Planning

System Analysis:
Planning the Approach
CSC 2202 Systems Analysis and Design 1

Introduction
In systems analysis and design,
poor initial planning leads to
inadequate understanding of
requirements which is a major
cause of project failure.

Introduction (cont)
The analyst needs to focus on the
project objectives and ponder the
following:
What type of information is required?
What are the constraints on the
investigation?
What are the potential problems that
may make the task more difficult?

Introduction (cont)
Systems planning tasks
Examine the systems request
Conduct a preliminary
investigation
Conduct feasibility study to
determine whether further
development is warranted
Preliminary Investigation
Purpose/Aim
To decide whether to proceed

with the project

Objectives for a preliminary
investigation
1. Understand the problem
2. Define the project scope and constraints
3. Identify the benefits
4. Estimate the time and costs
5. Report to management

Preliminary Investigation Objectives

1. Understand the problem

 Identifythe true nature of the problem and
the reason for the systems request
 Stated problem may not be the real
problem
 Clear statement defines the investigation
scope

2. Define the project scope and constraints

 Project scope
 Define the range or extent of the project
 Set project boundaries
 Constraints
 Identify conditions, restrictions, or requirements
➠ Present vs. future
➠ Internal vs. external

3. Identify the benefits

 Tangible benefits
 Can be stated in dollars
 Based on increased revenue or reduced cost
 Intangible benefits
 Difficult
to measure in dollars
 Can involve job satisfaction or company image

4. Estimate the time and costs

 Determine what information is needed
 Identify the sources of information
 Decide whether to use interviews, if so how many,

and what time needed
 Decide whether to use surveys, if so who to
complete it, and what time needed
 Estimate the cost of gathering, analyzing, and
reporting the information to management

5. Report to management
 Finaltask in the preliminary investigation
 Key elements
 Evaluation of systems request
 Estimate of costs and benefits
 Recommendations

Steps
Steps in a preliminary investigation
1. Obtain authorization to proceed
2. Identify the necessary information
3. Perform fact-finding to gather the
required information
4. Analyze the information
5. Present results and recommendations to
management
Steps
1. Obtain authorization to proceed
 Projectscan create concern or opposition
 Need clear authorization from
management
 Good communication is important
 Initialmeeting with managers and users
 Explain the project
 Describe your responsibilities
 Invite questions

Steps
2. Identify the necessary information
 Review the preliminary investigation
objectives
 List all information needed for these
objectives
 Prepare a schedule of activities for this
phase

Steps
3. Perform fact-finding to gather the
required information
 Analyze organization charts
 Conduct interviews
 Review current documentation
 Observe current operations to obtain
information
 Conduct a brief survey of people who use
the system
Steps
4. Analyze the information
 Identify alternatives
 Include
costs and benefits
 Recommend an action
 Possible actions
 Take no further action
 Apply some other solution
 Proceed to systems implementation phase
 Proceed to next SDLC phase — systems

analysis
Steps
5. Present your results and recommendations to
management
 Typical report sections
 Introduction
 Systems request summary
 Findings
 Recommendations
 Time & cost estimates
 Expected benefits
 Appendix
 Oral presentation also might be required

Objectives and Terms of
Reference
As part of the planning process,
analysts must ensure that:
 They understand the objectives and terms
of reference agreed with the client.
 They are aware of constraints that affect
the analysis process.
 They plan to manage tasks in time.

Reference
The stated objectives of the client are
usually recorded in the terms of
reference document.
These are agreed on by the client
before analysis starts.
The Mnemonic “SCOPE” summarizes
the main areas included in the Terms of
reference.

Reference
S - System boundary
C - Constraints
O - Objectives
P - Permission
E - End products
The TOR document has to define the above
parameters.

Reference
System boundary
Defines the area of the organization
under study and specifies the limits of
the new system implemented as a
result of the project.

