Cost Benefit Analysis
Developing and installing a new IT system is an investment and can help the business create profit. Carrying out a cost benefit analysis helps to give management an idea of the costs of the new system, its benefits and risks.
Each phase of the development/implementation has a cost and when analysing the new system you should take into account the cost of: •
Some costs are a one time charge eg Development of software, while others are an ongoing cost to the business eg operating costs.
Costs and Benefits can be broken down into the following categories: 1.
Development costs - Development costs that are incurred during the development of the system are one time investment eg Wages, Equipment 2.
Operating costs - Operating costs are incurred throughout the life of the systems e.g. Wages, Supplies, Overheads
Items to consider in your Cost Benefit Analysis might be:
It includes the cost of purchasing or leasing of computers and peripherals. Software costs include required software costs. Personnel costs
Is the money, spent on the people involved in the development of the system. These expenditures include salaries, other benefits such as health insurance, travel allowance, etc. Facility costs
Expenses incurred during the preparation of the physical site where the system will be operational. These can be wiring, flooring, acoustics, lighting, and air conditioning. Operating costs
Operating costs are the expenses required for the day to day running of the system. This includes the maintenance of the system. That can be in the form of maintaining the hardware or application programs or money paid to professionals responsible for running or maintaining the system. Supply costs
These are variable costs that vary with the amount of use of paper, ribbons, disks, and the like. These should be estimated and included in the overall cost of...
Please join StudyMode to read the full document