BBA-305 ​

INFORMATION
SYSTEMS
MANAGEMENT​
UNIT – 3
Cost Benefit Analysis & System
Development
Cost Benefit Analysis (CBA)
 • Cost Benefit Analysis (CBA) is a
Cost systematic approach to evaluating
Benefit the financial costs and benefits of a
project or decision. It helps
Analysis organizations decide whether the
investment in an information
(CBA) system or IT project is justified.
 • Quantitative aspects focus on
1. numerical data, measuring the
financial impact of the project.
Quantitati • A. Costs
ve 1.Initial Costs:
1.Hardware Costs: Purchase of servers,
Aspects of computers, networking equipment.
2.Software Costs: Licensing, custom
Cost software development.
3.Installation Costs: Costs related to
Benefit setting up the system.
4.Training Costs: Costs for training staff on
Analysis new systems.
 A. Costs
2. Operating Costs:
1. • Maintenance and Support: Ongoing
expenses for software updates, hardware
Quantitati repairs.
• Utility Costs: Energy consumption,
ve Aspects cooling for data centers.
• Salaries: Additional staff required for
of Cost system operation and management.

Benefit
• Outsourcing: Contracting third-party
services for specific IT tasks (e.g., cloud
hosting, cybersecurity).
Analysis – 3. Opportunity Costs:
Contd. • The potential benefits that are lost by
choosing one option over another (e.g.,
delaying other projects to prioritize an IT
system).
 B. Benefits

1. 1. Increased Efficiency:
1. Automation of manual processes, faster processing times,

Quantitati and fewer errors.

2. Cost Savings:
1. Reduction in labor costs due to automation, reduced material

ve waste, and lower operating costs through better resource

management.

Aspects of
3. Revenue Generation:
1. New business opportunities, customer outreach, and
improved product/service delivery.

Cost 4. Time Savings:

1. Faster access to data, decision-making improvements, and
reduction in time spent on repetitive tasks.

Benefit 5. Return on Investment (ROI):

1. Calculation of the financial return from the system compared

Analysis –
to its costs.
6. Net Present Value (NPV):
1. The present value of future cash flows minus the initial

Contd. investment, used to determine long-term financial viability.

 C. Key Metrics in Quantitative
1. CBA
Quantitati 1.Payback Period:
1. The time it takes to recover the initial
ve investment.
2.Internal Rate of Return (IRR):
Aspects of 1. The rate at which the present value of
future cash flows equals the initial cost of
Cost the project.
3.Benefit-Cost Ratio (BCR):
Benefit 1. The ratio of total benefits to total costs,

Analysis – used to assess the project’s feasibility

(BCR > 1 means the project is financially
viable).
Contd.
2. Qualitative Aspects of Cost
Benefit Analysis
Qualitative aspects focus on non-financial or
intangible benefits that are more difficult to
measure but can significantly impact an
organization.

A. Intangible Benefits
Improved Decision- Enhanced Customer Increased Flexibility and Improved Employee Competitive Advantage: Risk Reduction:
Making: Satisfaction: Scalability: Satisfaction: • Improved market positioning by • Better data management,
• Better data quality and • Improved customer experience • The ability to adapt to changing • Reduction of mundane tasks, leveraging advanced information cybersecurity, and compliance
accessibility, leading to informed through faster response times, business needs, market demands, enhanced working conditions, and systems to deliver superior with regulations.
and timely business decisions. better service, and personalized and technological advancements. better tools for job performance. products/services.
offerings.
2. Qualitative Aspects of Cost
Benefit Analysis – Contd.
B. Organizational Impact

• Cultural Change:
• Adoption of new technologies often requires changes in organizational culture, employee
mindset, and workflows.
• Reputation and Brand Value:
• A modern, efficient information system can enhance an organization’s brand and improve
stakeholder trust.
• Sustainability:
• Systems that reduce energy consumption, paper use, or carbon footprint contribute to the
organization’s environmental goals.

