The main objectives of preliminary analysis is to identify the customer.doc

7/27/2019 The main objectives of preliminary analysis is to identify the customer.doc

1/10

Preliminary Analysis

Feasibility study

The feasibility study is conducted to assist the decision-makers in making the decisionthat will be in the best interest of the school food service operation. The extensiveresearch, conducted in a non-biased manner, will provide data upon which to base adecision.

A feasibility study could be used to test a new working system, which could be usedbecause:

The current system may no longer suit its purpose,

Technological advancement may have rendered the current system redundant,

The business is expanding, allowing it to cope with extra work load,

Customers are complaining about the speed and uality of work the business

provides,

Competitors are not winning a big enough market share due to an effective

integration of a computeri!ed system.

The main ob"ectives of preliminary analysis is to identify the customer#s needs, evaluatesystem concept for feasibility, perform economic and technical analysis, perform cost

benefit analysis and create system definition that forms the foundation for all subseuentengineering works. There should be enough expertise available for hardware andsoftware for doing analysis.

$hile performing analysis, the following uestions arise.

%ow much time should be spent on it&

As such, there are no rules or formulas available to decide on this. %owever, si!e,complexity, application field, end-use, contractual obligations are few parameterson which it should be decided.

'ther ma"or uestion that arises is who should do it.$ell an experienced well-trained analyst should do it. (or large pro"ect, there canbe an analysis team.

After the preliminary analysis, the analyst should report the findings to management, withrecommendations outlining the acceptance or re"ection of the proposal.


2/10

Although few businesses would not benefit from a computeri!ed system at all, theprocess of carrying out this feasibility study makes the purchaser)client think carefullyabout how it is going to be used.

After reuest clarification, analyst proposes some solutions. After that for each solution itis checked whether it is practical to implement that solution.

This is done through feasibility study. *n this various aspects like whether it is technicallyor economically feasible or not. +o depending upon the aspect on which feasibility isbeing done it can be categori!ed into four classes:

Technical (easibility

conomic (easibility

'perational (easibility

egal (easibility

The outcome of the feasibility study should be very clear. *t should answer the followingissues.

*s there an alternate way to do the "ob in a better way&

$hat is recommended&

Technical Feasibility

*n technical feasibility the following issues are taken into consideration.

$hether the reuired technology is available or not

$hether the reuired resources are available -

- anpower- programmers, testers / debuggers

- +oftware and hardware

'nce the technical feasibility is established, it is important to consider the monetary

factors also. +ince it might happen that developing a particular system may be technicallypossible but it may reuire huge investments and benefits may be less. (or evaluatingthis, economic feasibility of the proposed system is carried out.

Economic Feasibility

(or any system if the expected benefits eual or exceed the expected costs, the systemcan be "udged to be economically feasible. *n economic feasibility, cost benefit analysis is
http://www.freetutes.com/systemanalysis/sa3-technical-economic-operational-legal.html#technical-feasibilityhttp://www.freetutes.com/systemanalysis/sa3-technical-economic-operational-legal.html#economic-feasibilityhttp://www.freetutes.com/systemanalysis/sa3-technical-economic-operational-legal.html#operational-feasibilityhttp://www.freetutes.com/systemanalysis/sa3-technical-economic-operational-legal.html#legal-feasibilityhttp://www.freetutes.com/systemanalysis/sa3-technical-economic-operational-legal.html#technical-feasibilityhttp://www.freetutes.com/systemanalysis/sa3-technical-economic-operational-legal.html#economic-feasibilityhttp://www.freetutes.com/systemanalysis/sa3-technical-economic-operational-legal.html#operational-feasibilityhttp://www.freetutes.com/systemanalysis/sa3-technical-economic-operational-legal.html#legal-feasibility


3/10

done in which expected costs and benefits are evaluated. conomic analysis is used forevaluating the effectiveness of the proposed system.

*n economic feasibility, the most important is cost-benefit analysis. As the name suggests,

it is an analysis of the costs to be incurred in the system and benefits derivable out of thesystem. Click on the link below which will get you to the page that explains what costbenefit analysis is and how you can perform a cost benefit analysis.

