SEN2022 SOFTWARE ENGINEERING
ANALYSIS AND DESIGN
CHAPTER 6: FEASIBILITY ANALYSIS
Prepared by Prof. Dr. M. Alper TUNGA
SDLC
DECISION ANALYSIS
√ Purpose: to recommend a system solution to make a
decision analysis on “TO GO” or “NO GO”.
√ The steps are as follows:
− Identify candidate solutions
− Analyze candidate solutions
− Compare candidate solutions
− Recommend a system solution
√ The main tool is the feasibility analysis matrix.
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FEASIBILITY ANALYSIS
√ Feasibility is the measure of how beneficial or practical an
information system will be to an organization.
√ Feasibility analysis is the process by which feasibility is measured
√ There are six tests for feasibility:
− operational feasibility
− cultural feasibility
− legal feasibility
− technical feasibility
− schedule feasibility
− economic feasibility
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OPERATIONAL FEASIBILITY
√ It is a measure of how well a solution meets the system
requirements.
− How well proposed system solves the problems and takes
advantage of opportunities identified during the scope
definition and problem analysis phases
− How well proposed system satisfies system requirements
identified in the requirements analysis phase
− Is the problem still worth solving?
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CULTURAL FEASIBILITY
√ It is a measure of how well a solution will be accepted in
an organizational climate.
− Does management support the system?
− How do end users feel about their role in the system?
− What end users may resist or not use the system?
− How can this be overcome?
− How will the working environment change?
− Can users and management adapt to the change?
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LEGAL FEASIBILITY
√ It is a measure of how well a solution can be
implemented within existing legal and contractual
obligations.
− Copyrights
− Union contracts
− Legal requirements for financial reporting
− Antitrust laws
− National data and work laws
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TECHNICAL FEASIBILITY
√ It is a measure of the practicality of a technical solution
and the availability of technical resources and expertise.
− Is the proposed technology or solution practical?
− Do we currently possess the necessary technology?
− Do we possess the necessary technical expertise?
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SCHEDULE FEASIBILITY
√ It is a measure of how reasonable the project timetable
is.
− Are specified deadlines mandatory or desirable?
− Are mandatory deadlines realistic for proposed solution?
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ECONOMIC FEASIBILITY
√ It is a measure of the cost effectiveness of a project or solution.
− Do the problems or opportunities warrant the cost of a detailed study
and analysis of the current system?
√ Development costs – one time costs that will not recur after the
project has been completed.
− Personnel, Computer usage, Training, Supply, Equipment, Hardware
components, Software applications and tools.
√ Operating costs – costs that recur throughout the lifetime of the
system.
− Fixed costs: occur at regular intervals but at relatively fixed rates
− Variable costs: occur in proportion to usage
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ECONOMIC FEASIBILITY
√ Time Value of Money
− The concept that recognizes that a dollar today is worth more than a
dollar one year from now.
• Invest $100 at 2% for one year yields $102.
• So $100 today and $102 one year from today represent the same value.
− Present value
• the current value of a dollar at any time in the future.
◊ i: Discount rate – a percentage similar to interest rates that you earn on your
savings.
◊ n: Number of years.
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ECONOMIC FEASIBILITY
√ Time Value of Money (cont.)
− Example: It is estimated that the benefit from the new
information system after two years from now will be $20000.
The return rate of the other investments will probably be 10% in
two years. What is the today's worth of the benefit from our new
IS?
• If you have $0.8264 today, it will cost $1 in two years.
• What is the value of the benefit now, when it will be $20000 after
two years?
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ECONOMIC FEASIBILITY
√ Techniques for Economic Feasibility
− Payback Analysis
• a technique for determining if and when an investment will
pay for itself.
• Payback period – the period of time that will lapse before
accrued benefits overtake accrued and continuing costs.
− Net Present Value
• analysis technique that compares annual discounted costs
and benefits of alternative solutions.
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ECONOMIC FEASIBILITY
√ Techniques for Economic Feasibility (cont.)
− Return On Investment
• a technique that compares the lifetime profitability of
alternative solutions.
• The ROI for a solution or project is a percentage rate that
measures the relationship between the amount the
business gets back from an investment and the amount
invested.
