SAD ch02

Systems Analysis and Design
Alan Dennis, Barbara Haley Wixom, and Roberta Roth

John Wiley & Sons, Inc.
Slides by Candace S. Garrod

Red Rocks Community College
*PowerPoint Presentation for Dennis, Wixom, & Roth Systems Analysis and Design, 3rd Edition
Copyright 2006 © John Wiley & Sons, Inc. All rights reserved.
Project Initiation
Chapter 2
Key Ideas
• An opportunity to create business
value from using information
technology initiates a project.
• Feasibility analysis helps determine
whether or not to proceed with the IS
project.
• Projects are selected based on
business needs and project risks.
3
Key Ideas
• The project sponsor is a key person who
identifies business value to be gained
from using information technology.
• The approval committee reviews system
requests from groups throughout the
organization and selects projects for the
benefit of the business.
4
IDENTIFYING PROJECTS
WITH BUSINESS VALUE
How Do Projects Begin?
• Business needs should drive projects.

• Project sponsor recognizes business
need for new system and desires to see
it implemented.
• Business needs determine the system’s
functionality (what it will do).
• The project’s business value should be
clear.
6
System Request
• A document describing business reasons

for project and system’s expected value.
• Lists project’s key elements
• Project sponsor
• Business need
• Business requirements
• Business value
• Special issues or constraints
7
System Request Examples
• Project sponsor – VP of Marketing
• Business need – Reach new customers and
improve service to existing customers
• Business requirements – Provide web-based
shopping capability
• Business value - $750,000 in new customer
sales; $1.8M in existing customer sales
• Special issues or constraints – System must be
operational by holiday shopping season
8
Preliminary Project Acceptance
• System request is reviewed by

approval committee
• Based on information provided,
project merits are assessed.
• Worthy projects are accepted and
undergo additional investigation –
the feasibility analysis.
9
Your Turn
• If you were building a web-based system
for course registration,
• What is the business need?
• What would be the business requirements?
• What would be the business value (tangible
and intangible)?
• What special issues or constraints would
you foresee?
10
FEASIBILITY ANALYSIS
Feasibility Analysis
• Detailed business case for the project

• Technical feasibility
• Economic feasibility
• Organizational feasibility
• Compiled into a feasibility study
• Feasibility is reassessed throughout the
project
12
Technical Feasibility:
Can We Build It?
• Users’ and analysts’ familiarity with
the business application area
• Familiarity with technology
• Have we used it before? How new is
it?
• Project size
• Number of people, time, and features
• Compatibility with existing systems
13
Economic Feasibility
Should We Build It?
• Identify costs and benefits
• Assign values to costs and benefits
• Determine cash flow
• Assess financial viability
• Net present value (NPV)
• Return on investment (ROI)
• Break even point (BEP)
14
Example Costs and Benefits for
Economic Feasibility
PowerPoint Presentation for Dennis, Wixom &

Roth Systems Analysis and Design, 3rd Edition
Copyright 2006 © John Wiley & Sons, Inc. All
rights reserved..
15
Tangible vs. Intangible Costs
• Tangible Costs – Includes revenue that
the system enables the organization to
collect, such as increased sales.
• Intangible Costs – Are base on intuition
and belief rather than “hard numbers.”
16
Assign Cost and Benefit Values
• Difficult, but essential to estimate

• Work with people who are most
familiar with the area to develop
estimates
• Intangibles should also be quantified
• If intangibles cannot be quantified,
list and include as part of supporting
material
17
Determine Cash Flow:
Assign Values to Costs and Benefits –
Simple Cash Flow Method
18
Assess Financial Viability –
Net Present Value
• NPV = ∑ PV(future cash inflows) –
∑ PV(future cash outflows)
• PV = Cash flow amount

(1 + interest rate)n , where
• interest rate = required return
• n = number of years in future
19
Determine NPV
If NPV >= 0,
Project is OK
If NPV < 0,
Project is
unacceptable
20
Return on Investment
ROI = NPV
∑PV(cash outflows)
21
Break Even Point
• How long before the project’s returns
match the amount invested
• The longer it takes to break even,
the higher the project’s risk.
22
Organizational Feasibility
If we build it, will they come?
• Strategic alignment
• How well do the project goals align
with business objectives?
• Stakeholder analysis
• Project champion(s)
• Organizational management
• System users
23
PROJECT SELECTION
Project Selection Issues
• Approval committee works from the

system request and the feasibility study
• Project portfolio – how does the project fit
within the entire portfolio of projects?
• Trade-offs must be made to select projects
that will form a balanced project portfolio
• Viable projects may be rejected or deferred
because of project portfolio issues.
25
Summary
• Project initiation involves creating and
assessing goals and expectations for a new
system
• Identifying the business value of the new
project is a key to success
• Feasibility study is concerned with insuring
that technical, economic, and organizational
benefits outweigh costs and risks
• Project selection involves viewing the project
within the context of the entire project
portfolio, and selecting those projects that
contribute to balance in the portfolio
26
Copyright © 2006
John Wiley & Sons, Inc.
• All rights reserved. Reproduction or translation of this
work beyond that permitted in Section 117 of the 1976
United States Copyright Act without the express written
permission of the copyright owner is unlawful.
• Request for further information should be addressed to
the Permissions Department, John Wiley & Sons, Inc.
• The purchaser may make back-up copies for his/her
own use only and not for redistribution or resale.
• The Publisher assumes no responsibility for errors,
omissions, or damages, caused by the use of these
programs or from the use of the information contained
herein.
27

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Systems Analysis and Design

Alan Dennis, Barbara Haley Wixom, and Roberta Roth

Slides by Candace S. Garrod

• Business needs should drive projects.

• A document describing business reasons

• System request is reviewed by

• Detailed business case for the project

PowerPoint Presentation for Dennis, Wixom &

• Difficult, but essential to estimate

• PV = Cash flow amount

• Approval committee works from the

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