Cost 0enefit Analysis

Operational Feasibility

'perational feasibility is mainly concerned with issues like whether the system will beused if it is developed and implemented. $hether there will be resistance from users thatwill effect the possible application benefits& The essential uestions that help in testing

the operational feasibility of a system are following.

1oes management support the pro"ect&

Are the users not happy with current business practices& $ill it reduce the time

2operation3 considerably& *f yes, then they will welcome the change and the newsystem.

%ave the users been involved in the planning and development of the pro"ect&

arly involvement reduces the probability of resistance towards the new system.

$ill the proposed system really benefit the organi!ation& 1oes the overall

response increase& $ill accessibility of information be lost& $ill the systemeffect the customers in considerable way&

Legal Feasibility

*t includes study concerning contracts, liability, violations, and legal other trapsfreuently unknown to the technical staff.

Cost Benefit Analysis1eveloping an *T application is an investment. +ince after developing that application itprovides the organi!ation with profits. 4rofits can be monetary or in the form of animproved working environment. %owever, it carries risks, because in some cases anestimate can be wrong. And the pro"ect might not actually turn out to be beneficial.

Cost benefit analysis helps to give management a picture of the costs, benefits and risks.
http://www.freetutes.com/systemanalysis/sa3-cost-benefit-analysis.htmlhttp://www.freetutes.com/systemanalysis/sa3-cost-benefit-analysis.htmlhttp://www.freetutes.com/systemanalysis/sa3-cost-benefit-analysis.htmlhttp://www.freetutes.com/systemanalysis/sa3-cost-benefit-analysis.html


4/10

*t usually involves comparing alternate investments.

Cost benefit determines the benefits and savings that are expected from the system andcompares them with the expected costs.

The cost of an information system involves the development cost and maintenance cost.The development costs are one time investment whereas maintenance costs are recurring.The development cost is basically the costs incurred during the various stages of thesystem development.

ach phase of the life cycle has a cost. +ome examples are :

4ersonnel

uipment

+upplies

'verheads

Consultants# fees

Cost and Benefit Categories

*n performing Cost benefit analysis 2C0A3 it is important to identify cost and benefitfactors. Cost and benefits can be categori!ed into the following categories.

There are several cost factors)elements. These are hardware, personnel, facility,operating, and supply costs.

*n a broad sense the costs can be divided into two types

1. Development costs-

1evelopment costs that are incurred during the development of the system are one timeinvestment.

$ages

uipment

2. Operating costs,

e.g. , $ages+upplies'verheads


5/10

Another classification of the costs can be:

Hardware/software costs:

*t includes the cost of purchasing or leasing of computers and it#s peripherals. +oftwarecosts involves reuired software costs.

Personnel costs:

*t is the money, spent on the people involved in the development of the system. Theseexpenditures include salaries, other benefits such as health insurance, conveyanceallowance, etc.

Facility costs:

xpenses incurred during the preparation of the physical site where the system will beoperational. These can be wiring, flooring, acoustics, lighting, and air conditioning.

Operating costs:

'perating costs are the expenses reuired for the day to day running of the system. Thisincludes the maintenance of the system. That can be in the form of maintaining thehardware or application programs or money paid to professionals responsible for runningor maintaining the system.

!pply costs:

These are variable costs that vary proportionately with the amount of use of paper,ribbons, disks, and the like. These should be estimated and included in the overall costofthe system.

Benefits

$e can define benefit as4rofit or 0enefit 5 *ncome - Costs

0enefits can be accrued by :

- *ncreasing income, or- 1ecreasing costs, or- both

The system will provide some benefits also. 0enefits can be tangible or intangible, director indirect. *n cost benefit analysis, the first task is to identify each benefit and assign amonetaryvalue to it.
http://domains.googlesyndication.com/apps/domainpark/results.cgi?client=ca-afdo-pub-3366691112917527&url=http://freetutes.us/&hl=en&ac=r&q=monetary&afdt=pnCHggu8yLUKEwiv7IP30--YAhUCWnoKHYNK1TwQAxgBIAIwx6f2DjgeUMen9g5Qy7qLD1DVrK8PUNq3tRFQquj_E1DfoK8pUP3IidUBhttp://domains.googlesyndication.com/apps/domainpark/results.cgi?client=ca-afdo-pub-3366691112917527&url=http://freetutes.us/&hl=en&ac=r&q=monetary&afdt=pnCHggu8yLUKEwiv7IP30--YAhUCWnoKHYNK1TwQAxgBIAIwx6f2DjgeUMen9g5Qy7qLD1DVrK8PUNq3tRFQquj_E1DfoK8pUP3IidUB


6/10

The two main benefits are improved performance and minimi!ed processing costs.