Reference
Constraints
 Factorse.g. budget, timescales, technology
which may restrict the study or solution.
Objectives
 Statement of expectation of client from the
project. They have to be clear and
measurable.

Reference
Permission
 Indicates
who in the clients organization is
responsible for supervising the project and
making decisions.
End products
 Description of deliverables of the study.
Usually in form of a report.

Feasibility Study
•Is it possible?
•Is it justified?

Feasibility Study
It is a small scale systems analysis that
gives limited details.
Involves the analyst but is more time
limited.
Very important for large and complex
projects – before you decide to
proceed.
However, it is no substitute for a full and
detailed study.
Feasibility Study
A feasibility study is the measure of how

beneficial the development or
enhancement of an IS would be to the
business.

Determining Feasibility
Determining feasibility
 First
step is a determination of feasibility
 Goal is to identify nonfeasible projects as
soon as possible
 Feasibility can change over time
 Nonfeasible projects can be resubmitted
 Initially feasible projects can be rejected later

Levels of Feasibility
The feasibility study has to address the

following levels:
Economic or financial feasibility
Technical feasibility
Operational feasibility
Legal and ethical issues

Operational (Functional) feasibility

 The measure of how well a particular
Information System will work in a
given environment.
 Will the solution fulfil the end-users’
requirements?
 Will the organizational change result
in an acceptable quality of working
life for those affected by the system?

Technical feasibility
 Is the measure of the practicality of a
specific technical Information
System solution and the availability
of technical resources i.e. Do we
have the technology & skills needed
to develop & operate the system?

Economic feasibility
 Isthe measure of the cost-effectiveness of
an Information System solution i.e. Will the
system result in competitive advantage to
the enterprise?

Legal feasibility
 Will the proposed system conform to laws
and regulations?
Ethical issues
 Will the proposed system conform to the
norms of ethics for the Information systems
community?

Evaluating Feasibility
Feasibility analysis project teams makes a
recommendation to the steering committee
Steering committee makes a decision
 proceed, or stop now
which alternative?
Project team implements this decision
Feasibility Analysis
On completion of Feasibility Analysis:
 original problem (or need) understood
 alternative solutions considered
Involves financial, technical and

people factor considerations
Concludes with recommendation,
including costs and benefits

Feasibility Analysis
A project is economically feasible if the
future benefits outweigh the costs
The Systems Analyst calculates a
project’s costs and benefits
Cost-benefit analysis is performed when
 Conducting a preliminary investigation
 Evaluating a project
 Making recommendations to management

Describing Costs and Benefits
Tangible and intangible costs
 Tangible costs have a specific dollar value
 Examples: salaries, purchase of hardware or software
 Intangible costs are more difficult to measure in
dollars
 Examples: reduced customer satisfaction, low morale in
the organization
 Although intangible costs are important, tangible
cost figures should be used if available

Tangible and Intangible
Benefits
Tangible Benefits include
 faster system
 larger volumes of transactions
➤Tangible
Intangible Benefits include

 promote goodwill
 better work environment

Cost Benefit Analysis
Summarise costs and benefits of
the project
 to allow management to decide
whether to proceed
Costs and benefits can be tangible
and intangible

information needed
Estimate cost of operating the current system
Estimate cost of operating the proposed new
system
Description of benefits - tangible and intangible
Risk assessment for doing and not doing the
new project
 risky projects take longer than estimated to install
 risky projects likely to exceed cost estimate

information needed
Framework for assessing risk
 familiarity of company with the technology
proposed
 project “structure” (all requirements
known?)
 size of project relative to those normally
taken on

Tangible and Intangible Costs
Tangible Costs include
 Research and development costs
 Hardware costs
 Software costs
 Labor costs
 Maintenance costs
 Operational costs

Tangible and Intangible Costs
Intangible Costs include
 operationalslowdowns
 degradation in the workplace

Cost classifications
 Costs can be classified in several ways
 Tangible and intangible costs
 Direct and indirect costs
 Fixed and variable costs
 Developmental and operational costs

