and illustrates how organizations can benefit from following a formal process for identifying and selecting projects. Chapter 4 discusses how projects are identified and selected, initiated and planned, and assessed for feasibility. Systems planning and selection, the first phase of the systems development life cycle, consists of two primary activities: project identification and selection and project initiation and planning. During project identification and selection, potential projects are evaluated; these projects are classified and ranked; and then development projects are chosen. The objective of the project planning activity is the development of a Baseline Project Plan (BPP) and a Statement of Work (SOW). The BPP becomes the foundation for the remainder of the development project. The SOW produced by the team clearly outlines the objectives and constraints of the project. As with the project initiation process, the size, scope, and complexity of a project will dictate the comprehensiveness of the project planning process and resulting documents. An important aspect of the project initiation and planning process centers on the assessment of a project’s feasibility and risk. This chapter describes several types of feasibility, including economic, technical, operational, schedule, legal and contractual, and political factors. Instructional Objectives Specific student learning objectives are included at the beginning of the chapter. From an instructor’s point of view, the objectives of this chapter are to: 1. Illustrate the project identification and selection process. 2. Illustrate the steps in the project initiation and planning process. 3. Explain the need for and describe the contents of a Project Charter and Baseline Project Plan. 4. Provide a comprehensive overview of the various methods for assessing project feasibility. 5. Explain the differences between tangible and intangible benefits and costs and between one-time and recurring benefits and costs. 6. Illustrate how to perform cost-benefit analysis and describe what is meant by the time value of money, present value, discount rate, net present value, return on investment, and break-even analysis. 7. Describe how to evaluate the technical risks associated with a systems development project. 8. Explain the activities and participant roles within a structured walkthrough. 9. Prepare your students to develop a plan for conducting a term project involving several phases of systems development using the SDLC or other methodologies. 10. Describe the systems planning and selection process for an Internet electronic commerce application. Classroom Ideas 1. An alternative to lecturing on the contents of the chapter is to lecture from the Review Questions, Problems and Exercises, and Discussion Questions from the end of the chapter. Selected questions can be posed to students to help focus a discussion on specific concepts. Problems and Exercises 4-13, 4-14, 4-15 and 4-16 can be done in class. 2. Another very effective in-class exercise is to ask students who have been on systems development teams to compare their experiences to the concepts presented in Chapter 4. This discussion is a good way to elaborate on alternative ways for identifying and selecting information systems projects. Some organizations are very informal, compared to what is described in the book. Usually you can start a good debate on how formal project identification and selection should be, and who should control this process. Stress the tradeoffs of formal versus informal processes: consistency, awareness, budget and investment controls, long-term focus, etc. versus rapid action, commitment, current business needs, etc. 3. If you have access to a practicing systems analyst, an insightful activity is to invite him into your class to discuss how he identifies and selects projects in his organization. Consistency with organizational procedures, history of performance of the IS unit, management style, competitiveness of industry, and many other factors can affect how an organization chooses to undertake these processes. Have your guest explain why the process is more bottom-up or top-down. Be sure that this person addresses the interaction between business plans, IS plans, and project selection. 4. A role-play is also an effective way for students to gain an understanding of the project identification and selection process. In such an exercise, have some students play different roles for selecting new system or hardware projects within your university, school, or department. Have some students play the role of the steering committee and have others suggest projects. Jointly agree to the mission, objectives, and strategy. Now, let the steering committee try to prioritize a list of projects. Keep asking them how each project serves the mission or which objectives satisfy the project. 5. This chapter introduces many different concepts and terms that are central to understanding the project initiation and planning process. Be sure that you ask your students to review the key terms listed at the end of the chapter. 6. During a lecture, you might want to use the tables and figures in this chapter. Linking the processes described in this chapter to a specific example (e.g., the Pine Valley Furniture example in the chapter) is often a very good way for students to understand more abstract concepts. As part of a lecture, ask students to suggest costs and benefits that might arise with specific systems. Additionally, you can describe a systems development project with which you have been involved and ask the students to list the possible costs, benefits, and risks that would be part of a feasibility assessment of that system. 7. If you have access to a practicing systems analyst, an insightful activity is to invite him to your class to discuss how he initiates and plans projects in his organization. Ask him to provide such documentation as: the Table of Contents for the equivalent of the Baseline Project Plan and Statement of Work, project schedules and work descriptions, feasibility tables or spreadsheets, and team organizations. Some organizations have formal documents called business cases that must accompany any project request; if possible, have your guest outline what his organization considers to be the ideal format for a business case. 8. An interesting class discussion is the viability of economic feasibility assessments. How accurate and helpful are classical cost-benefit analyses of information systems? What measures of economic worth should be applied to systems projects? Should information systems be treated as investments, necessary costs, enablers of change, or otherwise? Remind your students that even when classical economic feasibility is assessed at this stage of a project, often only costs and benefits, not actual dollar values, can be fixed at this point. The incremental commitment and frequent review nature of systems projects means that the economic feasibility (as well as other feasibilities) can be reassessed at each project review point, with a decision to continue, redirect, or terminate the project. Lecture Notes Chapter 4 introduces students to the first phase of the systems development life cycle and illustrates how organizations can benefit from following a formal