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Study Guide in (SAD 101 – SYSTEM ANALYSIS AND DESIGN) Module No._4_

STUDY GUIDE FOR MODULE NO. 4

PROJECT MANAGEMENT

MODULE OVERVIEW

This module will teach you strategies, tools, and techniques for project management as applied to
information systems projects. These also provide process-centric survey of key project management
tools and techniques as they apply to systems analysis and design and you will know that you
understand the basics of project management when you can.

MODULE LEARNING OBJECTIVES

At the end of the module, the students are expected to:

1. List three general driving forces of project initiation.
2. Discuss each area of feasibility.
3. Identify the elements of feasibility analysis.
4. Describe project scheduling using WBS, PERT/CPM, and Gantt chart.

LEARNING CONTENTS (Project Management)

Project Initiation

Information system development projects are initiated for several reasons. There are three general
driving forces and these are:

1. To respond to an opportunity
2. To resolve a problem
3. To conform to a directive

Most companies continue to look for ways on how to increase their market share or to open up new
markets. One way these companies create opportunities is through strategic plans, which is both
short term and long term. An optimal way to identify new projects is through planning. The
advantage of this approach is that it provides a more stable and consistent environment in which
to develop new systems. Projects are identified, prioritized, and scheduled as strategic plans are
developed.

Projects are initiated to solve immediate business problems. These projects try to close the gap
between what information processing is required to run the business correctly and what is currently
in operation. They can be initiated as part of a strategic plan but more commonly are requested by
middle managers to resolve some difficulty in company operations.

Projects are initiated to respond to outside directives. One common outside pressure is
legislative changes that require new information- gathering and external reporting requirements
(such as changes in tax laws and labor laws). Furthermore, legislative changes can expand or
contract the range of services and products that an organization can offer in the market. Latest
laws and regulations can affect the strategic plan which results in an expedited need for new
systems. These regulatory changes can be seen in the telecommunications industry, with cable TV
and telephone companies competing for opportunities to provide cellular services, Internet access,
and personalized entertainment.

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As discussed in the previous session, the project planning phase of the SDLC is consists of activities
that are required to get the project organized and started. These activities include: define the
problem, confirm project feasibility, produce project schedule, staff the project, and launch the
project.

In this session, we will focus the discussion on confirming project feasibility and producing project
schedule.

Project Feasibility

According to Pressman, all projects are feasible given unlimited resources and infinite time.
Unfortunately, most of the projects must be developed within tight budgetary and time constraints.

During project feasibility, the project manager answers questions such as, “Are the expected
benefits reasonable?” and “Are the assumed costs realistic?”

A required activity for all information system projects is to assess project feasibility. The objective of
this activity is to determine whether a development project has a reasonable chance of success.
Feasibility analysis basically identifies all the risks of failure. A project team considers the original
assumptions and identifies other risks that could endanger the success of the project. The team
identifies first those risks and then establishes plans and procedures, if necessary, to make sure
that these risks don’t interfere with the project’s success. If the team thinks that there are
serious risks that could affect the project, the members should discover and evaluate them
immediately.

Areas of Feasibility

There are several areas of risk that a project team considers for a new system when confirming
project feasibility and these are discussed in the following sections.

Economic Feasibility

Economic feasibility is the process of identifying the financial benefits and costs associated with
a development project. This consists of two tests:

1. Is the anticipated value of the benefits greater than projected costs of development?
2. Does the organization have adequate cash flow to fund the project during the
development period?

A determination of the economic feasibility of the project always requires a thorough cost-benefit
analysis. Cost-benefit analysis is the analysis to compare costs and benefits to see whether
investing in the development of a new system will be beneficial. When developing a cost-benefit
analysis, it requires a three-step process. First, estimate the anticipated development and
operational costs. Development costs are those that are incurred during the development of the
new system. Operational costs are those that will be incurred after the system is put into production.
Second, estimate the anticipated financial benefits. Financial benefits are the expected annual
savings or increases in revenue derived from the installation of the new system. And lastly, the
cost-benefit analysis is calculated based on the detailed estimates of costs and benefits. Frequent
error that most inexperienced analysts make during cost-benefit analysis is to try to do the
calculations before thoroughly defining costs and benefits.

Generally, benefits can be viewed as tangible and intangible. Tangible benefits refer to items that
can be measured or estimated quantitatively and that accrue to the organization. Examples of
tangible benefits include reduced personnel expenses, lower transaction costs, or higher profit

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margins. Intangible benefits may have direct organizational benefits, such as the improvement of
employee morale, or they may have broader societal implications, such as the reduction of waste
creation or resource consumption.

In parallel with benefits, an information system can have both tangible and intangible costs. Tangible
costs refer to items that you can easily measure or estimate quantitatively and with certainty. While
intangible costs are those items that you cannot easily measure in terms of quantity and with
certainty.

