CHAPTER-5

Initiating and Planning Systems Development Projects

Learning Objectives
Describe the steps involved in the project initiation and planning
process.
Explain the need for and the contents of a Project Scope Statement
and Baseline Project Plan.
List and describe various methods for assessing project feasibility.
Describe the differences between tangible and intangible benefits
and costs and between one-time vs. recurring benefits and costs.
Learning Objectives (Cont.)
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.
Describe the general rules for evaluating technical risks associated
with a systems development project.
Describe the activities and participant roles within a structured
walkthrough.
Initiating and Planning Systems Development Projects

• What must be considered when making the decision on the division

between project initiation and planning (PIP) and analysis?
• How much effort should be expended on the PIP process?
• Who is responsible for performing the PIP process?
• Why is PIP such a challenging activity?
The Process of Initiating and Planning IS Development Projects

FIGURE 5-1
Systems development life cycle
with project initiation and
planning highlighted
 The Process
• Project initiation of Initiating
focuses and Planning
on activities IS Development
designed Projects
to assist in organizing
a team to conduct project planning.
• Establishing the Project
The Process Initiation
of Initiating Team. IS Development Projects
and Planning

• Establishing a Relationship with the Customer.

• Establishing the Project Initiation Plan.
• Establishing Management Procedures.
• Establishing the Project Management Environment and Project
Workbook.
• Developing the Project Charter.
 The Process of Initiating and Planning IS Development Projects

• The key activity of project initiation is the development of the project

charter.
• A short document that is prepared for both internal and external stakeholders
• Provides a high-level overview of the project
• Useful communication tool that helps to assure that the organizations and
other stakeholders understand the initiation of a project
• A project
Thecharter
Processtypically contains:
of Initiating and Planning IS Development Projects
• Project title and date of authorization
• Project manager name and contact information
• Customer name and contact information
• Projected start and completion dates
• Key stakeholders, project role, and responsibilities
• Project objectives and description
• Key assumptions or approach
• Signature section for key stakeholders
• The keyThe
activity of project
Process planning
of Initiating is theISprocess
and Planning of defining
Development Projectsclear,
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 the Project Scope Statement (PSS).
Elements of Project Planning
• Describe project scope, alternatives,
feasibility.
• Divide project into tasks.
• Estimate resource requirements and
create resource plan.
• Develop preliminary schedule.
• Develop communication plan.
Elements of Project Planning (Cont.)
• Determine standards and procedures.
• Identify and assess risk.
• Create preliminary budget.
• Develop a statement of work.
• Set baseline project plan.
Deliverables and Outcomes
• Business Case
• Justification for an information system
• Presented in terms of the tangible and intangible economic benefits and costs
• The technical and organizational feasibility of the proposed system
Deliverables and Outcomes (Cont.)
• Baseline Project Plan (BPP)
• A major outcome and deliverable from the PIP phase
• Contains the best estimate of a project’s scope, benefits, costs, risks, and
resource requirements
Deliverables and Outcomes (Cont.)
• Project Scope Statement (PSS)
• A document prepared for the customer
• Describes what the project will deliver
• Outlines at a high level all work required to complete the project
Assessing Project Feasibility
• Economic
• Technical
• Operational
• Scheduling
• Legal and contractual
• Political
Assessing Project Feasibility (Cont.)