process for identifying and selecting projects. Systems planning and selection, the first phase of the systems development life cycle, consists of two primary activities, project identification and selection and project initiation and planning. Figure 4–1 highlights these primary activities. Identifying and Selecting Projects Systems planning and selection is the first SDLC phase and can be broken into two primary activities: (1) project identification and selection and (2) project initiation and planning. During the first phase, all possible systems development projects are identified and assessed by senior management, a business group, IS management, or a steering committee. The actual methods used to identify and select a project for development vary by organization; the selection process can be very formal or very informal. As illustrated in Figure 4–2, requests for information systems development come from three primary sources: (1) managers and business units; (2) information systems managers; and (3) formal planning groups. During the project identification and selection activity, three key tasks are performed; these are: (1) identifying potential development projects; (2) classifying and ranking IS development projects; and (3) selecting IS development projects. First, projects can be identified by a key member of top management, a steering committee, user departments, or the development group. Each of these identification methods has its own strengths and weaknesses. Table 4–1 highlights the common characteristics of each selection method. Top management and steering committees are often thought of as top-down sources, since these selection methods choose projects that reflect the broader needs of the organization. In contrast, managers, business units, and the development group are considered to be bottom-up sources for projects, since these selection methods focus on a particular business need. Second, since funds are often limited, organizations need a method of classifying and ranking potential development projects. The classification and ranking of potential projects can be performed by top management, a steering committee, business units, or the IS development group. Third, the selection methods use a variety of criteria; these criteria are summarized in Table 4–2. When selecting IS development projects, many factors must be considered, including the perceived needs of the organization, the existing systems and ongoing projects, resource availability, evaluation criteria, current business conditions, and decision maker perspectives. These factors are highlighted in Figure 4–3. Although only those projects most likely to achieve business objectives are considered, the relative importance of these projects will change as business conditions change. The primary deliverable from the project identification and selection activity is a schedule of specific IS development projects; this schedule results from both top-down and bottom-up initiatives. Figure 4–4 summarizes the project identification and selection activity. The principle of incremental commitment should be applied to each development project. Initiating and Planning Systems Development Projects Many of the initiation and planning activities overlap the analysis phase. However, spending an appropriate amount of time on these activities can reduce the amount of time required for later phases. The amount of time that is spent on this activity will vary based on the organization’s experience with building this type of system, the analysts’ experiences, the customers’ awareness of their needs, and/or the size and complexity of the project. A rule of thumb is that between 10 and 20 percent of the entire development effort should be spent on project initiation and planning. As Figure 4–5 illustrates, the purpose of project initiation and planning is to turn a vague systems request into a project description. Project initiation and project planning are the two major activities of the project initiation and planning phase. As summarized in Table 4–3, project initiation consists of five activities. As summarized in Table 4–4, project planning consists of ten activities. A Baseline Project Plan and a Project Charter are the primary deliverables for the project planning activity. A project’s size, scope, and complexity influence the project planning process. During the project planning activity, a business case is made for the project; this business case highlights the economic benefits and costs, technical feasibility, and organizational feasibility for the new system. A Baseline Project Plan (BPP) contains an estimate of the project’s scope, benefits, costs, risks, and resource requirements; provides detailed project activities for the systems analysis phase; and is used by the project selection committee to determine whether the project should be continued, redirected, or cancelled. The BPP is an internal document and is not shared with customers. The BPP is updated as the project progresses through the systems development life cycle. A Project Charter is prepared for internal and external stakeholders and provides a high-level overview of the project. Assessing Project Feasibility A project is often evaluated on its economic, operational, technical, schedule, legal and contractual, and political feasibility. The results of this analysis form the business case that justifies the resource expenditures on the project. The Pine Valley Furniture’s Customer Tracking System example illustrates the feasibility assessment process. Figure 4–6 is the System Service Request (SSR) submitted to Pine Valley Furniture’s Systems Priority Board. Economic feasibility, sometimes called cost-benefit analysis, identifies the financial benefits and costs associated with a development project. Several worksheets and techniques are presented in the chapter that can be used after each SDLC phase to help determine whether a project should continue, be redirected, or be cancelled. When assessing economic feasibility, the analyst identifies both tangible and intangible benefits. Tangible benefits can be measured in dollars and with certainty. In contrast, intangible benefits cannot be measured in dollars or with certainty. Initially, tangible benefits may need to be categorized as intangible benefits. In later stages, when more information is available, the intangible benefits can often be categorized as tangible benefits. Figure 4–7 is a worksheet summarizing tangible benefits. Both the tangible and intangible costs of an information system should also be identified. Systems development costs can also be categorized as one-time or recurring costs. As Figures 4–8 and 4–9 illustrate, worksheets are used to summarize these costs. When preparing an economic feasibility analysis, the time value of money should be considered. The time value of money is a process of comparing present cash outlays to future expected returns. The discount rate is used to compute the present value of future cash flows, and the present value is the current value of a future cash flow. The formula for calculating the present value of a cash flow is: . A summary worksheet can be created that summarizes a project’s economic analysis; Figure 4–10 shows Pine Valley Furniture’s summary worksheet; this worksheet