Direct and indirect costs
 Direct costs are those that can be
associated with the development of a
specific system
 Examples: project team salaries, new hardware
or software needed for the system
 Indirectcosts, or overhead expenses,
cannot be attributed to a particular system
 Examples:network administrator’s salary, copy
machine rental costs
Fixed and variable costs
 Fixed costs are relatively constant and do
not depend on a level of activity or effort
 Examples: salaries, rental charges
 Variable costs depend on the level of
activity
 Examples: printer paper, supplies, telephone
line charges

Developmental and operational costs
 Development costs are incurred only once,
at the time the system is developed
 Examples: system development team salaries,
user training, hardware purchase
 Operational costs are incurred after the
system is implemented and continue while
the system is in use
 Examples: system maintenance, ongoing
training, annual license fees
Benefit classifications
Benefit classifications
 Benefits can be classified into the same
categories as costs
 Tangible and intangible benefits
 Direct and indirect benefits
 Fixed and variable benefits
 Developmental and operational benefits
 Benefits also can be classified as positive

benefits and cost-avoidance benefits

Positive and cost-avoidance benefits
Positive and cost-avoidance benefits

 Positive benefits are a direct result of the new
information system
 Examples: increased revenues, improved services,
higher morale, better management
 Cost-avoidance benefits refer to expenses that
would be necessary if the new system is not
installed
 Examples: handling work with current staff instead of
hiring, not having to replace hardware or software

Techniques for Evaluating
Financial Feasibility
Cost benefit analysis
Return on Total Assets (ROTA)
Payback Analysis
Net Present Value
Break Even Analysis

Cost-Benefit Analysis
Cost-benefit analysis is the process of
comparing anticipated costs to anticipated
benefits
Cost-benefit analysis produces reliable
information for making decisions
Common cost-benefit techniques
 Payback analysis
 Return on investment (ROI) analysis
 Present value analysis

Payback Analysis
Original Investment
Payback =
Average annual return on investment
Project investment decision based on how

long it will take for the benefits of the
system to pay back the development costs
Useful measure to prioritise many projects
which are competing for resources and
commencement

Payback Analysis
Payback analysis
 Payback analysis is the process of determining
how long it takes for an information system, to pay
for itself
 Four step process
1. Determine the system’s initial development cost
2. Estimate annual benefits
3. Determine annual operating costs
4. Find the payback period by comparing total costs to
accumulated benefits

Payback Analysis
Payback analysis
 When costs are plotted, the economically
useful life of the system is shown
 Systems development costs are high at
first, then drop
 Operational costs remain low at first, then
increase as more maintenance is required
 Benefits usually increase rapidly when the
system becomes operational, then level off

Payback Analysis
Payback analysis
 Pros and cons
 Payback analysis emphasizes costs and
benefits early in the system’s life and ignores
those that occur later
 Even though it has drawbacks, payback
analysis is widely used

Return on Total Assets
(ROTA)
Net income from the project
ROTA =
Total assets invested in the project
Reveals effectiveness in generating profits

from available assets
A required rate of return is the percentage
rate that an investment must earn in order
for it to be financially attractive
Return on investment Analysis
Return on investment analysis
 ROI is a percentage rate that measures
profitability by comparing a project’s total
net benefits (the return) to its total costs
(the investment)
 ROI = (total benefits - total costs) / total
costs
 Projects can be ranked using ROI

Return on investment Analysis
Return on investment analysis
 Pros and cons
 ROI does consider all costs and benefits during
the system’s life, and is a more precise method
than payback analysis
 ROI only measures the overall rate of return for
the total period, and annual rates can vary

considerably
 ROI ignores the timing of costs and benefits

Net Present Value
Takes into account the time value of money
Able to compare today’s costs with costs in

the future (also for benefits)

Present Value Analysis
Present value analysis
The time value of money is a concept
that adjusts future costs and benefits
and expresses them in terms of
current dollars
The timing of costs and benefits
directly affects the desirability of a
project

