1. SW Project Management IT Project Conceptualization
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Glenn Booker
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2. Project conceptualizing and initiation
Now we’ll expand on the project life cycle, and examine its first phase in detail
The ‘IT project methodology’ used throughout the text is fairly typical as a foundation, but every project tailors its base methodology to meet its own needs
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3. Project conceptualizing and initiation
This chapter focuses on defining the goal for a project, and several objectives to help meet that goal
Then we’ll expand on the business case concept, including MOV and feasibility
The higher level governing structure to choose IT projects will be discussed
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4. IT Project Methodology (ITPM)
A project methodology provides the overall strategy for managing and controlling them
This describes the overall game plan
The methodology recommends phases, deliverables, processes, tools to support projects; but your project’s needs may differ!
Sharing a common foundation also makes CMMI level 3+ happy
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5. ITPM
Using a common methodology also helps managers decide which projects should be supported, and makes cross-project measurements feasible
The ITPM is flexible to accommodate any SDLC, and may be further adjusted for the skill level of the project team, project size, application type, etc.
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6. ITPM phases and deliverables
Conceptualize and initialize project – delivers the business case
Develop project plan and charter – delivers them
Execute & control project – follows an SDLC, and delivers the completed system
Close project – delivers a final project report and presentation
Evaluate project – delivers a project evaluation and lessons learned
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7. Phase 1
Conceptualize and initialize project defines the goal of the project, and how it will add value to the organization
Do so by comparing project to possible alternatives, and making a cost/benefit, feasibility, and risk analysis to prove which choice is best
This produces the project’s business case
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8. Phase 2 Develop project plan and charter
The project charter defines the project organization, and how the project will be implemented
It clarifies the project goal in terms of scope, schedule, budget, and quality standards
The project plan answers the who/what/ where/when/why/how questions
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9. Phase 2
The business case (phase 1) and project plan (phase 2) are kept separate
The business case focuses on how well the project matches the business strategy
Should the project be done at all?
The project plan focuses on how the project will be achieved – more tactical concerns
How will we make the project happen?
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10. Phase 3 Execute & control project carries out the project plan
Project manager must make sure the resources and infrastructure are available to the project team
People, technical infrastructure
Development methods and tools
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11. Phase 3 Also need to provide: And use plans for: Work environment
Controls over scope, schedule, budget, and quality
Human resources system
And use plans for:
Risk management
Procurement
Quality management
Change management
Communications
Testing
Implementation
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12. Phase 4
Close project transfers control from the development team to the client or sponsor
Team should make a final project report and presentation to document everything was accomplished
Allows final project cost and schedule to be measured
Archive project files, release resources
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13. Phase 5 Evaluate project success, often called a ‘post-mortem’ review
Project manager and team review what worked, what didn’t
Record lessons learned, look for broader best practices
Can review individual performance
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14. Phase 5 - Third party review
Can get third party review of the project
Will project meet its goal?
How about scope, schedule, budget, and quality objectives?
Did we deliver everything promised?
Is the client happy?
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15. Phase 5 - Third party review
Did we follow our own processes and methodology?
How did we handle risks and problems?
How well did we work with the sponsor?
Did we behave ethically and professionally?
Did the project provide value to the organization? (if you can tell yet)
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16. ITPM Foundation
The ITPM is based on having five sets of resources available to the team
PM process groups
Objectives for this project
Tools
Infrastructure
And the PMBOK knowledge areas
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17. PM process groups
These groups of processes are the activities needed to carry out the project life cycle
Initiating processes
Planning processes
Executing processes
Controlling processes
Closing processes
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18. Objectives for this project
The objectives for this project, taken together, ensure the project goal is met
The objectives typically address four areas
Scope
Schedule
Budget
Quality
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19. Tools
Tools support the project processes, and creation of the product itself
Could include estimation tools, requirements management tools, cost/schedule tools, quality tools, etc.
The development environment (IDE, CASE tools) are in this category too
(Yes,some consider this part of infrastructure)
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20. Infrastructure This includes three categories of infrastructure
Organizational – define project organization, roles, reporting structure
Project – the physical environment, processes, and controls
Technical – general tools: , Office suite, Internet access, PM software, etc.
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21. PMBOK knowledge areas
The lessons learned from past projects feeds into the PMBOK knowledge areas,
This can refine your project methodology to suit your needs, culture, and environment
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22. Business case
Now we’ll look in detail at how to develop a business case for a project
What reasons might be used to justify an IT project?
Reduce cost, create new product, improve customer service, processes, reporting, communication, decision making, create stronger connection to suppliers or customers, meet legal requirements
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23. Business case process
The process for preparing a business case has about eight steps
Select core team
Define MOV
Identify alternatives
Assess feasibility
Assess TCO
Assess TBO
Analyze alternatives
Propose & support recommendation
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24. Select core team
The team to develop the business case should come from multiple perspectives – business, technical, management, etc.
Provides a better balanced viewpoint
Enhances credibility, gets buy-in across org.