reflects the present value calculations of all benefits and costs associated with the Customer Tracking System. The summary worksheet also shows the break-even analysis and return on investment calculations. Figure 4–11 graphically illustrates the Customer Tracking System’s break-even point. Table 4–5 describes three commonly used economic cost-benefit analysis techniques: net present value (NPV), return on investment (ROI), and break-even analysis (BEA). An economic analysis conducted during project initiation and planning may indicate that the project will not break even and/or have a high return on investment. However, not all benefits and costs have been quantified at this point in the project, and a long list of intangibles can help justify the continuation of the project. Another option is to run pessimistic, realistic, and optimistic benefit and cost estimates; these views can help strengthen the business case. When building the business case, other feasibility criteria should be examined. For instance, operational feasibility is an assessment of the degree to which a proposed system solves the business problems or takes advantage of the business opportunities outlined in the System Service Request or project identification study. Technical feasibility is the assessment of the organization’s ability to construct the proposed system. Schedule feasibility is an assessment of the degree to which the potential time frame and completion dates for all major activities within a project meet organizational deadlines and constraints for affecting change. Legal and contractual feasibility is an assessment of the potential legal and contractual ramifications due to the construction of a system. Political feasibility is an evaluation of how key stakeholders within the organization view the proposed system. Information collected during project initiation and planning is organized into the Baseline Project Plan. A BPP contains four sections; introduction, system description, feasibility assessment, and management issues; an outline is shown in Figure 4–12. Figure 4–13 shows a project scope statement; Figure 4–14 shows a context-level data flow diagram. The management issues section of the BPP outlines concerns that management has about the project. Included in the management issues section are two matrixes that help project stakeholders understand who is responsible for what, and who the user can contact for specific information. Figure 4-15 shows the Task-Responsibility Matrix and Figure 4-16 shows the Project Communication Matrix. Reviewing the Baseline Project Plan Once a Baseline Project Plan is prepared, management, users, and the development team will review the document. A walkthrough is a common method of review. Individuals participating in a walkthrough assume one of several roles including; coordinator, presenter, user, secretary, standards bearer, or maintenance oracle. The walkthrough coordinator may prepare a Walkthrough Review Form, similar to Figure 4–17. Figure 4–18 shows a Walkthrough Action List on which changes to a Baseline Project Plan are recommended. Walkthroughs are generally conducted with presentations. These types of presentations need to be conducted well and designing a high-quality presentation is relatively simple. Table 4-6 presents guidelines for making an effective presentation. PVF WebStore: Systems Planning and Selection Internet-based electronic commerce is becoming a viable, attractive option for many businesses. While the systems planning and selection process for Internet-based electronic commerce applications does not differ from the process used for other applications, it does warrant special consideration. Students should be aware of certain terminology, like the Internet, electronic commerce (EC), intranet, extranet, and electronic data interchange (EDI). Electronic commerce refers to Internet-based communication supporting day-to-day business activities. Figure 4-19 shows the three possible modes of electronic commerce. While an intranet is Internet-based communication supporting business activities within a single organization, an extranet is Internet-based communication supporting business-to-business activities. When developing intranets and extranets, the developers know who the users are, the applications being used, network connection speed, and the types of communication devices. In contrast, when developing Internet-based electronic commerce applications, several “unknowns” must be dealt with; these include the user, connection speed, and access method. Table 4–7 lists these unknowns. At the end of this chapter, as well as at the end of the remaining chapters, you will find a section relating Internet development issues to the topics presented in the chapter. The authors use the Pine Valley Furniture WebStore to illustrate how an electronic commerce application is developed. In this chapter the authors overview the initiation and planning of Pine Valley Furniture’s e-commerce system and the WebStore project walkthrough. Table 4–8 summarizes the Web-based systems costs; Table 4–9 summarizes the WebStore project’s benefits and costs; Table 4–10 highlights feasibility concerns. Figure 4–20 is a Gantt chart showing the schedule for the WebStore. Key Terms Checkpoint Solutions Answers for the Key Terms Checkpoint section are provided below. The number following each key term indicates its location in the key term list. Review Questions Solutions 4-1. Describe the project identification and selection process. Answer: Organizations vary as to how they identify projects—some projects are identified by top-down initiatives while others are identified by bottom-up initiatives—and all methods of identification have been found to have strengths and weaknesses. Research has found, for example, that projects identified by top management more often have a strategic organizational focus. Because limited resources preclude the development of all proposed systems, most organizations have some process of classifying and ranking the merit of each project. Those projects deemed to be inconsistent with overall organizational objectives, redundant in functionality to some existing system, or unnecessary are removed from consideration. Classifying and ranking projects, the second major activity, focuses on assessing the relative merit of potential projects. Different organizations may follow different processes for this activity. Project selection, the third activity, is a process of considering both short- and long-term projects and selecting those most likely to achieve business objectives. Additionally, as business conditions change over time, the importance of any single project may substantially change. 4-2. Describe several project evaluation criteria. Answer: Table 4–2 describes several project evaluation criteria, including value chain analysis, strategic alignment, potential benefits, resource availability, project size/duration, and technical difficulty/risks. 