Benefits that you receive now are
more valuable than those you receive
in the future, because you gain the
use of the money and can invest it
Costs that you incur now are more
expensive than those you incur in the
future, because you lose the use of
the money immediately

 Present value adjustment factors are based on a
specified interest rate called the discount rate
 The discount rate is the return a company might
expect on a risk-free investment, such as a bond
 Each company determines its own acceptable rate
of return for an information systems project
 Adjustment factors are printed in tables called
present value tables, which are readily available

 Pros and cons
 Present value analysis not only considers all
costs and benefits, but adjusts the values
based on timing
 NPV results depend on future estimates, and
are only as reliable as the forecasts themselves

 Many companies use all three methods to
evaluate projects

Break Even Analysis
Break-even point is where it becomes
profitable for the business to get the
new information system
Total costs include recurring costs
(during operation of the system) plus
development costs (once only)

The feasibility study report
Has the following sections
Background
The current situation
The proposed solution
Costs and Benefits
Recommendations.

Background consists of
 Theterms of reference
 Reasons for the study
The current situation consists of

 Overview of the current situation
 Problems and requirements identified

The proposed solution
 Description of requirements for the new
system along with a number of options
explaining how this solution might be
implemented.
 Technical, cost and operational
implications are described.

Costs and Benefits
 Comparison of costs and benefits using an
appropriate evaluation criteria.
Recommendations.
 Summary of the previous sections of the
report
 Recommendations as to how the client
should proceed.
The “PIECES” framework
Wetherbe's “PIECES” problem solving

framework is a checklist for identifying
problems with an existing information
system.
Useful for identifying operational
problems to be solved, and their
urgency

P - Performance
I - Information
E - Economy
C - Control
E - Efficiency
S - Services
Performance
 Is current throughput and response time
adequate?
Information
 Do end users and managers get timely,
pertinent, accurate and usefully
formatted information?

Economy
 Are services provided by the current
system cost-effective?
 Could there be a reduction in costs
and/or an increase in benefits?
Control
 Are there effective controls to protect
against fraud and to guarantee
information accuracy and security?

Efficiency
 Does current system make good
use of resources: people, time, flow
of forms?
Services
 Are current services reliable?
 Are they flexible and expandable?

Review Questions
Using an organization with which you
are familiar, prepare the Terms of
Reference for a project to develop a
new information system of your choice.

Planning

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Planning

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System Analysis:

Planning the Approach

CSC 2202 Systems Analysis and Design 1

CSC 2202 Systems Analysis and Design 2

CSC 2202 Systems Analysis and Design 3

To decide whether to proceed

CSC 2202 Systems Analysis and Design 5

CSC 2202 Systems Analysis and Design 6

CSC 2202 Systems Analysis and Design 7

1. Understand the problem

CSC 2202 Systems Analysis and Design 8

2. Define the project scope and constraints

CSC 2202 Systems Analysis and Design 9

3. Identify the benefits

CSC 2202 Systems Analysis and Design 10

4. Estimate the time and costs

 Decide whether to use interviews, if so how many,

CSC 2202 Systems Analysis and Design 11

CSC 2202 Systems Analysis and Design 12

 Describe your responsibilities

CSC 2202 Systems Analysis and Design 14

CSC 2202 Systems Analysis and Design 15

 Proceed to systems implementation phase

 Proceed to next SDLC phase — systems

 Oral presentation also might be required

CSC 2202 Systems Analysis and Design 19

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CSC 2202 Systems Analysis and Design 22

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A feasibility study is the measure of how

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The feasibility study has to address the

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Operational (Functional) feasibility

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Involves financial, technical and

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Intangible Benefits include

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 Fixed and variable costs

 Developmental and operational costs

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 Fixed and variable benefits

 Developmental and operational benefits

 Benefits also can be classified as positive

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Positive and cost-avoidance benefits

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