C. Challenges in Assessing Qualitative Benefits

• Subjectivity:
• Measuring non-financial benefits like customer satisfaction or employee morale can be
subjective and difficult to quantify.
• Long-Term Impact:
• Some qualitative benefits, like improved flexibility or reduced risk, might not show immediate
results but have a significant long-term impact.
Assessing Information
Needs of the Organization
Assessing Information
Needs of the
Organization

• Assessing information needs

involves identifying what data and
information are necessary for
decision-making, planning, and
operational efficiency within the
organization.
1. Importance of
Information Needs
Assessment
• Informed Decision- Making:
• Information helps managers make decisions
based on current and relevant data.
• Resource Optimization:
• Accurate information reduces wastage of
resources and allows for more efficient
operations.
• Strategic Planning:
• Information systems must align with the
strategic goals of the organization, providing
data that supports future planning and
growth.
• Risk Management:
• Access to critical information helps in
identifying and mitigating risks.
2. Steps in Assessing Information Needs

IDENTIFYING STAKEHOLDER DATA SOURCES INFORMATION USER

BUSINESS ANALYSIS AND SYSTEM REQUIREMENTS
GOALS REQUIREMENTS REQUIREMENTS AND USABILITY
 2. Steps in Assessing Information Needs

A. Identifying Business Goals B. Stakeholder Analysis

• Understand Strategic • Internal Stakeholders:
Objectives: • Assess the information needs of
• Align the information system with different departments (e.g.,
the organization’s overall strategic finance, marketing, HR) and
goals. executives.
• Key Performance Indicators • External Stakeholders:
(KPIs): • Understand the information
• Determine which metrics and data requirements of customers,
are needed to track performance suppliers, regulators, and partners.
toward these goals. • Information Flow:
• Map how information flows within
the organization, ensuring that the
right data reaches the right people
at the right time.
2. Steps in Assessing
Information Needs
C. Data Sources and Requirements
1.Identify Data Sources:
1. Determine internal (e.g., transaction databases,
customer management systems) and external
(e.g., market reports, competitor analysis) data
sources.
2.Data Quality:
1. Assess the quality of the available data, ensuring
it is accurate, timely, complete, and relevant.
3.Information Gaps:
1. Identify gaps where information is lacking or
insufficient to meet organizational needs.
2. Steps in Assessing
Information Needs
D. Information System Requirements
1.Data Collection and Storage:
1. Assess the system's ability to gather, store,
and retrieve necessary information efficiently.
2.Processing and Analysis:
1. Determine the system’s capability to process
data, generate reports, and provide analytics
for decision-making.
3.Integration with Other Systems:
1. Ensure compatibility and integration with
other IT systems in the organization, such as
ERP, CRM, and Supply Chain Management
systems.
2. Steps in Assessing
Information Needs
E. User Requirements and Usability
1.End-User Needs:
1. Identify what information end-users
(employees, managers) need to
perform their roles effectively.
2.User-Friendly Interface:
1. Ensure the system is easy to use,
with intuitive dashboards and
reporting tools that allow users to
access relevant data quickly.
 Interviews and Surveys:
• Conduct interviews with stakeholders and use
surveys to gather insights on their information
3. Tools and needs.
Workshops and Focus Groups:
Techniques for • Organize group discussions to identify common
Assessing information requirements across departments.
Information SWOT Analysis:
Needs • Use SWOT analysis (Strengths, Weaknesses,
Opportunities, Threats) to evaluate the
organization’s current information systems and
identify areas for improvement.

Data Flow Diagrams (DFDs):

• Use DFDs to visually map how information flows
through the organization, identifying bottlenecks
and inefficiencies.
 Evolving Business Needs:

• Business needs can change rapidly,

4. requiring continuous reassessment of
Challenges information systems.

in Assessing Data Overload:

Information • Too much information can overwhelm
Needs users, making it difficult to extract
actionable insights.
Resistance to Change:

• Employees may resist changes in

information systems, especially if it
requires them to learn new tools or
processes.
 SYSTEM
DEVELOPMEN
T
 Input: Resources that enter
the system.
A system refers to a set of
interrelated components
that work together to
achieve a specific goal. It
takes inputs, processes

1. them, and produces outputs.

Process: The
transformation of input to
output.

Concept Components of a System:

of Output: The final product or

System result.

Feedback: Information used

to control and improve the
system.
 Open System

Closed System
2. Types
of Deterministic System
Systems
Probabilistic System

Social System
 A. Open System

Definition: An open
system interacts
with its external

2. Types environment,
exchanging material,
energy, or

of information.

Systems Examples: Business

organizations,
ecosystems.

• Dynamic and adaptive.