4-3. List and describe the steps in the project initiation and planning process. Answer: Project initiation focuses on activities designed to assist in organizing a team to conduct project planning. The types of activities performed during project initiation are listed in Table 4–3. Project planning is the process of defining clear, discrete activities and the work needed to complete each activity within a single project. The objective of the project planning process is the development of a Baseline Project Plan (BPP) and a Statement of Work (SOW). The range of activities performed during project planning is shown in Table 4–4. 4-4. What is contained in a Baseline Project Plan? Are the content and format of all baseline plans the same? Why or why not? Answer: The Baseline Project Plan (BPP) contains all information collected and analyzed during project initiation and planning. The plan reflects the best estimate of the project’s scope, benefits, costs, risks, and resource requirements given the current understanding of the project. The BPP specifies detailed project activities for the next life cycle phase, analysis, and less detail for subsequent project phases (these depend on the results of the analysis phase). The content and format of a BPP depends on the size, complexity, and standards of an organization. 4-5. Describe three commonly used methods for performing economic cost-benefit analysis. Answer: Three methods for performing economic cost–benefit analysis are net present value (NPV), return on investment (ROI), and break–even analysis (BEA) and are listed and described in Table 4–5. 4-6. List and discuss the different types of project feasibility factors. Is any factor most important? Why or why not? Answer: The types of project feasibility factors are economic, technical, operational, schedule, legal and contractual, and political. Economic feasibility is the process of identifying the financial benefits and costs associated with a development project. Technical feasibility is the process of assessing the development organization’s ability to construct a proposed system. Operational feasibility is the process of assessing the degree to which a proposed system solves business problems or takes advantage of business opportunities. Schedule feasibility is the process of assessing the degree to which the potential time frame and completion dates for all major activities within a project meet organizational deadlines and constraints for affecting change. Legal and contractual feasibility is the process of assessing potential legal and contractual ramifications due to the construction of a system. Political feasibility is the process of evaluating how key stakeholders within the organization view the proposed system. No factor is “most” important; one factor may be more important in some situations, while another may be “most” important in others. 4-7. What are the potential consequences of not assessing the technical risks associated with an information systems development project? Answer: The potential consequences of not assessing and managing risks can include failure to attain expected benefits from the project, inaccurate project cost estimates, inaccurate project duration estimates, failure to achieve adequate system performance levels, and failure to adequately integrate the new system with existing hardware, software, or organizational procedures. 4-8. What are the types or categories of benefits from an IS project? Answer: There are two primary categories of benefits from an IS project: tangible benefits and intangible benefits. Tangible benefits are those derived from the creation of an information system that can be measured in dollars and with certainty. Intangible benefits are those derived from the creation of an information system that cannot be easily measured in dollars or with certainty. 4-9. What intangible benefits might an organization obtain from the development of an IS? Answer: Intangible benefits are derived from the creation of an information system and cannot be easily measured in dollars or with certainty. Potential intangible benefits include competitive necessity, more timely information, improved organizational planning, and increased organizational flexibility. Additional intangible benefits are identified in Table 4-9 on page 112 of the textbook. 4-10. Describe the concept of the time value of money. How does the discount rate affect the value of $1 today versus one year from today? Answer: The time value of money (TVM) refers to the concept of comparing present cash outlays to future expected returns. A dollar today is worth more than a dollar one year from today because money can be invested. The rate at which money can be borrowed or invested is called the cost of capital and is called the discount rate for TVM calculations. 4-11. Describe the structured walkthrough process. What roles need to be performed during a walkthrough? Answer: A structured walkthrough occurs when a peer group systematically reviews a product created during the systems development process. The objective of this review is to assure that the product conforms to organizational standards and that all relevant parties understand and agree with the information contained in the product (e.g., a Baseline Project Plan). Most walkthroughs are not rigidly formal or exceedingly long in duration. It is important, however, that a specific agenda be established for the walkthrough so that all attendees understand what is to be covered and the expected completion time. At walkthrough meetings, there is a need to have individuals play specific roles. A coordinator plans the meeting and facilitates a smooth meeting process. This person may be the project leader or a lead analyst responsible for the current life cycle step. The presenter describes the work product to the group. The presenter is usually an analyst who has done all or some of the work being presented. A user (or group) assures that the work product meets the needs of the project’s customers. This user would usually be someone not on the project team. A secretary takes notes and records decisions or recommendations made by the group. This may be a clerk assigned to the project team, or it may be one of the analysts on the team. The standards bearer assures that the work product adheres to organizational technical standards. Many larger organizations have staff groups within the unit responsible for establishing standard procedures, methods, and documentation formats. These standards bearers validate the work so that it can be used by others in the development organization. A maintenance oracle reviews the work product in terms of future maintenance activities. The goal is to make the system and its documentation easy to maintain. Problems and Exercises Solutions 4-12. The economic analysis carried out during project identification and selection is rather superficial. Why is this? Consequently, what factors do you think tend to be most important for a potential project to survive this first phase of the life cycle? Answer: At this early stage the most important criteria is the extent to which the project under consideration supports the organization’s mission. At this point, economic concerns are secondary. Economic concerns will become more important during the next project phase, after a preliminary analysis of the project request shows the evidence for a business case. 4-13. Consider your use of a PC at either home or work and list tangible benefits from an information system. Based on this list, does your use of a PC seem to be beneficial? Why or why not? Answer: Use of a PC at work can provide a number of tangible benefits. For one, it can help reduce labor costs. For example, documents can be prepared, edited, and copied faster with a PC and word processing software than without this equipment. The use of a word processor and a spreadsheet can help reduce errors in spelling and in calculation. If the right software is used, spreadsheet and graphics can be embedded within word processing documents, allowing greater flexibility in creating and integrating documents. File and network management software can allow greater control over work quality and workflow. Use of project management software can help improve resource control and project outcome quality. For example, spreadsheet analysis can help shorten and strengthen the decision-making process. Given these sample tangible benefits, the use of a PC seems to be beneficial. 