Chapter 7 Initiating and Planning Systems Development Projects



Chapter 6

Initiating and Planning Systems Development Projects

Chapter Overview

Chapter 6 introduces students to the second phase of the SDLC, project initiation and planning. Project initiation includes those activities that assist in organizing a team to conduct project planning. During project initiation, one or more analysts work with a customer to establish work standards and communication procedures. Project planning is the process of defining clear, discrete activities and the work needed to complete each activity. The objective of the project planning process is the development of a Baseline Project Plan (BPP) and the 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 dictate the comprehensiveness of the project planning process and resulting documents.

An important aspect of the project initiation and planning process focuses on the assessment of a project’s feasibility and risk. Chapter 6 describes several types of feasibility, including economic, technical, operational, schedule, legal and contractual, and political. Students will find that the economic feasibility assessment techniques described in this chapter are similar to techniques they learned in a prior managerial accounting or finance course. Other forms of feasibility assessment are likely to be new. The extent to which you focus on each aspect of feasibility is influenced by your overall curriculum.

The authors use Pine Valley Furniture’s WebStore to demonstrate how initiating and planning systems development projects for Internet-based applications is similar to more traditional systems development activities. This section briefly discusses how Jim Woo and Jackie Judson initiate and plan PVF’s WebStore.

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 steps involved in the project initiation and planning process.

2. Explain the need for and describe the contents of a Statement of Work and Baseline Project Plan.

3. Provide a comprehensive overview of the various methods for assessing project feasibility.

4. Explain the differences between tangible and intangible benefits and costs and between one-time and recurring benefits and costs.

5. 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.

6. Describe how to evaluate the technical risks associated with a systems development project.

7. Explain the activities and participant roles within a structured walkthrough.

8. Prepare your students to develop a plan for conducting a term project involving several phases of systems development using the SDLC or other methodologies.

9. Compare and contrast the initiation and planning of Internet-based electronic commerce applications to the initiation and planning process for more traditional applications.

Classroom Ideas

1. Chapter 6 introduces several concepts and terms central to understanding the project initiation and planning process. Ask your students to review this chapter’s key terms. Use Review Question 2 to assess whether your students understand the chapter material.

2. During your lecture, use this chapter’s tables and figures to illustrate the chapter’s major concepts. Link the processes described in the chapter to a specific example, such as Pine Valley Furniture. This is a good way for students to understand the chapter’s more abstract concepts. Given the interrelatedness of Chapters 6 and 7, you may want to blend the tables and figures from these chapters. As part of your lecture, have students suggest various costs and benefits that might arise with specific systems. One alternative is to briefly 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 for that system.

3. An alternative to lecturing on this chapter is to lecture from the Review Questions, Problems and Exercises, and Field Exercises. Pose selected questions to your students, focusing the discussion on specific, important concepts. Problems and Exercises 2, 3, 4, 5, and 6 are good problems to work in class.

4. 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 6. This discussion is a good method for elaborating on alternative ways for identifying and selecting information systems projects. This comparison can be done through discussions of Field Exercises 3, 4, 5, or 6.

5. If you have access to practicing systems analysts, an insightful activity is to invite them into your class to discuss how they initiate and plan projects in their organizations. Ask them to provide certain types of documentation, such 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 organization descriptions. Some organizations have formal documents called business cases that must accompany any project request; if possible, ask your guests to outline what their organizations consider to be the ideal format for a business case.

6. An excellent video segment, Making the Business Case, is available for use with this chapter. This 12-minute segment can be used to introduce this chapter, as a transition from Chapter 5, or as a way to close your class on this chapter, given discussion time. Notes on using this video segment are included in a separate section of this instructor’s manual. See the Preface to this instructor’s manual for information on how to obtain this and other video segments produced for use with the third edition of Modern Systems Analysis and Design.

7. Discuss with your students the viability of economic feasibility assessments. How accurate and helpful are classical cost-benefit analyses of information systems? What measures of economic worth apply to systems projects? Should information systems be treated as investments, necessary costs, enablers of change, or otherwise? The Parker book, listed in the References section at the end of the chapter, provides several good ideas on alternative ways for viewing the economics of information systems. You may wish to locate more recent publications in both trade and academic publications, since this is a recurring topic in our literature. Feasibility is often discussed in the introductory MIS class, so link this topic to what students have studied in prior courses. Remind your students that even when classical economic feasibility is assessed at this stage of a project, often only categories of 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) are reassessed at each project review point, with a decision to continue, redirect, or terminate the project as an outcome.

8. Ask your students to identify several different types of businesses. Next, ask your students to identify Internet-based electronic commerce applications for these businesses. Using the feasibility criteria presented in this chapter, ask your students to justify the development of these applications.

