Economic Analysis

Between  the  very  important  information  contained  in  feasibility  study  is  cost-benefit  analysis  and measurement  of the economic  justification  for  a  computer-based system  project.  The Cost-benefit analysis delineates costs for project weighs and development them against real example for measurable directly in dollars and intangible benefits of a system.

I.   Introduction

A.   Statement of the problem

B.    Implementation environment

C.    Constraints

II.    Management Summary and Recommendations

A.   Important Findings

B.    Comments

C.    Recommendations

D.   Impact

III. Alternatives

A.   Alternative system configurations

B.    Criteria used in selecting the final approach

IV. System Description

A.   Abbreviated statement of scope

B.    Feasibility of allocated elements

V.    Cost-Benefit Analysis

VI.  Evaluation of Technical Risk

VII. Legal Ramifications

VIII. Other Project Specific Topics.

Figure - Feasibility Study Outline

The Cost-benefit analysis is difficult through there criteria which vary with the characteristics of the system to be established the relative size of the project and the expected return on investment desired as part of an organization strategic plan. In addition many advantages derived from computer-based systems are intangible example for better design quality by iterative optimization rise customer satisfaction by programmable control and better business decisions by preanalyzed and reformatted sales data. Direct quantitative comparisons may be hard to achieve.

As we noted above analysis of advantages will different depending on system kind. To describe let consider the advantages for management information systems most data-processing systems are build with better information quantity, quality, organization or timeliness as a primary goals. Thus its impact on the user environment and the concentrate on information access. The advantages which might be related with an engineering-scientific analysis program or a computer-based product could various substantially.

Costs related with the development of a computer-based system the analyst can estimate each cost and then use ongoing and development costs to determine a return on investment a payback period and a break-even point.

The following extract (FRI77) may best characterize cost-benefit analysis like political rhetoric after the election the cost-benefit analysis may be forgotten after the project implementation starts. Moreover it is really important because it has been the vehicle through which management approval has been obtained.

The Effort exhausted on a feasibility analysis which results in cancellation of a proposed project is not wasted effort. Only through the sending the time to evaluate feasibility do we decrease the chances for extreme embarrassment or worse at later stages of a system project.