Class 8 Preliminary Investigation: Steps 2 4, Risk, and ROI

1
Class 8 Preliminary Investigation Steps 2 -
4, Risk, and ROI

• Preliminary Investigation
• Steps overview (Fig. 4.6, p. 238)
• Risk Evaluation (technique for PI, Ch 4)
• ROI (technique for PI, Tech Module F)
• Exercise 7Risk Evaluation for Latinitas

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Preliminary Investigation

• Perform enterprise analysis
• Determine system objectives, constraints, goals,
  risk, requirements, and scope.
• Evaluate feasibility and obtain approval to
  proceed.
• Conduct JAD sessions to confirm preliminary
  findings. Document with prototype or screen shots.

Figure 4.6, p. 238
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Risk Management Techniques

• Sources of risk for IS projects
• The Organization
• The proposed system
• Developer expertise
• User characteristics
• Risk analysis
• Risk reduction strategies

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Risk Analysis Steps

• Identify tasks and deliveries that are risky.
• Determine risk reduction strategies to lower the
  likelihood of each risk.

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Risk Assessment Factors (p.251-253)

• Organization
• A. Clear, stable objectives?
• B. Has a strategic Plan for Info Resources
  (SPIR)?
• C. System fits into objectives?
• Information System
• A. Clear requirements ?
• B. Structured business process ?
• C. Install at only one site? cross functional?
• D. Completed in less than three months ?
• E. Stable, proven technology ? Or technology too
  old?
• F. Install at one site?
• Developers
• Experienced with chosen development methodology?
• Skilled at determining functional requirements?
• Familiar with information architecture ?
• Users
• Experienced with proposed application area
  processes ?
• Familiar with systems development process ?
• Users and management committed to success ?

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Risk Evaluation form (examples p. 70 252)
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Risk Evaluation form (examples, p. 70, 252)
1st Factor (3 items)
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Risk Evaluation form (examples, p. 70, 252)
2nd Factor (6 items)
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EMS Scheduling Project

• This was a project to automate scheduling of
  drivers and medical staff for the City of
  Austins Emergency Medical Services.

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Objectives

• Automate scheduling
• Alert managers to scheduling conflicts
• Staffing reports
• Create an electronic scheduling form

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Risk Evaluation form
EMS realized they needed a SPIR
hired consultants.
Goal of DFDs was to illustrate problems with
lack of model requirements or routine,
structured procedure.
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Risk Evaluation form
Items 2 c, d, e focus on size complexity
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ASTA example (p.21) Managers in 3 departments
received reports. The real story Comments on p.
7 by Yolanda were not made at the 1st real
meeting. The team figured out the problems later.
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Item 2f is related to both 2c 2e.
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Users now likely to all use web browser entry.
Production servers may be at single site.
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Item 2e Will proposed system use stable, proven
technology?
Technology Curve
general adoption
standardization
consolidation
maturation
early adopters
obsolescence
invention-experimentation
time/barriers to entry
Source Andersen Consulting, Spring 1997 (now
Accenture)
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Technology Curve
general adoption
standardization
consolidation
maturation
early adopters
obsolescence
invention-experimentation
time/barriers to entry
Source Andersen Consulting, Spring 1997 (now
Accenture)
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Technology Curve
Visual Studio ?
general adoption
SAP ?
Oracle db?
PeopleSoft ?
standardization
Oracle ERP?
consolidation
Siebel CRM ?
Microsoft CRM ?
maturation
early adopters
obsolescence
invention-experimentation
time/barriers to entry
Source of curve Andersen Consulting, Spring 1997
(now Accenture) Source of tools in red
comments for discussion
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Managing Business Risk of IT

• I think we need to prepare ourselves to be
  surprised, and surprised again and again.
• --Tech Services manager, manufacturing company

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Risk Evaluation form (figure 1,page 58)
3rd risk factor (3 items)
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Questions for your project team

• Think about your client and your team
• Q1 What is the answer to item 3a Are the
  developers experienced in chosen methodology?
• Q2 What is the answer to item 3b Are they
  skilled at determining functional requirements?

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Risk item 3c. Are the developers familiar with
technology and information architecture of
proposed system?
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The Fashion Genie Solution
An integrated system of standardized hardware and
proprietary software that emphasizes
functionality and usability.
Scan customer card and bar code
Wireless handheld device receives item information
Sales staff brings item in appropriate size

• Fitting Room Monitor
• Displays complementary items
• Consumer selects items

The Magic of the Fashion Genie
Increases Sales per Customer
Improves Customer Experience
Gathers Data on Consumer Buying Patterns
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Conceptual Architecture
Scan Item
Select Item(s)
Scan Customer Card
Presentation Layer
viewMatches
displayStatus
viewProfile
Application Layer
findMatches
checkInventory
idTargets
getCustProfile
External Application Layer
Runner Application
Product DB
Inventory DB
FG Data Warehouse
Customer Profile DB
Data Layer
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Risk Evaluation form (figure 1,page 58)
Reminder this includes the developer who will
maintain (aka enhance) the system, even if that
developer is mainly a system user.
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Risk Evaluation form (figure 1,page 58)
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Risk Evaluation for a Quoting Website and Sales
Database System for Torres Insurance (Fig. 4.13,
p. 252)
Characteristics of the internal user (Gail Torres)
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Risk Analysis Steps

• Identify tasks and deliveries that are risky.
• Determine risk reduction strategies to lower the
  likelihood of each risk.