FIGURE 5-2
System Service Request for Customer
Tracking System (Pine Valley Furniture).
Assessing Project Feasibility (Cont.)
• Economic feasibility: a process of identifying the financial benefits and
costs associated with a development project
• Often referred to as a cost-benefit analysis
• Project is reviewed after each SDLC phase in order to decide whether to
continue, redirect, or kill a project
Determining Project Benefits
• Tangible benefits refer to items that can be measured in dollars and
with certainty.
• Examples include:
• reduced personnel expenses,
• lower transaction costs, or
• higher profit margins.
Determining Project Benefits (Cont.)
• 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
Determining Project Benefits (Cont.)
• Intangible benefits are benefits derived from the creation of an
information system that cannot be easily measured in dollars or with
certainty.
• May have direct organizational benefits, such as the improvement of
employee morale.
• May have broader societal implications, such as the reduction of waste
creation or resource consumption.
Determining Project Costs
• Tangible cost: a cost associated with an information system that can
be measured in dollars and with certainty
• IS development tangible costs include:
• Hardware costs,
• Labor costs, or
• Operational costs including employee training and building renovations.
Determining Project Costs (Cont.)
• Intangible cost: a cost associated with an information system that
cannot be easily measured in terms of dollars or with certainty
• Intangible costs can include:
• Loss of customer goodwill,
• Employee morale, or
• Operational inefficiency.
Determining Project Costs (Cont.)
• One-time cost: a cost associated with project start-up and
development or system start-up
• These costs encompass activities such as:
• Systems development,
• New hardware and software purchases,
• User training,
• Site preparation, and
• Data or system conversion.
Determining Project Costs (Cont.)
• Recurring cost: a cost resulting from the ongoing evolution and use of
a system
• Examples of these costs include:
• Application software maintenance,
• Incremental data storage expenses,
• Incremental communications,
• New software and hardware leases, and
• Supplies and other expenses (i.e. paper, forms, data center personnel).
Determining Project Costs (Cont.)
• Both one-time and recurring costs can consist of items that are fixed
or variable in nature.
• Fixed costs are billed or incurred at a regular interval and usually at a
fixed rate.
• Variable costs are items that vary in relation to usage.
Determining Project Costs (Cont.)
• Procurement
• Consulting, equipment, site preparation, capital,
management time
• Start-up
• Operating systems, communications installation,
personnel hiring, organizational disruption
• Project-related
• Application software, software modification, personnel
overhead, training, data analysis, documentation
• Operating
• System maintenance, rental, asset depreciation,
operation and planning
The Time Value of Money
• Net Present Value (NPV)
• Use discount rate to determine present value of cash
outlays and receipts
• Return on Investment (ROI)
• Ratio of cash receipts to cash outlays
• Break-Even Analysis (BEA)
• Amount of time required for cumulative cash flow to
equal initial and ongoing investment
The Time Value of Money
• Time value of money (TVM): the concept that money available today
is worth more than the same amount tomorrow
• Discount rate: the rate of return used to compute the present value of
future cash flows (the cost of capital)
• Present value: the current value of a future cash flow
The Time Value of Money (Cont.)
• Net Present Value
• PVn = present value of Y dollars n years from now based on a discount rate of
i.
• NPV = sum of PVs across years.
• Calculates time value of money
The Time Value of Money (Cont.)
• Break-even analysis: a type of cost-benefit analysis to identify at what
point (if ever) benefits equal costs
Assessing Technical Feasibility
• Technical feasibility: a process of assessing the development
organization’s ability to construct a proposed system
Assessing Technical Feasibility
• The potential consequences of not assessing and managing risks can
include the following:
• 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.
Project Risk Factors
• Project size
• Team size, organizational departments, project duration,
programming effort
• Project structure
• New vs. renovated system, resulting organizational
changes, management commitment, user perceptions
• Development group
• Familiarity with platform, software, development method,
application area, development of similar systems
• User group
Assessing Technical Feasibility (Cont.)
• Risk can be managed on a project by:
• Changing the project plan to avoid risky factors.
• Assigning project team members to carefully manage the risky aspects.
• Setting up monitoring methods to determine whether or not potential risk is,
in fact, materializing.
Assessing Technical Feasibility (Cont.)
• The four primary factors associated with the amount of technical risk
on a given project are:
• Project size,
• Project structure,
• The development group’s experience with the application and technology
area, and
• The user group’s experience with systems development projects and the
application area
Assessing Technical Feasibility (Cont.)
• Four general rules emerged as technical risk assessments:
• Larger projects are riskier than smaller projects.
• A system in which the requirements are easily obtained and highly structured
will be less risky than one in which requirements are messy, ill structured, ill
defined, or subject to the judgment of an individual.
Assessing Technical Feasibility (Cont.)
• The development of a system employing commonly used or standard
technology will be less risky than one employing novel or nonstandard
technology.
• A project is less risky when the user group is familiar with the systems
development process and application area than if unfamiliar.
Assessing Technical Feasibility
(Cont.)
FIGURE 5-8
Effects of degree of
project structure, project
size, and familiarity with
application area on
project implementation
risk (Source: Based on
7th Applegate, Austin,
and McFarlan. 2007; Tech
Republic, 2005.)
Assessing Other Feasibility Concerns

• Operational
• Does the proposed system solve problems or take
advantage of opportunities?
• Scheduling
• Can the project time frame and completion dates
meet organizational deadlines?
• Legal and Contractual
• What are legal and contractual ramifications of the
proposed system development project?
• Political
• How do key stakeholders view the proposed system?
Building the Baseline Project Plan
• Baseline Project Plan (BPP) is a document intended primarily to
guide the development team.
• Sections:
• Introduction
• System description
• Feasibility assessment
• Management issues
Building the Baseline Project Plan (Cont.)

• Project Scope statement is part of the BPP

introduction.
• Sections:
• Problem statement
• Project objectives
• Project description
• Business benefits
• Deliverables
• Expected duration
Factors in Determining Scope
• Organizational units affected by new system
• Current systems that will interact with or change because of new
system
• People who are affected by new system
• Range of potential system capabilities
Diagram Depiction of Project Scope

FIGURE 5-11
Context-level data flow diagram showing project scope for Purchasing
Fulfillment System (Pine Valley Furniture)
Building the Baseline Project Plan (Cont.)

• System description section outlines possible

alternative solutions.
• Feasibility assessment section outlines issues related
to project costs and benefits, technical difficulties,
and other such concerns.
• Management issues section outlines a number of
managerial concerns related to the project.
Reviewing the Baseline Project Plan

• Structured Walkthroughs: a peer-group review of

any product created during the system
development process
• Roles: coordinator, presenter, user, secretary,
standard-bearer, maintenance oracle
• Can be applied to BPP, system specifications,
logical and physical designs, program code, test
procedures, manuals and documentation
Summary
• In this chapter you learned how to:
Describe steps involved in project initiation and
planning.
Explain the need for and contents of Statement of
Work and Baseline Project Plan.
List and describe methods for assessing project
feasibility.
Describe tangible vs. intangible costs and benefits, and
one-time vs. recurring costs and benefits.
Summary (Cont.)
Perform cost-benefit analysis, and understand time
value of money, present value, discount rate, return on
investment, and break-even analysis.
Describe rules for evaluating technical risk of systems
development projects.
Describe activities and roles of structured
walkthroughs.