• Affected by external
Characteristics:
influences (e.g., market
trends, regulations).
 B. Closed System

• Definition: A closed system does not interact

with its environment. It is self-contained and
self-regulating.
• Examples: Thermodynamic systems in
physics.
• Characteristics:
2. Types of • Isolated from external influences.
• Focuses on internal processes and efficiency.
Systems C. Deterministic System

• Definition: A system where outcomes are

precisely determined by inputs without any
randomness.
• Examples: Mechanical systems like clocks.
• Characteristics:
• Predictable and reproducible behavior.
• No variability in output.
 D. Probabilistic System

• Definition: A system where outcomes are

influenced by probability, involving uncertainty or
randomness.
• Examples: Stock market systems, weather
forecasting models.
• Characteristics:
2. Types of • Outputs cannot be predicted with certainty.
• Based on statistical models and probability.
Systems E. Social System

• Definition: A system composed of people or

groups of people interacting in social or
organizational settings.
• Examples: Companies, governments.
• Characteristics:
• Involves human behaviors, relationships, and
decisions.
• Adaptive and evolving with societal changes.
 3. System Development Approaches

System Prototyping End User

Development Life Development
Cycle (SDLC)
A. System Development Life Cycle
(SDLC)
Definition: Stages: Advantages: Disadvantages:
• A structured approach to • Planning: Defining the • Clear structure and • Time-consuming and rigid.
developing an information scope, objectives, and detailed documentation. • Difficult to accommodate
system that goes through feasibility of the project. • Minimizes risks by breaking changes once the project
sequential stages. • Analysis: Gathering and down the development has started.
analyzing user process.
requirements.
• Design: Creating detailed
design specifications for
hardware, software, and
system architecture.
• Development: Coding and
creating the actual system.
• Testing: Verifying that the
system meets the
requirements and is error-
free.
• Implementation:
Deploying the system into
the production
environment.
• Maintenance: Ongoing
support and system
updates.
 Definition: A method where a prototype (or preliminary version) of
the system is developed quickly to demonstrate concepts and test
functionality.

Process:
• Requirements Gathering: Users and developers discuss the basic
requirements.
• Initial Prototype: A basic working model of the system is developed.

B. • User Evaluation: Users test the prototype and provide feedback.

• Refinement: The prototype is refined based on feedback.
• Final System: The prototype evolves into the final system.

Prototyping Advantages:
• Early detection of errors.
• Better user feedback.
• Flexibility to make changes.

Disadvantages:
• Can lead to scope creep if requirements keep changing.
• Sometimes lacks proper documentation.
 Definition:
• A development approach where end-users (non-
programmers) are given tools to create or modify
C. End their own applications.

User Characteristics:
• Allows users to build solutions that meet their own
Developme specific needs.
• Involves low-code or no-code platforms.
nt Advantages:
• Fast and flexible for user-specific solutions.
• Reduces dependency on the IT department.

Disadvantages:
• Potential for poorly designed solutions.
• Can lead to system inconsistencies if not properly
managed.
4. System Development Models

Waterfall Spiral Model

Model
 A. Waterfall Model

Definition:
A linear and sequential model where each phase of development must be completed before the next begins.

Stages:
Requirement Integration and
System Design. Implementation. Deployment. Maintenance.
Analysis. Testing.

Advantages:
Simple and easy to manage. Phases do not overlap.

Disadvantages:
Inflexible to changes. Difficult to backtrack once a stage is completed
 Definition:

• A risk-driven model that combines elements of both iterative

and Waterfall models. Development is divided into spirals,
with each spiral addressing risks.

Stages:

• Identify Objectives: Determine system objectives and

requirements.

B. Spiral
• Identify and Resolve Risks: Assess risks and develop
strategies to address them.
• Development and Testing: Build a prototype or a part of

Model the system.

• Plan the Next Iteration: Plan the next phase of
development based on feedback.
Advantages:

• Focus on risk management.

• Accommodates changes throughout the process.

Disadvantages:

• Complex and costly.

• Requires careful monitoring and risk management.
 5. System Analysis, Design, and Implementation

SYSTEM ANALYSIS SYSTEM DESIGN SYSTEM

IMPLEMENTATION
 A. System Analysis

Definition:
The process of understanding the current system, identifying problems, and defining
requirements for the new system.

Steps:
Analyze current
Define system Gather Identify areas for Document
workflows and
objectives. requirements. improvement. requirements
data.
 Definition:
The process of designing the technical architecture, components, user
interfaces, and data structures of the system.

B. System
Design
Steps:
Create data
Specify
models (e.g., ER
Create a system Design user hardware and
diagrams,
architecture. interfaces. software
database
requirements.
schemas).
 Definition:
• The process of deploying the
system into production, ensuring it
is operational.
C. System Steps:
Implementati • Install and configure the hardware
and software.
on • Migrate data from the old system
to the new one.
• Train users and provide
documentation.
• Conduct final testing and resolve
issues.
• Go live with the system.