Survey And Feasibility Study

 

In this section, we present recommendations for the contents of the preliminary survey and feasibility study. Basically, each of these documents consists of two parts: the present system and an alternative. The latter section actually presents several potential alternatives and evaluates them on technical, economic and operational criteria. We must estimate technical and operational feasibility and compare costs with benefits.

 

Cost and Benefits of New Systems: Management usually insists on a cost/benefit justification for a system. You will generally find that the categories for benefits differ considerably depending on the type of system planned. For example, it is likely that strategic systems will have more uncertain benefits and will be justified by improvements in customer service, new sources of revenues, and such. The estimates of costs and benefits for transactions processing systems are usually more certain and detailed. The firm expects to reduce inventory balances by 25 percent, which results in a quantifiable savings in investment and handling.

 

The tangible and concrete benefits for some systems, particularly strategic applications, are likely not to exceed their costs. Management may decide to develop and system anyway and the cost/benefit analysis helps assess the risks involved.

In examining costs versus benefits, there are a large number of factors to consider. System costs include the following:

• Development
• Systems analyst time
• Programmer time
• User time
• Computer time
• Possible hardware purchase costs
• Possible software purchase costs
• Possible outside services costs (eg., system integrator, consultants)
• Operations
• Computer costs
• Communication costs
• Operating staff costs
• Incremental user costs
• Maintenance costs

 

Development costs are the actual costs of analysis, design and installation for the system. These costs are highly sensitive to the amount of time necessary to develop the system and are directly proportional to the number of analysts, programmers, and users and the length of their involvement. Computer time for testing tends to be far less expensive than staff time. Historically, the professions' estimates of the time required to design and install a system have been far too low.

 

We believe that technology can be used to increase revenue as well as reduce costs. Systems that give the firm a strategic advantage, such a greater market share, are difficult to cost-justify in advance. The following list of benefits may prove helpful in this analysis:

 

• The ability to obtain information previously unavailable.
• The receipt of information on a more timely basis.
• Improvements in operations
• The ability to perform calculations not possible before (for example, the simulation of production schedule)
• Reduction in clerical activity
• Improvements in quality and accuracy
• Improvements in decision making
• Better communications and coordination in the firm
• Improvements in customer service
• Creation of ties with customers and suppliers
• Reduction in cycle time
• Contribution to corporate strategy
• Improvement in competitiveness
• Major redesign and improvements in business processes
• A dramatic restructuring or redesign of the entire organization using IT design variables.