Answers to Key Terms

Suggested answers are provided below. These answers are presented top-down, left to right.

| 11. Political feasibility | | 16. Tangible cost |

| 14. Statement of Work | | 18. Walkthrough |

| 2. Business case | | 17. Technical feasibility |

| 4. Economic feasibility | | 8. One-time cost |

| 9. Operational feasibility | | 10. Present value |

| 12. Recurring cost | | 15. Tangible benefit |

| 3. Discount rate | | 7. Legal and contractual feasibility |

| 5. Intangible benefit | | 6. Intangible cost |

| 13. Schedule feasibility | | 1. Baseline Project Plan |

Answers to Review Questions

1. Break-even analysis finds the amount of time required for the cumulative cash flow from a project to equal its initial and ongoing investment. The present value represents the current value of a future cash flow. The net present value uses a discount rate, determined from the company’s cost of capital, to establish the present value of a project. The return on investment is the ratio of the net cash receipts of the project divided by the cash outlays of the project.

Economic feasibility identifies the financial benefits and costs associated with a development project. Legal and contractual feasibility assesses potential legal and contractual ramifications due to the construction of a system. Operational feasibility assesses the degree to which a proposed system solves business problems or takes advantage of business opportunities. Political feasibility evaluates how key stakeholders within the organization view the proposed system. Schedule feasibility determines 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.

Intangible benefits are derived from the creation of an information system that cannot be easily measured in dollars or with certainty. Tangible benefits are derived from the creation of an information system that can be measured in dollars and with certainty.

Intangible costs are costs associated with an information system that cannot be easily measured in terms of dollars or with certainty. Tangible costs are those costs associated with an information system that can be measured in dollars and with certainty.

2. Project initiation focuses on activities that assist in organizing a team to conduct project planning. The types of activities performed during project initiation are listed in Table 6-1. 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 6-2.

3. 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. Net present value (NPV), return on investment (ROI), and break-even analysis (BEA) are three methods for performing economic cost-benefit analysis. These methods are listed and described in Table 6-6. NPV uses a discount rate determined from the company’s cost of capital to establish the present value of a project. ROI is the ratio of the net cash receipts of the project divided by the cash outlays of the project. BEA finds the amount of time required for the cumulative cash flow from a project to equal its initial and ongoing investment.

5. The project feasibility factors are economic, technical, operational, schedule, legal and contractual, and political. Economic feasibility identifies the financial benefits and costs associated with a development project. Technical feasibility assesses the development organization’s ability to construct a proposed system. Operational feasibility assesses the degree to which a proposed system solves business problems or takes advantage of business opportunities. Schedule feasibility determines 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 evaluates the potential legal and contractual ramifications due to the construction of a system. Political feasibility evaluates 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 factor is more important in other situations.

6. The potential consequences of not assessing and managing risks 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.

7. Numerous factors are used to assess a project’s risk, including project size, project structure, familiarity of the development group with similar systems and technology, and the familiarity of the user group with the systems development process. Table 6-7 lists and describes these risk factors in more detail.

8. The two primary benefit categories from an IS project are tangible benefits and intangible benefits. Tangible benefits are benefits derived from the creation of an information system that can be measured in dollars and with certainty. Intangible benefits are benefits derived from the creation of an information system that cannot be easily measured in dollars or with certainty.

9. Intangible benefits are derived from the creation of an information system and cannot be easily measured in dollars or with certainty. Competitive necessity, more timely information, improved organizational planning, and increased organizational flexibility are four possible intangible benefits. Additional intangible benefits are listed in Table 6-3.

10. 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.

11. 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 exceeding 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, 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 the organization’s 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 others can use it 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.

Answers to Problems and Exercises

1. This is a small project and should not take long to complete. If your students’ familiarity with PCs is moderate to high, or if they have the help of someone who is familiar with buying and installing PCs, then the risk for this project is relatively low. Risks can arise when leading-edge technology is selected. For example, as this book is finalized, Windows XP is scheduled for release in the near future. Ask your students to comment on how reliable Windows XP is and the risk accepted by early adopters of this operating system.

2. Use of a PC at work provides several tangible benefits. For one, it helps 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 spreadsheet helps reduce errors in spelling and in calculations. 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 allows greater control over work quality and workflow. Use of project management software helps improve resource control and project outcome quality. For example, spreadsheet analysis helps shorten and strengthen the decision-making process. Given these tangible benefits, the use of a PC seems beneficial.

