2. Feasibility study

During this stage, the company has to decide firstly whether there is a need for the system and secondly, if there is a need, can the cost of the system be justified against the benefits that it will bring.

Consider three imaginary (very brief!) alternatives that a company could choose from:

a) Company does not change anything

Benefit: No disruption to the business. Least cost.

Performance: No change, system remains outdated.  Process becomes increasingly less efficient.

b) Company makes alterations to half the system

Benefit: Best parts of the system are kept, whilst the least efficient parts are redesigned to improve performance.

Cost: Moderate, training moderate.

Performance improvement: 30%

c) Complete overhaul

Benefit: Reduces running costs for the company (more profitable).

Cost: High, given that new equipment / software will be required.  Training for staff needed.

Performance: 70% improvement over the old system in time.

As you can see, deciding on the best alternative is often not simple - management have to take many factors into account. There are often complicated relationships between cost, performance and benefit.