Better alignment with organizational goals
Better access to detailed supporting data
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25. Define MOV MOV is Measurable Organizational Value
The MOV must be some characteristics that can be objectively measured, to prove the project provided real value to the org
MOV proves success or failure of the project
All key stakeholders must agree on MOV
MOV must also support the org’s strategy
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26. Define MOV
There are six steps to defining MOV (Yes, all within step 2 of writing a business case)
Identify desired area of impact
Identify desired value of the project
Develop an appropriate metric
Set a time frame for achieving MOV
Get agreement from stakeholders
Summarize MOV in a statement
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27. Identify desired area of impact
Where will this project affect the organization? (could be more than one)
Strategic: new markets, products & services
Customer: better products & services, better loyalty, higher satisfaction
Financial: increased profits, profit margins
Operational: lower costs, higher efficiency
Social: education, health, safety, environment
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28. Identify desired value of the project
Ok, now within each area of impact, what will the project do to provide value?
Will it help you do something:
Better? (e.g. quality, effectiveness)
Faster? (speed, efficiency, cycle time)
Cheaper? (reduce cost!)
Or do more in some way? (new markets, products)
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29. Develop an appropriate metric
So how will you measure that value?
$$ - generate $x in new sales
Percentage - reaching at least a certain number (customer satisfaction > 95%)
Numbers – have at least y new customers
Don’t get fancy – simple, clear measures are often the best
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30. Develop an appropriate metric
Make it clear how the measure will be collected
Might need surveys, competitor data, etc.
Make sure the measure really addresses the value you wish to measure
Some things like loyalty or satisfaction are hard to nail down
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31. Set a time frame for achieving MOV
Determine how long it’ll take to achieve the MOV
Could have multiple time objectives – reach x by 6 months, y by 12 months, etc.
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32. Get agreement from stakeholders
Yup, easy to say, much harder to achieve
Everyone (project manager, sponsor, etc.) needs to agree the MOV is realistic
Don Quixote may like impossible dreams, but most techies hate impossible goals
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33. Summarize MOV in a statement
So what’s the output from all this work?
A sentence or two, or maybe a short table, to summarize the MOV (or MOVs if there are multiple) and it/their time frames
“Project XYZ will achieve {the MOV} within {the time frame} after its completion”
Or something vaguely like that…
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34. Identify alternatives
Now back to the overall business case, step 3 - Identify alternatives
Most problems can be solved more than one way, so your job is to brainstorm and find several* plausible ways to address the problem
One can be the ‘change-nothing’ answer
* (for homework, at least three)
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35. Identify alternatives
Alternatives can examine many possible approaches, such as
Change processes but keep the existing systems
Reengineer an existing system
Buy something off the shelf to replace an existing system
Start over, and make a new system
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36. Assess feasibility
Step 4 is to assess the feasibility and risks of each alternative
Feasibility assessment consists of considering three dimensions
Economic feasibility – a full cost/benefit analysis is nice, but at least determine if the cost of each alternative is within reach
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37. Assess feasibility
Technical feasibility measures whether the alternative can be accomplished
Do you have the infrastructure, skills, equipment, experience, etc. to implement each alternative?
If not, can the deficiencies be met reasonably?
Would you need to consider outsourcing or other outside sources?
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38. Assess feasibility
Organizational feasibility considers each alternative’s impact on your organization
Would it result in major changes?
Will jobs be affected?
Will people welcome a new approach?
Other possible areas of feasibility could include legal or ethical concerns
Are there, e.g. union conflicts or labor law concerns?
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39. Assess feasibility
The risk assessment should identify major plausible risks to the success of the project
Not the success of the product produced
What could keep the project from reaching its conclusion on time and within budget?
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40. Assess feasibility Identify each risk
Estimate the impact on the project – how much effort or money would it cost to fix?
How likely is the risk? Estimate the percent chance of it happening
Determine how the project could respond to the risk to reduce (mitigate) its impact
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41. Assess TCO
Determine the Total Cost of Ownership (TCO) of each alternative, which is the sum of
Direct costs – the cost of implementing the project
Ongoing costs – the cost of maintaining the system
Indirect costs – the cost of lost productivity during development, unexpected system down time, etc.
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42. Assess TBO
Determine the Total Benefits of Ownership (TBO); what are the benefits of each alternative?
What is the value of time not spent on paper-work, of reduced errors, of getting information faster, of sales of new products, etc.?
