After two years the new system was implemented

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After two years the new system was implemented despite warnings that it was not adequately tested. Ten months later the system was scrapped, the bank’s top systems and trust executives had resigned and the company had taken a $60 million write-off to cover expenses. During the ten months, the company lost 100 institutional accounts with $4 billion in assets. FOCUS 18-3 on page 668 describes a project at Blue Cross/Blue Shield that was scrapped after six years of work and a $120 million investment. Five important aspects to be considered during a feasibility study are as follows: 1. Economic feasibility . Will system benefits justify the time, money and other resources required to implement it? 2. Technical feasibility . Can the planned system be developed and implemented using existing technology? 3. Legal feasibility . Does the system comply with all applicable federal and state laws and statutes, administrative agency regulations, and the company’s contractual obligations? 4. Scheduling feasibility . Does the organization have access to people who can design, implement and operate the proposed system? Can people use the system and will they use it? The feasibility analysis that Ann performed for Shoppers Mart is shown in Table 18-8 at the end of this chapter on page 682 . Calculating Economic Feasibility Costs and Benefits In a recent survey, 9 out of 10 executives agree that information technology could greatly enhance their competitive edge; however, only 6 out of 10 agreed that the necessary IT spending would be justified. Many companies overspend on information technology. The best business strategy is to spend only on IT projects where the expected benefits exceed the costs.
Page 12 of 20 The basic framework for feasibility analysis is the capital budgeting model , in which cost savings and other benefits as well as initial outlay costs, operating costs, and other cash outflows, are translated into dollar estimates. Some of the tangible and intangible benefits a company might obtain from a new system are cost savings; improved customer service, productivity, decision making, and data processing; better management control; and increased job satisfaction and employee morale. Equipment costs are an initial outlay cost if the system is purchased and an operating cost if rented or leased. The primary operating cost is maintaining the system. Studies show that between 65% and 75% of an organization’s systems efforts are spent in maintaining current information systems. Initial outlay and operating costs are summarized in Table 18-2 on page 670 . 1) Hardware 2) Software 3) Staff 4) Supplies and overhead 5) Maintenance/backup 6) Documentation 7) Site preparation 8) Installation 9) Conversion 10) Financial Capital Budgeting Various feasibility measures are used to narrow the list of alternative approaches that meet system requirements.

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