(urther costs and benefits can be categori!ed as

"angi#le or $ntangi#le %osts and &enefits

Tangible cost and benefits can be measured. %ardware costs, salaries for professionals,software cost are all tangible costs. They are identified and measured.. The purchase ofhardware or software, personnel training, and employee salaries are example of tangiblecosts. Costs whose value cannot be measured are referred as intangible costs. The cost ofbreakdown of an online system during banking hours will cause the bank lose deposits.

0enefits are also tangible or intangible. (or example, more customer satisfaction,improved company status, etc are all intangible benefits. $hereas improved responsetime, producing error free output such as producing reports are all tangible benefits. 0oth

tangible and intangible costs and benefits should be considered in the evaluation process.

Direct or $ndirect %osts and &enefits

(rom the cost accounting point of view, the costs are treated as either direct or indirect.1irect costs are having rupee value associated with it. 1irect benefits are also attributableto a given pro"ect. (or example, if the proposed system that can handle more transactionssay 678 more than the present system then it is direct benefit.

*ndirect costs result from the operations that are not directly associated with the system.*nsurance, maintenance, heat, light, air conditioning are all indirect costs.

Fi'ed or (aria#le %osts and &enefits

+ome costs and benefits are fixed. (ixed costs don#t change. 1epreciation of hardware,*nsurance, etc are all fixed costs. 9ariable costs are incurred on regular basis. ecurringperiod may be weekly or monthly depending upon the system. They are proportional tothe work volume and continue as long as system is in operation.

(ixed benefits don#t change. 9ariable benefits are reali!ed on a regular basis.

Performing Cost Benefit Analysis (CBA)

xample:

Cost for the proposed system 2 figures in ;+1 Thousands3


7/10

0enefit for the propose system

4rofit 5 0enefits - Costs5 7?, ===5 ;+1 >?@, ===

+ince we are gaining , this system is feasible.

+teps of C0A can briefly be described as:

stimate the development costs, operating costs and benefits

1etermine the life of the system

$hen will the benefits start to accrue&

$hen will the system become obsolete&

1etermine the interest rate

This should reflect a realistic low risk investment rate.

Select Eal!ation "ethod

$hen all the financial data have been identified and broken down into cost categories, theanalyst selects a method for evaluation.

There are various analysis methods available. +ome of them are following.

>. 4resent value analysis6. 4ayback analysis


8/10

?. et benefit analysis7. Cash-flow analysis@. 0reak-even analysis

Present al!e analysis#

*t is used for long-term pro"ects where it is difficult to compare present costs with futurebenefits. *n this method cost and benefit are calculated in term of today#s value ofinvestment.

To compute the present value, we take the following formula $here,

iis the rate of interest /nis the time

xample:

4resent value of B78 interest at the end of 7th year is calculates as

4 5 .>7375 >?D>.7 7.67 E7@?.D>

7 ?D>.7< >==7@.??

$et Present %al!e # $PA

The net present value is eual to benefits minus costs. *t is expressed as a percentage ofthe investment.

et 4resent 9alue5 Costs - 0enefits


9/10

8 5 et 4resent 9alue)*nvestments

xample: +uppose total investment is B7==== and benefits are BE====Then et 4resent 9alue 5 B2E==== - 7====3

5 B


10/10

Cash'flo Analysis#

+ome pro"ects, such as those carried out by computer and word processors services,produce revenues from an investment in computer systems. Cash-flow analysis keeps

track of accumulated costs and revenues on a regular basis.

The main objectives of preliminary analysis is to identify the customer.doc

Documents

Transcript of The main objectives of preliminary analysis is to identify the customer.doc