3. There are several one-time costs, including equipment purchase or lease, equipment installation, hardware and software, and disruption to the rest of the organization. The purchase of the equipment (PCs, network interface cards, PC software, LAN software, cabling) and furniture (workstation tables and chairs) presents substantial one-time costs. Structural modifications to the facilities where the network will reside may be required. These possible structural modifications represent one-time costs. Recurring costs include the costs of maintaining and replacing equipment and software and for the personnel required to fulfill these tasks, including managing network accounts and shared disk space and backing up disks.

4. The following spreadsheet summarizes the economic analysis requested in this question.

5. Students should estimate, as best they can, the dollar figures for each of the costs they described in their answer for Question 3. In addition, they should quantify, as best they can, the benefits from such a system. They should then present an analysis with each of the items provided in the spreadsheet for the previous question. For the answer provided above for Question 3, let us assume that the one-time costs of implementing this LAN are $50,000 and the recurring costs are $20,000 per year. Assume the benefits are $65,000 per year. The following spreadsheet analysis provides an economic summary of this situation.

6. For the system described in the answer for Problem and Exercise 3, assume the following generic system specifications. There are nine 1.3 GHz Pentium 4s, each with 128MB of RAM, 20GB hard drives, and 17-inch color monitors. There is one 1.7 GHz Pentium 4, with 512 MB of RAM and a 60GB hard drive with a 17-inch color monitor. Each PC has a high quality network interface card, and each comes with Windows 2000. The LAN is Novell NetWare, with twisted-pair cabling.

7. The following spreadsheet summarizes the economic analysis requested in this question.

8. The following spreadsheet summarizes the economic analysis requested in this question. Remind students to use 12 percent as the discount rate.

9. The following spreadsheet summarizes the economic analysis requested in this question.

10. 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.

11. 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.

12. 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.

13. The following spreadsheet summarizes the economic analysis requested in this question.

14. Students should submit an answer similar to the following:

The group members need 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 the group members to use a network to share files than to be continually sharing physical documents or exchanging 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.

15. 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. The implementation of similar systems of PCs and LANs has become common throughout many organizations.

16. 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.

17. 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 must 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 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, conflicts may occur 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.

Guidelines for Using the Field Exercises

1. Students should be able to present a project overview, recommendation, alternatives, and system description for nearly any project they are considering. This question demonstrates that the Baseline Project Plan is robust and useful for planning nearly any project.

2. Similarly, the students should be able to discuss their projects in terms of the feasibility categories. Ask your students to share feasibility information for their projects with the class. This activity demonstrates that feasibility issues are important for all projects, whether they involve systems or not.

3. The Baseline Project Plans will vary slightly from this chapter’s Baseline Project Plan. However, each plan is likely to be comprised of the same basic elements. Students will notice that these plans are modified in various ways during the life of the projects. It is best to think of these plans as a set of flexible guidelines rather than a set of rigid operating procedures that are etched in stone. Project planning should be flexible. The point of a plan is to guide and prepare, not to constrain.

4. Most PC-based software packages have a licensing agreement that permits the purchaser to use one copy of the software on any single computer, provided the software is in use on only one computer at any time. If an organization has multiple licenses for the software, then at any time the organization may have as many copies of the software in use as they have licenses. The software is typically considered in use on a computer when it is loaded into the temporary memory (i.e., RAM) or installed into the permanent memory (e.g., hard disk, CD–ROM, or other storage device). Some software vendors allow that if the software is permanently installed on the hard disk or other storage device of a computer and one person uses that computer more than 80 percent of the time it is in use, then that person may also use the software on a portable or home computer. Some software vendors also allow the purchaser to make one back-up copy of the original software. Organizations frequently purchase site licenses that allow them to make and use multiple copies of software. Software vendors vary on the strictness of their licensing agreements. However, over the past few years, software vendors have become stricter with licensing agreements and infringements throughout business, education, and government.

5. Students are likely to find a variety of ways that information systems projects are initiated. Sometimes the initiation comes from users, managers of users, or systems personnel. In addition, project initiation is relatively informal in some organizations, while in other organizations the process is relatively formal. It is useful for students to compare their answers and see the variety of ways that this task is completed. Have your students discuss the relative merits of these various initiation methods.

6. Students are likely to find organizations that develop information systems quickly and/or in an ad hoc fashion. In these settings the systems personnel are probably under great pressure to build systems as quickly as possible. Under such pressure, there is little or no time for planning. Alternatively, it may be that there is planning, but that it happens on the back of envelopes or in the minds of the systems personnel. It is useful for students to compare their answers to this question and discuss the potential disadvantages of this lack of planning and the reasons why systems personnel develop systems in this way.

Guidelines for Using the Broadway Entertainment Company Cases

Guidelines and answers for using the Broadway Entertainment Company cases are available on this textbook’s companion Web site. Please visit hoffer to access this information.

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