There are three popular techniques to assess economic feasibility and these are the following:

 Net Present Value (NPV)

The two concepts behind NPV are that all benefits and costs are calculated in terms of today’s
present value and that benefits and costs are combined to give a net value. The objective of NPV
is to determine a specific value based on a predetermined discount rate.

 Payback Period
Also called the breakeven point, is the point in time at which the increased cash flow (benefits)
exactly pays off the costs of development and operation.

 Return of Investment (ROI)

This is a measure of the percentage gain from an investment such as a new system. The objective
of the ROI is to calculate a percentage return (like an interest rate) so that the costs and the benefits
are exactly equal over the specified time period.

The Time Value of Money (TVM) is the concept that should be applied to each technique. This refers
to the concept of comparing present cash outlays to future expected returns.

Technical Feasibility

A large part of determining resources has to do with assessing technical feasibility. The purpose of
assessing technical feasibility is to gain understanding of the organization’s ability to construct
the proposed system. Technical feasibility should include an assessment of the development
group’s understanding of the possible target hardware, software, and operating environments to
be used as well as system size, complexity, and the group’s experience with similar systems.

Operational Feasibility

Operational feasibility is the process of assessing the degree to which a proposed system solves
business problems or takes advantage of business opportunities. This is a measure of how well the
solution will work in the organization. Also, this is a measure of how people feel about the
system/project. Operational feasibility is dependent on the human resources available for the
project and involves projecting whether the system will operate and be used once it is installed.

Schedule Feasibility

The purpose of assessing schedule feasibility is for systems analyst to gain understanding of the
likelihood that all potential time frames and completion date schedules can be met and that meeting
these dates will be sufficient for dealing with the needs of the organization. Schedule feasibility is
a measure of how reasonable the project timetable is.

Resource Feasibility

The project team must assess the availability of resources for the project. The most important

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resource consists of the members of the team. In developing projects, it requires the involvement
of systems analysts, system technicians, and users. At necessary times, some required people
may not be available to the team. Another risk to consider here is that the people who are
assigned may not have the essential skills for the project.

Other resources needed for a project to be successful include adequate computer resources,
physical facilities, and support staff.

Feasibility Analysis

Feasibility analysis is the process by which feasibility is measured. It is designed to determine

whether or not a project will be successful. A feasibility analysis may be conducted for a project
with an emphasis on financial feasibility, environmental integrity, cultural acceptability, or political
viability. It is a determination as to the likelihood of success and a description of how that
determination was achieved.

In general terms, the elements of a feasibility analysis for a project should cover the following:

 Need analysis – This implies recognition of a need for the project. The need may affect the
organization itself, another organization, the public, or the government. A preliminary study is
then conducted to confirm and evaluate the need. A proposal of how the need may be satisfied
is then made.

 Process work – This is the preliminary analysis done to determine what will be required
to satisfy the need. The work may be done by a consultant who is an expert in the project
field. The preliminary study often involves system models or prototypes. A simulation of the
proposed system can be carried out to predict the outcome before the actual project starts.

 Engineering and design – These involve a detailed technical study of the proposed project.
Written quotations are obtained from suppliers and subcontractors as needed. Technology
capabilities are evaluated as needed. If necessary, product design should be done at this
time.

 Cost estimate – This involves estimating project cost to an acceptable level of accuracy.
Both initial and operating costs are included in the cost estimation.

 Financial analysis – This involves an analysis of the cash flow profile of the project. This
should consider rates of return, inflation, sources of capital, payback periods, breakeven
point, and residual values. Moreover, this analysis determines whether or not and when
funds will be available to the project.

 Project impacts – This provides an assessment on how much impact the proposed project
has. Some of the factors that will determine how a project is perceived by the public include
environmental, social, cultural, political, and economic impacts. Also, the value added potential
of the project should be assessed.

 Conclusions and recommendations – The feasibility study should end with the overall
outcome of the project analysis. This may indicate an endorsement or disapproval of the
project. A recommendation on what should be done is included in the feasibility report.

Project Scheduling

Project scheduling determines the order in which activities will be performed, setting start and end

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times for each activity, and assigning specific tasks to team members. The activity of developing
project schedule is one of the most difficult efforts of the project planning phase, yet it is one of the
most important.

There are several tools used for project scheduling and these are discussed in the succeeding
sections.

Work Breakdown Structure

A work breakdown structure (WBS) is a hierarchy of phases, activities, and individual tasks that are
required to complete the project. This is important in planning and executing the project since it is
the foundation for developing the project schedule, for identifying milestones in the schedule, and
for managing cost. WBS is developed before dependencies are identified and activity durations
are estimated. This can be used to identify the tasks in PERT diagram.