Tangible benefits are easy to estimate, intangible ones take more assumptions…
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43. Analyze alternatives
Step 7, analyze alternatives to see which has the most value for the organization
There are five cash flow metrics most often used to answer that ‘most value’ question: payback, breakeven, ROI, NPV, and scoring models
Typically use a few of them for a given project
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44. Payback
Payback is the amount of time (years) needed for an investment to pay for itself in new cash flow (or other benefit)
Payback = initial investment / cash flow
Initial investment is in dollars
Cash flow is in $/yr typically
A smaller payback period is good
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45. Breakeven
Breakeven is like payback, but it’s typically expressed in terms of the number of units sold to recoup the investment, based on knowing a ‘net profit margin’ per unit sold
Breakeven = initial investment / net profit margin
The dimensions of breakeven are units sold, as in, “We have to sell 20 cars this weekend to break even from our ads on TV”
Want a smaller breakeven point
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46. ROI Return on Investment is probably the best known cash flow measure
It describes the percent by which project total benefits will exceed costs
ROI = 100*(total benefits-total costs)/(total costs)
Want a larger ROI
Often tricky to measure benefits
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47. NPV
Net Present Value reminds us that, in a good economy, money can be invested over time to earn a profit – the ‘time value of money’
To calculate NPV, need the expenses and benefits of the project, year by year, for its life
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48. The interest rate used here is a critical assumption!
NPV
First find the net cash flow each year
Net cash flow = outflow – inflow = expenses – benefits
Then find the discounted cash flow of each year’s expenses
Discounted CF = net cash flow/(1+r)t
Where r=interest rate, t=number of years
The interest rate used here is a critical assumption!
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49. NPV
The NPV of the project is the sum of all discounted cash flows, minus the initial investment
NPV = S(discounted cash flow) – investment
You want NPV to be positive, and as large as possible
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50. Scoring models
This is a catchall category, when you want to combine different measures to come up with an overall score for each alternative
Total score = S(wici)
Where wi is the weighting percentage for each score, and ci is the score value
The sum of all weighting percentages = 100%
The highest total score generally wins
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51. Cash flow metrics summary
Units
Want it
Payback
Years
Small
Breakeven
Items sold
ROI
Percent
Large
NPV $
Large & positive
Scoring models
None (numeric)
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52. Propose & support recommendation
Ok, so we survived cash flow metrics, picked a couple of them, and calculated them for each alternative
Now comes the easy part – the conclusion
Based on this analysis, pick the alternative with the most value to the organization
Page 59 in the text has a nice business case outline
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53. Project selection & approval
Everything so far is focused on making a case for one IT project
On a larger scale, an organization typically develops a project portfolio – all the projects it supports
Depending on the org, it may select all low risk projects, or a mix of technologies, etc.
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54. Project selection & approval
All organizations have limited resources, so the decision to allow a project or not is a common and critical one
There are many possible processes upon which to base a decision
We’ll focus on Balanced Scorecard, which is also used to manage active projects
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55. Balanced Scorecard
A key feature is that it uses more than just financial measures
Financial perspective
Customer perspective
Internal process perspective
Innovation & learning perspective
You define measures for each perspective
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56. Financial perspective
While traditional finance measures (ROI, NPV) can be useful, BS also encourages
Customer-focused finance measures
Measures of internal operations
Investments in employees or infrastructure
A new measure often used is EVA, economic value added
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57. EVA
EVA determines if you’re earning more money than the cost of capital
EVA = (net operating after taxes profit) minus (opportunity cost of the capital invested)
So positive EVA is good
Formula adapted from
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58. Customer perspective
This includes all dimensions of customer satisfaction, including satisfaction with how the products/services were delivered, processes used to create them, support, etc.
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59. Internal process perspective
This measures how well the organization’s processes help achieve its financial and customer goals
So this boils down to the efficiency and effectiveness of the organization’s processes
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60. Innovation & learning perspective
This recognizes that investments in people and infrastructure help achieve the other three perspectives
Support individual learning and growth
Encourage training, certifications
Care about employee satisfaction
Strive for continuous improvement
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61. Why all this BS?
The main point is to avoid making key decisions based solely on $$$
It encourages a broader perspective on project go/no-go decisions
The MOV can also be reviewed in the context of BS
See how MOV supports BS perspectives
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62. BS can still fail if
Non-finance measures are the focus and shouldn’t be; or no connection between them and finance measure
Metrics poorly defined
Goals not based on stakeholder req’ts
No clue how to get to high level goals
Rely on trial and error for improvement
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63. IT governance
In general, governance manages processes to avoid doing something unethical, illegal, or just daft
So HR governance helps avoid discrimination
IT governance helps comply with laws, like the Sarbanes-Oxley Act of 2002 (SOX) for financial reporting
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64. IT governance
IT governance starts with project management duties, but can also include change, life-cycle, asset/resource, portfolio, and security management
Best practices for IT governance include
Identify strategic value of potential projects, not just costs & risks
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65. IT governance
Top business management sets IT priorities, not just IT managers; this helps keep everyone on the same page
Communicate priorities and progress clearly (e.g. BS status updates)
Monitor projects regularly; traffic light dashboard reports are common
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66. PMO
A Project Management Office (PMO) can be a key IT governance body; they
Help coordinate the projects that are proposed and accepted
Help collect data across projects
Manage the organization’s portfolio
Collect audit trail history (e.g. for SOX)
Improve estimation for future projects
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67. Summary The IT Project Methodology phases and deliverables
How to develop a business case, calculate MOV, assess feasibility and calculate cash flow metrics
Balanced Scorecard
IT governance and the PMO
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