Feasibility analysis

Feasibility analysis is performed to identify potential risks before the project starts and to identify constraints and restrictions on how a problem can be solved.

In fact, constraints are as important as requirements, as they dictate what the system should not do and what the system should not be.

There are several types of feasibility analysis that need to be undertaken, each providing insights into the overall feasibility of the solution. These are:

1. economic (financial)
2. technical
3. operational
4. scheduling (resources)
5. legal and contractual
6. political.

Economic feasibility

Economic feasibility analysis considers the cost and benefit of the proposed system.

If the system is being built to address a problem that is resulting in value loss, what is the amount of value that the system is expected to provide?

This is probably the most fundamental feasibility question. Answering it involves weighing the costs incurred by the customer business, including the cost of building the system, against the economic benefits that the system will provide to the business.

Both costs and benefits can be tangible and intangible:

1. Tangible costs: are direct expenditures by the business that can be measured; eg the purchase of hardware and resources
2. Intangible costs: are known to negatively affect the business’ finances but cannot be quantified; eg the time and effort involved in training users of the system
3. Tangible benefits: are measurable and positive financial impacts of the system on the business; eg reduced operational costs, new paid services
4. Intangible benefits: improve the finances of the business but not in measurable ways; eg improved customer service.

Break-even analysis

A break-even analysis is performed to estimate whether, and to what extent, a system will provide value to the business when all costs and benefits are considered.

The term break-even refers to the point in which the amount of value generated by the system is equal to the amount of resources spent to construct the system, that is, the point at which the business overcomes the cost of building the system.

For the system to be valuable, it must contribute further value to the business after the break-even point is reached.

The results of break-even analysis are captured using a chart as shown in the figure.

_{Figure. Example break even chart.
Notice the break-even point (BEP) where the revenue line, which represents added value, crosses the total cost line. In this break-even graph, the x axis represents the passage of time and the y axis represents finances.}

Will a proposed system be valuable?

A system immediately causes a loss due to the costs of building the system. This is why in a break-even analysis the total cost line starts above the x axis. Further costs are incurred by the operation of the system.

A thorough economic analysis is critical to guide business decisions.

It may, for example, be observed through a break-even analysis that the revenue line will never exceed the total cost line, indicating that the system will not generate value for the business.

Ideally, the system consistently generates revenue for the business, eventually paying for itself (break-even point) and then generating further profits.

However, the amount of revenue estimated by the break-even analysis may not be high enough to motivate the business to proceed with the project; they may choose to pursue other opportunities with better prospects in regards to value.

Technical feasibility

Examining technical feasibility involves determining whether the technical aspects of the proposed system are practical and whether the project team has the technical expertise to implement the solution.

This analysis will also determine if the technologies required to build the solution exist and how difficult it would be to build any technologies that do not exist.

The solution’s complexity and structure and the project team’s familiarity with required technologies can indicate if further project resources and time may be needed.

Operational feasibility

Operational feasibility is studied to evaluate whether the proposed solution is likely to make a positive impact on the business and take advantage of any business opportunities identified.

It is important to assess whether the solution fits into the day-to-day operations of the organisation and to determine if end-users or staff/management can and will adapt to the solution, and assess any resistance to the proposed changes.

Scheduling feasibility

Analysing scheduling feasibility consists of predicting the duration of the project and assessing whether the project can be completed within the time frame in which the system will be useful.

To perform this analysis, consider the time required for project team members to learn new technologies when estimating schedules.

Also, determine if deadlines are mandatory or desirable, as it is usually preferable to extend a project in order to deliver a properly functional solution, rather than rush a project and deliver a potentially faulty system.

Legal and contractual feasibility

The study of legal feasibility assesses any legal requirements or conflicts that the system may encounter to determine the risk of legal issues faced by the business either building the system or operating it.

Legal requirements can include:

1. secure storage of personal information
2. using secure communication protocols
3. compliance with processes designed to prevent infringement of copyright and trademarks.

Political feasibility

Political feasibility is analysed to gain an understanding of any impact the proposed solution may have on key stakeholders within the organisation.

The new system may affect the organisation’s balance of power and have political ramifications. Affected stakeholders may not support the project and can even block or disrupt the project.