4-14. Assume you are put in charge of launching a new website for a local nonprofit organization. What costs would you need to account for? Make a list of expected costs and benefits for the project. You don’t need to list values, just sources of expense. Consider both one-time and recurring costs. Answer: One-time Costs: server purchase, internet service setup, initial website development, etc. Recurring Costs: internet connectivity fees, hardware upgrades, website maintenance, etc. Recurring Benefits: reduced administrative costs, etc. 4-15. Consider the situation you addressed in problem 3. Create numeric cost estimates for each of the costs you listed. Calculate the net present value and return on investment. Include a break-even analysis. Assume a 10 percent discount rate and a five year time horizon. Answer: 4-16. Consider the situation you addressed in problem 4. Create a sample project scope statement, following the structure shown in Figure 4-13. Answer: 4-17. Assuming monetary benefits of an information system at $85,000 per year, one-time costs of $75,000, recurring costs of $35,000 per year, a discount rate of 12 percent, and a 5-year time horizon, calculate the net present value of these costs and benefits of an information system. Also calculate the overall return on investment of the project and then present a break-even analysis. At what point does break-even occur? Answer: The following spreadsheet summarizes the economic analysis requested in this question. 4-18. Use the outline for the Baseline Project Plan provided in Figure 4-12 to present the system specifications for the information system you chose for Problems and Exercises 3 and 5. Answer: Student answers for this question will vary. For class discussion purposes, assume the following generic system specifications. There will be nine 3GHz P4s, each with 512MB of RAM, 80GB hard drive, built-in network card, and a 17-inch flat panel monitor. There will be one 3.06GHz Intel processor, with 4GB of RAM, four 80GB hard drives, and a 21-inch flat panel monitor. Each PC will come with Windows XP. 1. Objectives: Develop an integrated information system for data processing and reporting. 2. Scope: Covers data entry, processing, and reports; excludes hardware and network. 3. Deliverables: Functional system, documentation, and training materials. 4. Milestones: • Analysis Complete: [Date] • Design Finalized: [Date] • Development Complete: [Date] • Testing Complete: [Date] • Deployment: [Date] 5. Timeline: [X] months total. 6. Budget: [Amount] for development, testing, and training. 7. Resources: Project Manager, Analysts, Developers, Testers. 8. Risks: Delays, budget issues; mitigate with regular reviews. 9. Stakeholders: Project team, end-users, vendors. 10. Approval: Sign-off required from stakeholders. 4-19. Change the discount rate for Problem and Exercise 6 to 10 percent and redo the analysis. Answer: The following spreadsheet summarizes the economic analysis requested in this question. 4-20. Change the recurring costs in Problem and Exercise 6 to $40,000 and redo the analysis. Answer: The following spreadsheet summarizes the economic analysis requested in this question. 4-21. Change the time horizon in Problem and Exercise 6 to three years and redo the analysis. Answer: The following spreadsheet summarizes the economic analysis requested in this question. 4-22. Assume monetary benefits of an information system of $40,000 the first year and increasing benefits of $10,000 a year for the next four years (year 1 = $50,000, year 2 = $60,000, year 3 = $70,000, year 4 = $80,000, year 5 = $90,000). One-time development costs were $80,000 and recurring costs were $45,000 over the duration of the system’s life. The discount rate for the company was 11 percent. Using a five-year horizon, calculate the net present value of these costs and benefits. Also calculate the overall return on investment and then present a break-even analysis. At what point does break-even occur? Answer: 4-23. Change the discount rate for Problem and Exercise 11 to 12 percent and redo the analysis. Answer: The following spreadsheet summarizes the economic analysis requested in this question. Since the overall NPV is negative, the ROI is not useful in this situation. According to the following spreadsheet, this project does not break-even. 4-24. Change the recurring costs in Problem and Exercise 11 to $40,000 and redo the analysis. Answer: 4-25. For the system you selected for Problems and Exercises 3, complete section 1.0.A, the project overview, of the Baseline Project Plan report. How important is it that this initial section of the Baseline Project Plan report is done well? What could go wrong if this section is incomplete or incorrect? Answer: Students should submit an answer that is somewhat like the following: These group members need a way to share documents and peripheral devices such as laser printers. Their work requires them to collaborate and share documents, yet they have had no efficient way to do so. It was determined that it would be more efficient for them to use a network to share files than to continually share physical documents or exchange diskettes. In addition, using a network would enable them to buy and easily share one laser printer rather than having to buy several laser printers or share one laser printer that is not networked. The system is to include replacement PCs for each of the nine group members, plus one more expensive PC to serve as a repository for data and unique software applications. There are many other such LANs throughout the organization, each connected to the organization’s network. At this point there are no foreseeable constraints to implementing the system. This is one of the last offices to be given a LAN. It is important that this initial section of the Baseline Project Plan be complete, accurate, and understood by all. Otherwise, there might be disagreements later about what this system will entail, and an inadequate or unwanted system might be implemented. 