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Risk Summary

• All projects have risk
• You may not meet the criteria expected
  cost/benefit, number of resources, time, etc
• You may not achieve established goals
  functionality or scalability or commitment
• Risk occurs in proportion to the scope of the
  project
• The key is to identify and manage the risks.

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Preliminary Investigation Step 3

• Step 3. Evaluate feasibility and obtain
  approval to proceed

Techniques 1. Goal Analysis
2. Cost/Benefit Analysis--ROI
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5 Categories of Feasibility

• Organizational and Cultural
• Technological
• Schedule
• Resource
• Economic
• Cost/benefit analysis and ROI
• Sources of funds (cash flow, long-term capital)
• p. 253 - 256

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Organizational and Cultural Feasibility

• Each company has own culture
• New system must fit into culture
• Evaluate related issues for potential risks
• Low level of computer competency
• Computer phobia
• Perceived loss of control
• Shift in power
• Fear of job change or employment loss
• Reversal of established work procedures

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Technological Feasibility

• Does system stretch state-of-the-art technology?
• Does in-house expertise presently exist for
  development?
• Does an outside vendor need to be involved?
• Solutions include
• Training or hiring more experienced employees
• Hiring consultants
• Changing scope and project approach

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Schedule Feasibility

• Estimates needed without complete information
• Management deadlines may not be realistic
• Project managers
• Drive to realistic assumptions and estimates
• Recommend completion date flexibility
• Assign interim milestones to periodically
  reassess completion dates
• Involve experienced personnel
• Manage proper allocation of resources

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Resource Feasibility

• Team member availability
• Conflict matrix
• Team skill levels
• Computers, equipment, and supplies
• Support staff time and availability
• Physical facilities

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Economic Feasibility

• Cost/benefit analysis (CBA)
• Estimate project development costs
• Estimate operational costs after project
• Estimate financial benefits based on annual
  savings and increased revenues
• Calculate CBA using complete list of costs and
  benefits
• CBA uses net present value (NPV), payback period,
  return on investment (ROI) techniques

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Intangibles in Economic Feasibility

• Intangible benefits cannot be measured in dollars
• Increased levels of service
• Customer satisfaction
• Survival
• Need to develop in-house expertise
• Intangible costs cannot be measured in dollars
• Reduced employee morale
• Lost productivity
• Lost customers or sales

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Steps to Conduct Economic Feasibility

• Identify Costs and Benefits
• Assign Values to Costs and Benefits
• Determine Cash Flow
• Determine Net Present Value
• Determine Return on Investment
• Return on investment (Benefit Cost)/Cost
  100

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Example Costs and Benefits
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Step 2. Assign Values to Costs and Benefits
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Calculate those values over time
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Non-Profit ROI Example

• Assumptions for Non-Profit Client
• IT team (MIS 374) work donated per semester
• Our team consists of 5 members working 1 hour per
  day over a period of 90 days (the duration of our
  project according to our project plan)
• 5 team members 90 days 1 hour/day
  15/hour 6750
• Each team member could earn at least 15/hour at
  an undergraduate IT consulting internship
• One future team will also donate time in updating
  the CRM system in 2007
• Donation amounts will increase by 30 yearly,
  while number of donation transactions will
  increase by 50 yearly
• Year Number of donators Donation amount
• 2006 5 500
• 2007 8 650
• 2008 11 845
• 2009 17 1098.50
• Cost Calculations
• Website registration at 10 flat fee yearly
• Additional server space required at 150 yearly
• PayPal charges 0.30 2.9 fee per transaction

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Topaz ROI
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Preliminary Investigation Review Final step

• Perform enterprise analysis
• Determine system objectives, project constraints,
  scope and goals
• Evaluate feasibility and obtain approval to
  proceed
• Conduct JAD session(s) to confirm preliminary
  findings

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Conduct JAD session(s) to Confirm Preliminary
Findings

• Joint Application Design - Developers and Users
  meet
• Executive sponsor
• End user and management
• External users (sometimes)
• Development team members management

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Joint Application Design Facilities

• Conducted in special room
• Limit interruptions
• May be off-site
• Resources
• Overhead projector, white board, flip charts,
  work material
• Electronic support (Laptops)
• CASE tools, meeting facilitation tools

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A JAD Facility
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Joint Application Design Participants

• Session leader trained in group dynamics and JAD
  group facilitation
• Knowledgeable business and system users
• Policy making managers
• Technical staff representatives to handle
• Computer and network configurations
• Operating environments
• Security issues
• Project team members