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ECONOMIC FEASIBILITY
Costs -
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Benefits
Development
400000
Costs
Operation
15000 16000 17000 18000 19000 20000
Costs
Discount
Factor (10%)
Time-Adjusted
Costs
Cumulative
Costs
Benefits 150000 170000 190000 210000 230000 250000
Time-Adjusted
Benefits
Cumulative
Benefits
Net Present
Value
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ECONOMIC FEASIBILITY
Costs -
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Benefits
Development
400000
Costs
Operation
15000 16000 17000 18000 19000 20000
Costs
Discount
1.0 0.9090 0.8264 0.7513 0.6830 0.6209 0.5645
Factor (10%)
Time-Adjusted
Costs
Cumulative
Costs
Benefits 150000 170000 190000 210000 230000 250000
Time-Adjusted
Benefits
Cumulative
Benefits
Net Present
Value
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ECONOMIC FEASIBILITY
Costs -
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Benefits
Development
400000
Costs
Operation
15000 16000 17000 18000 19000 20000
Costs
Discount
1.0 0.9090 0.8264 0.7513 0.6830 0.6209 0.5645
Factor (10%)
Time-Adjusted
400000 13635 13222 12772 12294 11797 11290
Costs
Cumulative
Costs
Benefits 150000 170000 190000 210000 230000 250000
Time-Adjusted
Benefits
Cumulative
Benefits
Net Present
Value
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ECONOMIC FEASIBILITY
Costs -
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Benefits
Development
400000
Costs
Operation
15000 16000 17000 18000 19000 20000
Costs
Discount
1.0 0.9090 0.8264 0.7513 0.6830 0.6209 0.5645
Factor (10%)
Time-Adjusted
400000 13635 13222 12772 12294 11797 11290
Costs
Cumulative
400000 413635 426857 439629 451923 463720 475010
Costs
Benefits 150000 170000 190000 210000 230000 250000
Time-Adjusted
Benefits
Cumulative
Benefits
Net Present
Value
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ECONOMIC FEASIBILITY
Costs -
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Benefits
Development
400000
Costs
Operation
15000 16000 17000 18000 19000 20000
Costs
Discount
1.0 0.9090 0.8264 0.7513 0.6830 0.6209 0.5645
Factor (10%)
Time-Adjusted
400000 13635 13222 12772 12294 11797 11290
Costs
Cumulative
400000 413635 426857 439629 451923 463720 475010
Costs
Benefits 150000 170000 190000 210000 230000 250000
Time-Adjusted
136350 140488 142747 143430 142807 141125
Benefits
Cumulative
Benefits
Net Present
Value
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ECONOMIC FEASIBILITY
Costs -
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Benefits
Development
400000
Costs
Operation
15000 16000 17000 18000 19000 20000
Costs
Discount
1.0 0.9090 0.8264 0.7513 0.6830 0.6209 0.5645
Factor (10%)
Time-Adjusted
400000 13635 13222 12772 12294 11797 11290
Costs
Cumulative
400000 413635 426857 439629 451923 463720 475010
Costs
Benefits 150000 170000 190000 210000 230000 250000
Time-Adjusted
136350 140488 142747 143430 142807 141125
Benefits
Cumulative
136350 276838 419585 563015 705822 846947
Benefits
Net Present
Value
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ECONOMIC FEASIBILITY
Costs -
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Benefits
Development
400000
Costs
Operation
15000 16000 17000 18000 19000 20000
Costs
Discount
1.0 0.9090 0.8264 0.7513 0.6830 0.6209 0.5645
Factor (10%)
Time-Adjusted
400000 13635 13222 12772 12294 11797 11290
Costs
Cumulative
400000 413635 426857 439629 451923 463720 475010
Costs
Benefits 150000 170000 190000 210000 230000 250000
Time-Adjusted
136350 140488 142747 143430 142807 141125
Benefits
Cumulative
136350 276838 419585 563015 705822 846947
Benefits
Net Present
–400000 –277285 –150019 –20044 111092 242102 371937
Value
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ECONOMIC FEASIBILITY
Payback Analysis
500000
400000
300000
200000
100000
0
0 1 2 3 4 5 6 7
-100000
-200000
-300000
-400000
-500000
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