1.0.A Project Overview: Project Title: Integrated Data Processing System Purpose: To create a comprehensive system for efficient data entry, processing, and reporting to improve operational efficiency and decision-making. Objectives: • Streamline data management processes. • Enhance reporting accuracy and timeliness. • Improve user experience through an intuitive interface. Scope: • Development includes system design, implementation, and testing. • Excludes hardware and network infrastructure. Key Benefits: • Increased efficiency in data handling. • Reduced manual errors in reports. • Improved accessibility of data insights. Importance: This initial section is crucial as it sets the foundation for the entire project. An incomplete or incorrect overview can lead to misunderstandings, misaligned goals, and scope creep, potentially resulting in delays, budget overruns, and project failure. 4-26. For the system you chose for Problems and Exercises 4-14, complete section 2.0.A, the alternatives, of the Baseline Project Plan report. Without conducting a full-blown feasibility analysis, what is your gut feeling as to the feasibility of this system? Answer: For the system described above, alternative configurations use different LAN operating systems. In addition, students may choose not to replace the workgroup’s existing PCs, or they may choose to replace their PCs with another type of PC. For example, they may choose to upgrade all of the PCs with IBM-compatible PCs, or they may replace the PCs with another hardware platform. Another configuration is to use a wireless LAN or even use an existing mainframe or departmental minicomputer as the server for the LAN. Other configurations involve choices on the implementation schedule, such as phasing-in the equipment. Alternatives might be based on different assumptions, such as the number of concurrent users, server space allotted for each user, the type of applications to be run on the network, or budget limitations. At first glance, this system seems to be highly feasible. 4-27. For the system you chose for Problems and Exercises 4-14, complete section 3.0.A–F, the feasibility analysis, of the Baseline Project Plan report. How does this feasibility analysis compare with your gut feeling from the previous question? What might go wrong if you rely on your gut feeling in determining system feasibility? Answer: This system seems to be feasible from an economic perspective. The initial costs are significant, but they are far outweighed by the tangible and intangible benefits that this system will provide. This system is relatively easy to implement, and the technology it uses is very stable, so the system is technically feasible. The skills required among personnel may be new, so there may be some risk of the technical staff having difficulties understanding multi-user operating systems. The system solves the business problem well and will not change day-to-day activities adversely. Thus, the system is operationally feasible. As long as software is used legally and is not copied illegally, the system should present no legal or contractual problems. The group members within this office will be required to use technology that is new to them. If they are resistant to the change, this may present problems. Given the relative simplicity of this system and the stability of the technology, the project seems feasible from a schedule, timeline, and resource perspective. 4-28. For the system you chose for Problems and Exercises 4-14, complete section 4.0.A–C, management issues, of the Baseline Project Plan report. Why might people sometimes feel that these additional steps in the project plan are a waste of time? What could you say to convince them that these steps are important? Answer: Assume there are four members on this team. The team consists of a team leader, who is a senior systems analyst, a junior analyst, the office supervisor, and an office worker. The two analysts will work primarily with the two office personnel team members. The other office personnel will communicate about the system through the two office personnel who are on the team. All involved have agreed that the system will have to meet the approval of the two office personnel assigned to the team. In addition, the office personnel are in the middle of a large, important project. Thus, the two analysts have agreed to meet about this project when it is convenient for the office personnel, and not to work in such a way that disrupts the other office personnel. The team leader is designated the official spokesperson for the project so that a consistent message is presented. The team also agrees to follow the systems development guidelines established by the organization and to use hardware and software supported by the company, when possible. People sometimes feel that these project management steps are a waste of time because they do not contribute directly to the completion of the project. However, setting these ground rules for who will work on the project and how they will work together is very important. Without this agreement there are likely to be conflicts later, which may adversely affect the success and timely completion of the project. Such agreements manage everyone’s expectations and lead to greater satisfaction with the project. Discussion Questions Solutions 4-29. Imagine that you are the chief information officer (CIO) of a company and are responsible for making all technology investment decisions. Would you ever agree to build an information system that had a negative net present value? If so, why? If not, why not? How would you justify your decision? Answer: During project identification and planning, it may be difficult to determine all of a project’s benefits and costs. A project that has an initial negative net present value may have a positive one later. As the textbook mentions, a project may have many intangible benefits. Additionally, a project may have strategic benefits that necessitate its development. 4-30. Imagine that you are interviewing for a job when the interviewer asks you which cost-benefit analysis technique is best for assessing a project’s economic feasibility. What would your response be? Answer: Each technique provides the manager with important information about the viability of the project. The NPV technique enables the manager to compare the present values of future benefits and cash outlays. The return on investment technique enables the manager to make comparisons between projects on an economic basis, and break-even analysis gives the manager an indication about the length of time it will take the organization to recoup its initial investment. 4-31. Imagine you are a member of the project approval committee. An ambitious young manager in the marketing department is well-connected with the top management team in your company. He catches you in the hall and mentions that he is frustrated with how long it takes to get a simple system enhancement through the “bureaucratic” approval process. He wonders whether you could sign off on a small enhancement request for his team’s reporting application. With a wink, he promises to “owe you one.” What would you say to him and why? Answer: Answers will vary. Most should include a discussion of the necessity of project planning and selection in the context of all the potential projects in an organization. Giving preferential treatment to one project will weaken any project approval process. All projects should be considered by the approval committee and subjected to the same review and approval process. I would say, "I understand your frustration, but it's important to follow the formal approval process to ensure all changes are properly reviewed and documented. This helps maintain system integrity and accountability. I encourage you to submit a formal request so it can be evaluated appropriately. Let’s work together to streamline the process in the future." This response emphasizes adherence to procedures while acknowledging the concern and suggesting a collaborative approach for future improvements. 