Feasibility Study:

October 25, 2007

Feasibility Study:

This phase or study presents an analyst with all opportunity to “firm up” or consolidate his/her knowledge of the system and to form ideas about the scope and cost of possible solutions.

This study is usually undertaken within time constraints and produces a written or oral feasibility study report. The content of this report will be used as a basis for deciding whether to continue or to postpone or cancel the project. Feasibility study is usually done in 3 phases or stages. These are:

  1. Technical Feasibility

This is concerned with specifying equipment and software that will successfully support the tasks required. Some of the technical needs might include:

  • A facility to produce outputs in a given time.

  • A facility to input large amounts of documents in a given time.

  • The ability to provide certain response times under certain conditions.

  • The ability to process certain volume of transactions at a certain speed.

  • The facility to communicate data to different locations.

In examining technical feasibility it is the configuration of the system that is initially more important than the actual hardware make.

The configuration should show the system’s requirements i.e. how many workstations are needed, how the units operate and communicate, the input/output speeds.

This is then used as a basis for tender documents against which dealers can make their equipment bids.

It is possible at the feasibility stage to pursue two different configurations which satisfy the key technical requirements, but which represent different levels of ambitions as costs.

  1. Operational Feasibility

This is concerned with human, organizational and political aspects. Among the issued to be examined are:

  • The job changes the system should bring.

  • The organizational structure that will be absorbed/changed.

  • The new skills that will be required.

  1. Economic Feasibility

This is concerned with evaluating a project on the basis on economic returns. In that the project must show financial returns that outweigh the costs. For this reason management tend to give more weight to economic feasibility than the others.

Approaches to carrying out economic feasibility include:

  1. Least Cost: It is based on the principle that costs are easier to identify and control than benefits and the one with least costs is selected.

  1. Payback: This is the time it takes a project to payback its investment. The alternative that pays investment i.e. quickest return on initial investment is selected.

Disadvantages:

  • This method ignores the system’s long term profitability in that it only considers the time taken to payback its investment.

  • The method doesn’t recognize the time value of money in that benefits that occur in the future are not worth as much as those that occur presently, but payback doesn’t recognize that.

  1. Net present value.

  1. Break Even Analysis.

 

The Feasibility Report

The content of this report includes:

  1. Introduction: i.e. project background and layout of the presented report.

  2. Term of reference

  3. Existing system

  4. System requirements.

  5. Proposed logical system i.e. selecting from various business system options.

  6. Proposed physical system: i.e. outlining technical solutions and technical implementation.

  7. Development Plan: ie a project plan for detailed analysis and design.

  8. Cost Benefit Analysis.

  9. Alternatives considered.

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