I found that article in my notes section and thought this would be useful for my friends and students. So I decided to share it on my blogging sites before starting the article let me confess some facts.

This blog was prepared by me when I was learning in Project management institute  as a student of PMP certification  and I noted the lecture of my teacher and asked him that can I published it on internet in future for my students? He smiled and said yes off course you can. How time passes now I am giving lectures for MBA in project management classes and lots of students who are doing diploma in project management are my personal tuition students. Confession complete now let’s begin.

PROJECT INITIATION – IDENTIFYING PROJECTS WITH BUSINESS VALUE

How Do Projects Begin?

• Business needs should drive projects. 
• Project sponsor recognizes business need for new system and desires to see it implemented. 
• Business needs determine the system’s functionality (what it will do). 

Initial System Request

• A document describing business reasons for project and system’s expected value. 
• Lists project’s key elements 
•    – Project sponsor 
•    – Business need 
•    – Business requirements 
•    – Business value 
•    – Special issues or constraints 

Preliminary Project Acceptance

• System request is reviewed by approval committee 
• Based on information provided, project merits are assessed. 
• Worthy projects are accepted and undergo additional investigation

FEASIBILITY ANALYSIS 
(Core course and useful for Students of MBA in project management)
Feasibility Analysis

• Detailed business case for the project 
• – Six Categories 
• Compiled into a feasibility study 
• Feasibility is reassessed throughout the project 

Assessing Project Feasibility

• Six Categories 
•    – Economic 
•    – Operational 
•    – Technical 
•    – Schedule 
•    – Legal and contractual 
•    – Political 

Economic Feasibility – Should We Build It?

• Identify costs and benefits 
• Assign values to costs and benefits 
• Determine cash flow 
• Assess financial viability 
•    – Net present value 
•    – Return on investment 
•    – Break even point 

Assessing Economic Feasibility (This part is not included in PMP certification)

• Cost – Benefit Analysis 
• Determine Benefits 
•    – Tangible Benefits 
•    Can be measured easily 
•       – Examples 
•       Cost reduction and avoidance 
•       Error reduction 
•       Increased flexibility 
•       Increased speed of activity 
•       Increased management planning and control 
• – Intangible Benefits 
•       Cannot be measured easily 
•         Examples 
•         – Increased employee morale 
•         – Competitive necessity 
•         – More timely information 
•         – Promotion of organizational learning and understanding 
• Determine Costs 
•      – Tangible Costs 
•        Can easily be measured in dollars 
•      – Example: Hardware 
• Determine Costs (Continued) 
•      – Intangible Costs 
•       Cannot be easily measured in dollars 
•       Examples: 
•       – Loss of customer goodwill 
•       – Loss of employee morale 
• One-Time Costs 
•        – Associated with project start up, initiation and development 
•        – Includes 
•        System Development 
•        New hardware and software purchases 
•        User training 
•        Site preparation 
•        Data or system conversion 
•        Recurring Costs 
• – Associated with on-going use of the system 
•       – Includes: 
•       Application software maintenance 
•       Incremental data storage expense 
•       New software and hardware releases 
• Consumable supplies 
•      – Time value of money (TVM) 
• The process of comparing present cash outlays to future expected returns. 

Assess Financial Viability – Net Present Value
•          NPV = ∑ PV(future cash inflows) – ∑ PV(future cash outflows)
• PV = Cash flow amount (1 +Interest Rate) n
–    Interest rate = required return 
–    n = number of years in future 
Assess Financial Viability – Return on Investment
-ROI =NPV

ΣPV(Cash Outflow)
Assessing Other Project Feasibility

• Operational Feasibility 
•    – Assessment of how a proposed system solves business problems or takes advantage of opportunities 
• Schedule Feasibility 
•    – Assessment of time frame and project completion dates with respect to organization constraints for affecting change 
• Legal and Contractual Feasibility 
•    – Assessment of legal and contractual ramifications of new system 
• Political Feasibility 
•    – Assessment of view of key stakeholders in organization toward proposed system 

RISK FACTORS
Factors Affecting Project Risk

• Each of the 11 factors below is rated as: 
•    – Low risk  −1 
•    – Medium risk  0 
•    – High risk  +1 
• The total of these 11 factors is the overall risk measure for the project 

Factors Affecting Project Risk

• Characteristics of the System Environment 
•    – Stable, well-defined objectives 
•    – Structured, clear procedures 
• Characteristics of the Information System 
•    – Model available or requirements stable and readily specifiable? 
•    – Procedures addressed are routine and well-structured? 
•    – Only one existing system affected by proposed system? 
•    – Project can be completed within one year? 
• Characteristics of the Users 
•    – Users have functional expertise? 
•    – Users have experience participating in systems development? 
•    – Users are committed to the project? 
• Characteristics of the development team 
•    – Developers have experience developing similar systems? 
•    – Developers are skilled at eliciting requirements? 

(At the end of article I would like to thank my project management institute professor and my diploma in project management students who prepared this blog for me)