4-32. Of the six methods for assessing project feasibility, which is the most important? In which situation is each method more or less important? Answer: The specifics of the project will determine which feasibility criterion is most important. Also, each method helps identify potential benefits and risks associated with the project. Case Problem Solutions 4-33. Pine Valley Furniture Case Exercises Solutions a. How were Pine Valley Furniture’s projects initiated? What is the focus for each of the new systems? Answer: Jackie Judson, PVF’s vice president of Marketing, submitted a System Service Request, requesting the development of a Customer Tracking System. The Customer Tracking System’s focus is primarily tactical. PVF’s board of directors initiated the WebStore project. The WebStore has more of a strategic focus. b. Modify the Customer Tracking System’s economic feasibility analysis to reflect the modifications mentioned in this case problem. Use a discount rate of 10 percent. After the changes are made, what are the new overall NPV, ROI, and BEP? Answer: A suggested answer is provided below. c. Modify the worksheet created in part b using discount rates of 12 and 14 percent. What impact do these values have on the overall NPV, ROI, and BEP? Answer: Suggested answers are provided below. d. Jim Woo would like to investigate how other online stores are targeting the business furniture market. Identify and evaluate two online stores that sell business furniture. Briefly summarize your findings. Answer: Student answers for this question will vary. Using a search engine, such as Yahoo!, your students should locate many online business furniture stores. Two such stores are Staples (http://www.staples.com) and Officefurniture.com (http://www.officefurniture.com). 1. Wayfair: • Targeting Strategy: Wayfair targets business customers with a dedicated section for office furniture and supplies. They emphasize a wide range of products, competitive pricing, and free shipping on orders over a certain amount. • Evaluation: Wayfair’s extensive product selection and user-friendly website cater to businesses looking for both basic and high-end office furniture. Their marketing includes email campaigns and SEO strategies focused on business needs. 2. Herman Miller: • Targeting Strategy: Herman Miller focuses on premium office furniture with an emphasis on ergonomics and design. They target businesses seeking high-quality, innovative office solutions. • Evaluation: Herman Miller’s marketing highlights product durability and design excellence, appealing to businesses willing to invest in high-end, stylish furniture. Their approach includes targeted online ads and partnerships with design influencers. 4-34. Hoosier Burger Case Exercises Solutions a. How was the Hoosier Burger project identified and selected? What focus will the new system have? Answer: Bob and Thelma Mellankamp realized that Hoosier Burger’s inventory control, customer ordering, and management reporting systems required improvement. As a result, Hoosier Burger hired Build a Better System to design a new system. The new system’s primary focus is strategic in nature, although it will also have a cross-functional focus. b. Identify the Hoosier Burger project’s scope. Answer: As mentioned in the textbook, several alternatives exist for defining a system’s scope. Figure 4–13 can be used as a guide. A suggested answer is provided below. Also, you can ask your students to develop a context-level data-flow diagram, similar to Figure 4–14. c. Using the six feasibility factors presented in the chapter, assess the Hoosier Burger project’s feasibility. Answer: Hoosier Burger will realize many tangible and intangible benefits from the new system. From an economic standpoint, Hoosier Burger should realize cost reduction and avoidance, error reduction, increased flexibility, increased order taking, and improved management planning and control. While exact dollar figures were not presented in the case scenario, students should recognize that tangible benefits will occur. The restaurant will also receive several intangible benefits. These include improved employee morale, easier access to information, and more timely information. In terms of tangible costs, Hoosier Burger will incur systems development costs, new hardware and software purchases, site renovations, data and system conversion, supplies, software and hardware maintenance, incremental data storage expense, and incremental communications costs. In terms of operational feasibility, the new Hoosier Burger system should solve the restaurant’s current information flow problems and should provide business opportunities for the restaurant. This new system will not only improve the order-taking process, but will also enable Bob and Thelma to use the order data to better manage Hoosier Burger’s operations. Technical, scheduling, and legal and contractual feasibility are of minimal concern. Bob and Thelma hired Build a Better System to design their system. Build a Better System is well-known in the community, has been in business for several years, and has a proven track record for developing systems for local and regional businesses. From Build a Better System’s perspective, this system is relatively small, is of limited complexity, and its development group has prior development experience with similar systems. While Bob and Thelma want the system implemented within a 4-month time frame, this date is somewhat flexible. In later chapters, reference is made to an existing POS system. One way to approach the legal and contractual issue is to assume that Build a Better System’s legal staff have evaluated the legal aspects associated with the project and do not foresee any legal ramifications. From a political standpoint, the key stakeholders, as well as Hoosier Burger’s employees, are very excited and accepting of the new system. d. Using Figure 4–13 as a guide, develop a Project Scope Statement for the Hoosier Burger project. Answer: Student answers for this question will vary. However, you should encourage your students to use Figure 4–13 as a guide for developing Hoosier Burger’s Project Scope Statement. Project Scope Statement: Title: Hoosier Burger Expansion Purpose: Open five new Hoosier Burger locations in 12 months to boost market share and revenue. Objectives: • Open five new restaurants. • Increase annual revenue by 10% within a year. Scope: • Includes: Site selection, construction, staff training, marketing. • Excludes: Existing locations, new menu development, international expansion. Deliverables: • Five new restaurants. • Completed construction and staff training. Timeline: 12 months. Budget: [Amount] (Construction, Equipment, Staffing, Marketing). Stakeholders: Project team, management, contractors, vendors. Approval: Senior management sign-off. 4-35. American Labs Case Exercises Solutions a. Identify several benefits and costs