Chapter 10

Return on Investment (ROI)

Ratio of net cumulative benefits to total cumulative costs

Expected Value Calculation

Technique to assign probabilities to scenarios and calculate the sum of expected values

Net Present Value (NPV)

Technique to standardize future cash values using a discount rate

ROI calculations for just a 1 year

all project benefits - all project costs/ all project costs

How is ROI reported?

as a percentage

How is BEA presented (Payback period)?

report as a time ex. 18 months, 3 weeks

intangible -> tangible

use expected value

How to access Security Feasability?

•Are minimum security requirements clear? •Are staff properly trained in security best practices? •Are metrics designed and practical for compliance? •Are 3rd party components evaluated? •Have we conducted threat monitoring? •Is there a credential safety process in place?

Examples of Intangible costs

•Loss of customer goodwill •Employee morale •Operational inefficiency •Increased effort or cost for suppliers and customers •Opportunity cost (your project has the developers, not another project) •Negative impact on interdependent systems •Increased risk in other areas

How do you calculate Expected Value?

•Step 1: Make a plausible link between the intangible and dollars. Owner must agree to it, ideally suggest it. •Step 2: Create a small set of possible scenarios, and then assign probabilities to each. Sum of probabilities must be 1.0. Owner must be leading this part. •Step 3: Calculate expected values of each, then sum the totals. •Step 4: Explain why that total is the likely tangible value of the intangible benefit. Use that number in your ROI and Payback.

What does One time Costs

•Systems development •New hardware and software purchases •User training •Site preparation Data or system conversion

What do you assess for Technical Feasibility?

- development team - systems technology maturity - vendor reliability/ capability

Types of Feasibility Tests

- financial (aka economic) - technical(aka technology) - organizational (aka operational) -security - scheduling -legal liability and contractual

What does financial Feasibility look at?

- net financial benefits - cost associated with the project - benefits and costs

Examples of Project Tangible Costs

- subscription/ leasing cost - labor costs operational costs, including employee training and building renovations - have to decide about overhead costs

What are the metrics of Financial Feasibility?

-return on investment (ROI) - Payback Analysis (BEA) - Net Present Value (NPV)

What does BEA analysis look like?

0-5 years of - discount rate -n(pv) of benefits

What are the guidelines for assessing technical feasibility?

1. Larger projects are riskier than smaller projects. 2. Messy, poorly understood or political projects are riskier than structured, easily understood and nonpolitical projects. 3. Projects using new or nonstandard technology are riskier than projects using common or standard technology. 4. Projects using an unfamiliar SDLC, in an unfamiliar application domain are riskier than projects using a familiar SDLC in a familiar application domain.

ROI calculations for just a 2 year

= NPV(all project benefits) - NPV ( All Project Costs)/ NPV(All Project Costs

Net Present Value Calculations

= sum of PV's across year - calculates time value of money

Payback Analysis (Break Even Analysis)

Amount of time required for cumulative benefits to exceed cumulative costs

Schedule Feasibility

Assessing if the project deadlines are reasonable with respect to business requirements and system quality

Organizational Feasibility

Assessing if the system can work, if the problem is worth solving, and if the proposal is the real solution

Feasibility Analysis

Assessing the Continued Feasibility of a Project

Technical Feasibility

Assessing the experience and capability of the development team, technology maturity, and vendor reliability

Cost-Benefit Analysis

Assessing the net financial benefits and costs associated with the project

Financial Feasibility

Assessing the net financial benefits and costs associated with the project

Cybersecurity Feasibility

Assessing the security requirements, training, metrics, and evaluation of third-party components

Intangible Benefits

Benefits that are hard to measure in dollars or with certainty

What are questions for organizational Feasability?

Can and Will the system work?

Total Cost of Ownership (TCO)

Cost of running a system with all costs included

Fixed Costs

Costs incurred at a regular interval and usually at a fixed rate - (tangible or intangible) - (one-time or recurring)

Variable Costs

Costs incurred depending on usage - (tangible or intangible) - (one-time or recurring)

Tangible Costs

Costs that can be easily measured in dollars and with certainty

Intangible Costs

Costs that cannot be easily measured in dollars or with certainty

Recurring Costs

Costs that occur during the lifetime of the system in production mode (tangible or intangible)

One-Time Costs

Costs that occur during the project and won't happen after system implementation (tangible or intangible)

Which Feasibility category deals with identifying financial benefits associated with the project?

Financial Feasibility

Graphical Example of BEA

Payback period = 26months

Tangible Benefits

Positive events or outcomes that can be easily measured in dollars