Analysing the Business Case

Article No: 1

1. What is SWOT analysis?

During the strategic planning various questions are asked by top managers, known as SWOT analysis. SWOT stands for Strength(S), Weakness(W), Opportunities(O), Threats(T).

Questions may be like:

·         What are our major strengths, and by what ways we can increase them in future? The strengths may be, that our designing staff is better than other company or we have upgraded network.

·         What are our major weakness, and how we can overcome them? The weakness may be, that we are still using older systems and other companies are using new systems, so the productivity ratio is higher than ours.

·         What are our major opportunities, and how we can take advantage of them? Opportunities may be, that our company can be first with new software than others.

·         What are the major threats that our company is facing, and what we can do about them, are there any IT plans to reduce that threats? Threats may be, that other companies are providing better facilities than ours.

2. What is a business case?

A written report that outlines the justification for an information system. The report highlights economic benefits and costs and the technical and organizational feasibility of the proposed systems. To analyze the business case for a specific proposal, the analyst must consider the company’s overall mission, objectives, and IT needs.

Business case should answer questions such as following:

·         Why are we doing project? Is there any urgent need of the project?

·         What is the project about? How it will give benefits to us?

·         What will be the cost of the project and how much time it will take to complete the project?

·         Will we suffer any productivity loss during the transition? Eg: while making any product there may be wastage also, so that will be the loss.

·         If we are investing than what will be the return, and up to what time the return will be?

·         What are the risks of doing the project? What are the risks of not doing the projects?

·         How will we measure success?

·         What alternatives do we have? If the project has not been selected, is there any other project?

3. What are the common reasons for system projects?

The starting point for most projects is called a system request, which is a formal way of asking for IT support. A system request can be of:

·         For improvement in an existing system

·         For the correction of problems

·         For the replacement of an older system

·         For the development of an entirely new system

Main reasons for system request:

·         Improved service

·         Support for new products and services

·         Better performance

·         More information

·         Stronger controls

Improved services

System request can be for improving services that company is providing. For example: A cellular company till now was providing the bills at home by courier or any other services, so to reduce the cost of courier services and benefit for customers they started to provide services on internet, so easily you can check as well as you can pay the payment by credit cards.

Support for new products and services

If company had launched any product than there may be request for adding services to that product. For example: As we take any Antivirus software than company provides additional service means to update your version.

Better performance

it may be possible that current information system might not meet performance requirements. For example: It might respond slowly to data inquiries at certain times, or unable to support company growth.

More information

The system may produce information which is less for decision making or it is unable to support the company’s changing information needs. For example: a system that tracks customer orders might not be capable of analyzing the predicting marketing trends.

Stronger controls

A system may be giving security to data, which is not sufficient so for more strong protection there may be request. Security can be of user passwords, encryption, biometric devices.

4. What is system review committee?

In most organization, the IT department gets many requests, which is difficult to manage so they assign the task to one group known as system review committee or a computer resources committee. Its main objective is to combine judgment and experience of several managers to evaluate system projects. The main goal if the committee is to evaluate system request

A typical committee consists of the IT director and several managers from other departments. The IT director act as a technical consultant to ensure that committee members are aware of important issues, problems and opportunities.

Requests from several departments:

·         A request from the technical support to the group for cellular link so representatives can download technical data immediately.

·         A request from the marketing group to analyze current customer spending habits and forecast future trends.

·         A request from accounting department to redesign customer statements and allow internet access.

·         A request from the production staff for an inventory control system that can exchange data with major suppliers.

Dis-advantages of system review committee

·         If there is any decision to be taken than the committee has to wait for all members to meet together.

·         Members might favor projects requested by their own departments.

·         Internal political differences could delay important decision.

Many smaller companies depend on one person to evaluate system requests instead of a committee. If only one person has the necessary IT skills and experience, that person must consult closely with users and managers throughout the company to ensure that business and operational needs are consider carefully.

5. What is feasibility study? List and briefly discuss feasibility tests.

Feasibility study determines if the information system makes any sense for the organization from an economic and operational standpoint. A request must pass several tests known feasibility stud, to see whether it is worthwhile to proceed further.