associated with implementing this new system. Answer: Inventory management will likely be more efficient, with fewer mistakes made and less administrative bookkeeping. Customer service will also be improved, with technicians able to provide more up-to-date information and more accurate turnaround estimates to customers when requested. The system will require initial one-time costs in hardware, development, and training costs. Maintenance and other recurring costs will also need to be accounted for. b. Using Figure 4-10 as a guide, prepare an economic feasibility analysis worksheet for American Labs. Using a discount rate of 10 percent, what are the overall NPV and ROI? When will break-even occur? Answer: c. Modify the spreadsheet developed for question c to reflect discount rates of 11 and 14 percent. What impact will these new rates have on the economic analysis? Answer: 11 percent 14 percent Petrie’s Electronics Case Question Solutions 4-36. Look over the scope statement (Figure 4-1). If you were an employee at Petrie’s Electronics, would you want to work on this project? Why or why not? Answer: Answers will vary. Most should be willing to work on the project as a result of the clear scope statement in Figure 4-1. Yes, I would want to work on this project. Reason: The project offers a clear purpose with tangible objectives, such as expanding the company's market presence and increasing revenue. It involves varied tasks, including site development and staff training, which can provide valuable experience and career growth opportunities. Additionally, successful completion could enhance the company’s reputation and lead to further exciting projects. 4-37. If you were part of the management team at Petrie’s Electronics, would you approve the project outlined in the scope statement in Figure 4-1? What changes, if any, need to be made to the document? Answer: Answers will vary. Project deliverables should probably be added to the scope statement. Yes, I would approve the project. Reason: The project aligns with strategic goals of expanding market presence and increasing revenue. Potential Changes: • Detail Timeline: Specify key milestones and deadlines. • Budget Breakdown: Provide a more detailed budget to manage financial risks. • Risk Management Plan: Include a section for identifying and mitigating potential risks. 4-38. Identify a preliminary set of tangible and intangible costs you think would occur for this project and the system it describes. What intangible benefits do you anticipate for the system? Answer: Answers will vary. Tangible costs should include things like system development, new hardware costs, outsourcing fees, user training, system maintenance, etc. Intangible costs might include things like possible inefficiencies due to the learning curve for new or current employees associated with the new system, etc. Intangible benefits should include things like increased customer goodwill, increased competitiveness with other similar stores in the market, etc. Preliminary Costs: Tangible Costs: • Construction Costs: Building and renovation expenses for new locations. • Equipment Costs: Purchase of kitchen appliances and furnishings. • Staffing Costs: Recruitment, salaries, and training expenses. • Marketing Costs: Promotion and advertising for new openings. Intangible Costs: • Brand Reputation Risk: Potential impact on brand if new locations do not meet quality standards. • Employee Morale: Stress and adjustment period for staff adapting to new locations. Intangible Benefits: • Increased Brand Recognition: Enhanced market presence and brand visibility. • Customer Loyalty: Improved customer experience leading to stronger brand loyalty. • Employee Satisfaction: Opportunities for career growth and development in new locations. 4-39. What do you consider to be the risks of the project as you currently understand it? Is this a low-, medium-, or high-risk project? Justify your answer. Assuming you were part of Jim’s team, would you have any particular risks? Answer: Answers will vary. Risks associated with the project include organizational risks (whether the organization can support such a system effectively), vendor risk (risk associated with outsourcing the development), financial risks (risk associated with investing a large sum of money in a large project like this), etc. The project is likely a high-risk project, since it’s new, uncharted territory for the company. It’s a rather large financial investment, and Jim is a new, untested project manager in the company. Team members on Jim’s team run the risk of investing their time and resources into this project instead of others that they could be working on. Project Risks: 1. Construction Delays 2. Budget Overruns 3. Staffing Issues 4. Market Acceptance Risk Level: Medium Justification: Risks are manageable but could impact timeline and budget. Jim’s Team Risks: • Operational Integration: Ensuring consistency across new locations. • Brand Consistency: Maintaining the brand’s identity and customer experience. 4-40. If you were assigned to help Jim with this project, how would you utilize the concept of incremental commitment in the design of the Baseline Project Plan? Answer: The principle of incremental commitment refers to the continuous review strategy described on p. 108. After each stage in the SDLC, the project is reviewed for business need, as well as accuracy of cost, benefit, and risk estimations. 4-41. If you were assigned to Jim’s team for this project, when in the project schedule (in what phase or after which activities are completed) do you think you could develop an economic analysis of the proposed system? What economic feasibility factors do you think would be relevant? Answer: An economic analysis can occur in the planning phase of the SDLC, after the scope and general feasibility have been established. With a relatively clear idea of initial costs, project duration, physical (hardware) costs, and a rough estimation of the probable benefits of the system, an initial economic feasibility analysis of the system can be produced. 4-42. If you were assigned to Jim’s team for this project, what activities would you conduct in order to prepare the details for the Baseline Project Plan? Explain the purpose of each activity and show a timeline or schedule for these activities. Answer: Details for the baseline project plan (BPP) can be prepared after project planning has occurred and clear, discrete tasks and work estimates for each task have been formulated. 4-43. In Case Question 4, you analyzed the risks associated with this project. Once deployed, what are the potential operational risks of the proposed system? How do you factor operation risks into a systems development plan? Answer: Operational risks associated with the project center around whether the system will actually perform the function it was meant to perform. The risk here is that the CRM system will be ineffective in increasing customer service and customer retention. Operation risks are factored in during operational feasibility analysis, and should be carefully considered prior to project approval. Solution Manual for Essentials of Systems Analysis and Design Joseph S. Valacich, Joey F. George, Jeffrey A. Hoffer 9780133546231
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