A WBS can be illustrated in a block diagram.

Since the WBS is a hierarchical structure, it may be conveyed in outline form:

Level 1 Level 2 Level 3

Task 1
Subtask 1.1
Work Package 1.1.1
Work Package 1.1.2
Work Package 1.1.3
Subtask 1.2
Work Package 1.2.1
Work Package 1.2.2
Work Package 1.2.3
Task 2
Subtask 2.1
Work Package 2.1.1
Work Package 2.1.2
Work Package 2.1.3

Each organization uses its own terminology for categorizing WBS components according to their
level in the hierarchy. Some organizations refer to different levels as tasks, subtasks, and work
packages, as depicted in the outline above. While others use the terms phases, entries, and
activities.

It is somehow difficult to develop a WBS from scratch. The project team can meet to brainstorm and
try to think of everything that it needs to complete the project. This meeting is a type of bottom-up

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approach— brainstorm for each single task and make sure to cover everything.

The major advantage of a good WBS is that it provides the most accurate estimate for the
duration and effort required for the project.

Also, schedules built from a good WBS are much easier to monitor and control. Therefore, WBS is
a key to a successful project.

PERT/CPM Diagram

PERT is an acronym for Program Evaluation and Review Technique and CPM stands for Critical
Path Method. Formerly these were two distinct techniques, however recently these were
merged into a single scheduling technique.

PERT/CPM is a diagram of all the tasks identified in the WBS, illustrating the sequence of
dependencies of the tasks. This begins with the list of activities and tasks developed in the WBS.
The WBS is analyzed, including the duration and
expected resources for each task, to determine the dependencies. For every task, the chart
identifies all the immediate predecessor tasks and the successor tasks.

The figure below is an example of a PERT/CPM diagram.

The critical path is the longest path through the PERT/CPM diagram and contains all the tasks that
must be done in the defined sequential order. It is called critical path since if any task on the critical
path is delayed, the entire project will be completed late. The tasks on critical path are monitored
very carefully by project managers.

There are rules in PERT/CPM diagram and these are the following:

 Each activity must be represented by its own branch on the chart.

 Direction of time flows is indicated by arrows. An activity line meeting an event node
indicates activity completion. The length of an activity branch is not representative of the
time the activity will take.
 Relationships between activities are determined by the sequence of the branches.
 If several activities terminate at one node, no activities starting at that node may begin
until all entering activities are completed.

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 For analysis reason, no two activities are allowed to both start and end at the same
nodes. If the project network would seem to require this, a dummy activity must be
inserted. A dummy activity has no time; it merely preserves the proper sequencing in
the network design.

One of the advantage of the PERT/CPM technique is that it produces a diagram that makes it easy
to see dependencies and the critical path. Though it is not easy to view the project’s progress on a
PERT chart. A different chart is used in viewing the activities spread out over a calendar and this is
called a Gantt chart.

There are also disadvantages of PERT/CPM and these are the following:

 There can be potentially hundreds or thousands of activities and individual dependency

relationships.
 The lack of a timeframe on most PERT/CPM charts makes it harder to show status
although colors can help (e.g., specific color for completed nodes).
 When the PERT/CPM charts become unwieldy, they are no longer used to manage
the project.

Gantt Charts

Developed in 1917 by Henry Gantt, a Gantt chart is a bar chart that represents the tasks and
activities of the project schedule. This chart is good for monitoring the progress of the project as it
moves along.

The Gantt chart below shows three kinds of schedule dependencies (in red) and percent complete
indications.

The major advantage of the Gantt chart is its simplicity. The systems analyst will not only find this
technique easy to use, but also it lends itself to worth-while communication with end users. Another
advantage of Gantt chart is that the bars representing activities or tasks are drawn to scale—that is,
the size of the bar indicates the relative length of time it will take to complete each task.

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REFERENCE

1. Bentley, Lonnie D., Whitten, Jeffrey L., 2007. System Analysis & Design Methods 7th
edition, McGraw-Hill Education.
2. Satzinger, John W., Jackson, Robert B., Burd, Stephen D., (2004), Systems analysis and
design in a changing world (3rd ed.), Course Technology
3. Kendall, Kenneth E. and Kendall, Julie E., (2004), Systems analysis and design (6th ed.),
Pearson Education, Inc.
4. Hoffer, Jeffrey A., George, Joey F., Joseph S., (2005), Modern systems analysis and design
(3rd ed.), Upper Saddle River, N.J. : Prentice Hall
5. Whitten, Jeffery L., Bentley, Lonnie D., Dittman, Kevin C., (2004), Systems analysis and design
methods (6th ed.), Boston : McGraw-Hill Irwin
6. Retrieved March 26, 2008, http://en.wikipedia.org/wiki/Gantt_chart

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