Types of feasibility study:

·         Operational feasibility

·         Technical feasibility

·         Economic feasibility

·         Legal feasibility

·         Schedule feasibility

Operational feasibility

Operational feasibility is the process of examining the likelihood that the project will attain its desired objectives. The goal of this study is to understand the degree to which the proposed system will likely solve the business problems or take advantage of the opportunities outlined in the system service request or project identification study. In other words, assessing operational feasibility requires that you gain clear understanding of how an IS will fit into the current day-to-day operations of the organization.

In short it means that a proposed system will be used effectively after it has developed.

·         Does management and users support for project?

·         Will the new system result in a workforce reduction (means if new system will be applied than how many employees will be reduced)? If so, what will happen to affected employees?

·         Will the new system require training for users? If so, is the company ready to provide all types of resources for training?

·         Will users be involved in planning the new system right from the start?

·         Is there any risk to the company’s image?

·         Do legal or ethical issues need to be considered?

Technical feasibility

The goal of the technical feasibility study is to understand the organization’s ability to construct the proposed system. This analysis should include an assessment of the development group’s understanding of the possible target hardware, software, and operating environments to be used as well as system size, complexity, and the group’s experience with similar systems.

In short technical feasibility refers to the technical resources needed to develop, purchase, install or operate the system?

·         Does the company have necessary hardware, software and network resources? If not, can those resources can be acquired without difficulty?

·         Does the company have the needed technical expertise? if not, can it be acquired?

·         Will a prototype be required?

·         Will the combination of hardware and software supply adequate performance?

·         Will the system be able to handle future transaction volume and company growth?

Economic feasibility

The purpose for assessing economic feasibility is to identify the financial benefits and costs associated with the development project. Economic feasibility is often referred to as cost benefit analysis. During the project initiation and planning, it will be impossible for you to define exactly all benefits and costs related to a particular project. Yet, it is important that you identify and quantify benefits and costs or it will be impossible for you to conduct a sound economic analysis and determine if one project is more feasible than other.

TCO (Total Cost of Ownership) includes all cost for making project:

·         People, including IT staff and users

·         Hardware and equipment

·         Formal and informal training

·         Licenses and fees

·         Consulting expenses

·         Facility costs

An information system can provide many benefits to an organization, like tangible or intangible benefits.

1.Tangible benefits

A tangible benefit is an item that can be measured in dollars and with certainty. Examples of tangible benefits include reduced personnel expenses, lower transaction costs, or higher profit margins. It is important to note that not all tangible benefits can be easily quantified. For example, a tangible benefit that allows a company to perform a task 50 percent of the time may be difficult to quantify in terms of hard dollar savings.

·         A new scheduling system that reduces overtime

·         An online package tracking that improves service and decrease the need for clerical staff.

·         Removing production delays

·         Error reduction

·         Increased flexibility

·         Increased speed of activity

·         Cost reduction and avoidance

·         Improvement of management planning and control

·         Opening new markets and increasing sales opportunities

2. Intangible benefits

Intangible benefits refer to the items that cannot be easily measured in dollars or with certainty. Intangible benefits may have direct organizational benefits, such as the improvement of employee morale, or they may have broader societal implications, such as the reduction of waste creation or resource consumption.

·         A user-friendly system that improves employee job satisfaction

·         A sales tracking system that supplies better information for marketing decisions

·         A new web site that improves the company’s image

·         Increased organizational flexibility

·         More timely information

·         Promotion of organizational learning and understanding

·         Competitive necessity

Schedule feasibility

Schedule feasibility considers the likelihood that all potential time frames and completion date schedules can be met and that meeting dates will be sufficient for dealing with the needs of the organization. For example, a system may have to be operational by a government-imposed deadline, by a particular point in the business cycle.

In short, it means that a project can be implemented in an acceptable time frame. When assessing schedule feasibility, a systems analyst must consider the interaction between time and costs. For example, speeding up a project schedule might make a project feasible, but much more expensive.

·         Can the company or the IT team control the factors that affect schedule feasibility?

·         Has the management established a firm timetable for the project?

·         What conditions must be satisfied during the development of the system?

·         Will an accelerated schedule pose any risks? If so, are the risks acceptable?

·         Will project management techniques be available to coordinate and control the project?

·         Will a project manager be appointed?

6. What is preliminary investigation and what are the steps in the preliminary investigation?

To study the system request in detail the analyst does investigation known as preliminary investigation.

Steps:

1.      Understand the problem or opportunity

2.      Define the project scope and constraints

3.      Performing fact finding

4.      Evaluate feasibility

5.      Estimate project development time and cost

6.      Present results and recommendations to management

1. Understand the problem or opportunity

If the system request involves a new information system or a substantial change in an existing system, system analysts might need to develop a business profile that describes business functions and processes. Even where the request involves relatively minor changes or improvements, you need to understand how those modifications will affect business operations and other information systems. Often a change in one system has an unexpected effect on another system. When you analyze system request, you need to determine which departments, users, and business processes are involved.

In many cases, the systems request does not show the underlying problem, but only a symptom. For example:

·         A request to investigate mainframe processing delays might show improper scheduling practices rather than hardware problems.

·         Similarly, a request for analysis of customer complaints might disclose a lack of sales representative training, rather than problems with the product.

2. Define project scope and constraints

Project scope means defining the specific boundaries, or extent, of the project. Some analysts find it helpful to define project scope by creating a list with sections called must do, should do, could do, and won’t do. The scope of project also establishes the boundaries of the preliminary investigation itself. A system analyst should limit the focus to the problem at hand and avoid unnecessary expenditure of time and money.

A constraint is a requirement or condition that the system must satisfy or an outcome that the system must achieve. A constraint can involve hardware, software, time, policy, law or cost. System constraints also define project scope. For example:

·         A system must operate with existing hardware

·         The order entry system must accept input from 15 remote sites

·         The human resources information system provide statistics on hiring practices

·         The new web site must be operational by March 1

When examining constraints, you should identify their characteristics.

PRESENT versus FUTURE

Is the constraint something that must be met soon as the system is developed or modified, or is the constraint necessary at some future time?

INTERNAL versus EXTERNAL

Is the constraint due to a requirement within the organization or does some external force, such as government regulation, impose it?

MANDATORY versus DESIRABLE

Is the constraint mandatory? Is it absolutely essential to meet the constraint, or it is merely desirable?

3. Performing fact-finding

Fact finding involves various techniques. Depending on what information is needed to investigate the systems request, fact finding might consume several hours, days, or weeks. For example, a change in a report format or data entry screen might require a single telephone call to a user, whereas a new inventory system would involve series of interviews.

·         Analyze organization charts

·         Conduct interviews

·         Review documentation

·         Observe operations

·         Conduct a user survey

a. Analyze organization charts

In many instances you will not know the organizational structure of departments involved in the study. You should obtain organization charts to understand how the department functions and identify individuals you might want to interview. Organization charts can be obtained form the company’s human resources department. If such charts are unavailable, you should obtain the necessary information directly from department personnel and then construct your own charts.

When organization charts are available, you should verify their accuracy. Keep in mind that organization charts show formal reporting relationships but not the informal alignment of a group, which also is important.

b. Conduct interviews

The primary method of obtaining information during the preliminary investigation is the interview.

1.      Determine the people to interview

2.      Establish objectives for the interview

3.      Develop interview questions

4.      Prepare for the interview

5.      Conduct the interview

6.      Document the interview

7.      Evaluate the interview

Your primary role in an interview is to ask effective questions and listen carefully. When conducting interviews during the preliminary investigation, you should interview managers and supervisors who have a broad knowledge of the system and can give you an overview of the business processes involved.

c. Review documentation

Although interviews are an extremely important method of obtaining information, you also may want to investigate the current system documentation. The documentation might not be up-to-date, so you should check with users to confirm that you are receiving accurate and complete information.

d. Observe operations

Another fact-finding method is to observe the current system in operation. You might see how workers carry out typical tasks. You might choose to trace or follow the actual paths taken by input source documents or output reports. In addition to observing operations, you might want to sample the inputs or outputs of the system.

e. Conduct a user survey

Interviews can be time consuming. Sometimes you can obtain information from a larger group by conducting a user survey. In this case, you design a form that users complete and return to you for tabulation. A survey is not as flexible as a series of interviews, but is less expensive, generally take less time, and can involve a broad cross-section of people.

4. Evaluate feasibility

You have analyzed the problem or opportunity, defined the project scope and constraints and performed fact-finding. Now you must evaluate the project’s operational, technical, economic and schedule feasibility.

5. Estimate project development time and cost

To develop specific time and cost estimates for the next development stage, you should consider the following issues:

·         What information must you obtain, and how will you gather and analyze the information?

·         What sources of information will you use, and what difficulties will you encounter in obtaining the information?

·         Will you conduct interviews? How many people will you interview, and how much time will you need to meet with the people and summarize their responses?

·         Will you conduct a survey? Who will be involved? How much time will it take people to complete it? How much time will it take to prepare it and tabulate the results?

·         How much will it cost to analyze the information gathered and to prepare a report with findings and recommendations?

6. Present results and recommendations to management

At this stage, you have several alternatives. You might find that no action is necessary or that some other strategy, such as additional training is needed.

The final task in the preliminary investigation is to prepare a report to management, and possibly deliver a presentation. The report includes an evaluation of the system request, an estimate of costs and benefits, and your recommendations.

Format of report

1.      Introduction

2.      System request summary

3.      Recommendations

4.      Project roles

5.      Time and cost estimates

6.      Expected benefits

7.      Findings

7. Factors that affect systems projects

There are 2 types of factors that affect projects

1. Internal factors

·         Strategic plan

·         Top managers

·         User requests

·         Information technology department

·         Existing system and data

2. External factors

·         Technology

·         Suppliers

·         Customers

·         Competitors

·         The economy

·         Government

8. What do you mean RISK and RISK management?

A risk is an event that could affect the project negatively. Risk management is the process of identifying, evaluating, tracking and controlling risks to minimize their impact.

For example, with Microsoft Project Software, a user can enter the following information for each risk:

·         Probability, which represents the probability that the risk will happen, expressed as a percentage.

·         Cost, which indicates the potential financial impact of the risk

·         Description, which specifies actions to be taken if the risk occurs

·         Mitigation plan, which identifies plans to control limit the risk

·         Contingency plan, which specifies actions to be taken if the risks occurs

Evaluating Feasibility

The first step in evaluating feasibility is to identify and weed (remove) out the systems requests that are not feasible. For example, a request would not be feasible if it required hardware or software that the company already ha rejected.

Systems request that are not currently feasible can be resubmitted as new hardware, software, or expertise become available. Development costs might decrease, or the value of benefits might increase enough that a systems request eventually becomes feasible. Conversely, an initially project can be rejected later. Acquisition costs might increase, and the project might become more expensive than anticipated. In addition, managers and users sometimes lose confidence in a project.

Setting priorities

After rejecting systems requests that are not feasible, the system review committee must establish priorities for the remaining items. The highest priority goes to projects that provide the greatest benefit, at the lowest cost, in the shortest period of time.

Factors that affect priority

1.      Will the proposed system reduce cost? Where? When? How? How much?

2.      Will the system increase revenue for the company? Where? When? How? How much?

3.      Will the system project result in more information or produce better results? How? Are the results measurable?

4.      Will the system serve customers better?

5.      Will the system serve the organization better?

6.      Can the project be implemented in a reasonable time period?

7.      Are the necessary financial, human, and technical resources available?

Very few projects will score high in all areas. Some proposed systems might not reduce costs but will provide important new features. Other system might reduce operating costs substantially but require the purchase or lease of additional hardware. Some systems might be very desirable but require several years of development before producing significant benefits.

Discretionary and Nondiscretionary projects

Is the project absolutely necessary? Projects where management has a choice in implementing them are called discretionary projects. Projects where no choice exists are called nondiscretionary projects.

Resource Used:

1. System Analysis and Design (By: Shelly) (This whole content is taken from this stipulated book only, because it has impressed me a lot after getting to know about this topic. So I wish, you have enjoyed while reading the article. Last but not least, thanks to author for giving to me and you valuable knowledge.)

Compiled By: Chaudhary Amit V.