1. Information Technology Project Management – Third Edition
By Jack T. Marchewka
Northern Illinois University
Copyright 2009 John Wiley & Sons, Inc. all rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information contained herein.

2. Conceptualizing and Initializing the Project
Chapter 2

3. Information Technology Project Methodology
A strategic-level plan for managing and controlling the project
Game plan for implementing project and product lifecycles
Recommends phases, deliverables, processes, tools, and knowledge areas for supporting an IT project
Must be flexible and include “best practices” and “lessons learned” from successful and unsuccessful experiences over time.
Should lead to fewer wasted resources and projects that provide true value to the organization
Can be
Traditional (e.g., Waterfall)
Agile (e.g., XPM, SCRUM)

4. An IT Project Methodology
Figure 2.1

5. Phases Phase 1: Conceptualize and Initialize
Define the overall goal of the project – most important step in the ITPM
Project is undertaken for a specific purpose and that purpose must be to add tangible value to the organization
Aids in defining the project’s scope, guides decisions throughout the project life cycle and will be used to evaluate the project’s success
Identify alternatives along with the costs, benefits, feasibility and risks
The project’s goal and analysis of alternatives that support the goal are summarized in a deliverable called the business case
Senior management uses the business case during the selection process to determine whether the project should be funded

6. Phases Phase 2: Develop the Project Charter and Detailed Project Plan
The project charter is a key deliverable of this phase
Defines how the project will be organized and implemented
Identifies and gives authority to a PM to begin carrying out the processes and tasks associated with the SDLC
The project plan provides all the tactical details concerning
Who is the PM, plan sponsor, project team
What is the scope, resources, tools, technologies, value to the org
How long, how much
The project’s scope, schedule, budget, and quality objectives are defined in detail

7. Phases continued Phase 3: Execute and Control the Project
Carry out the project plan to deliver the IT product
The project team uses a set of systems analysis and design tools for implementing the SDLC
Must have people with appropriate skills on board, risk plan, quality management plan, change management plan, testing plan, communication plan, etc.
Phase 4: Close Project
Formal acceptance should transfer control from the project team to the client or project sponsor
Project team should prepare a final report to document and verify that all deliverables have beenmet

8. Phases continued Phase 5: Evaluate Project Success
Post mortem by project manager and team of entire project
Document lessons learned and best practices to improve organization’s methodology for future projects
Evaluation of team members by project manager
Identify strengths and opportunities for improvement to help maximize each person’s potential
Outside evaluation of project, project leader, and team members
Evaluate project’s organizational value

9. Project Management Process Groups
A process is a series of actions directed toward a particular result
Project management can be viewed as a number of interlinked processes
The project management process groups include:
Initiating processes
Defining and authorizing a project or project phase
Planning processes
Devising and maintaining a workable scheme to ensure that the project addresses the organization’s needs
Executing processes
Coordinating people and resources to carry out the various plans and produce the products, services or results of the project or phase
Monitoring and controlling processes
Regularly measuring and monitoring progress to ensure that the project objectives are met
Closing processes
Formalizing acceptance of the project or phase, closing out contracts, documenting lessons learned

10. Level of Activity and Overlap of Process Groups Over Time

11. Mapping the Process Groups to the Knowledge Areas
You can map the main activities of each PM process group into the nine knowledge areas using the PMBOK® Guide
Note that there are activities from each knowledge area under the planning and monitoring and controlling process groups
Information Technology Project Management, Sixth Edition

12. Process Groups and Knowledge Area Mapping

13. Process Groups and Knowledge Area Mapping

14. Process Groups and Knowledge Area Mapping

15. IT Project Management Foundation
Project Management Process Groups
Initiating processes
Planning processes
Executing processes
Controlling processes
Closing processes
Project Objectives

16. IT Project Management Foundation
Tools - e.g. Microsoft Project ®, Computer Aided Software Engineering (CASE)
Infrastructure
Organizational Infrastructure
How projects are supported and managed
How resources are allocated, reporting relationships of the PM and team members, role of project
Project Infrastructure – supports the project team in terms of:
Project Environment
Roles and Responsibilities of team members
Processes and Controls
Technical Infrastructure
hardware and software tools to support the project team
Project Management Knowledge Areas

17. The Business Case
Definition of Business Case: an analysis of the organizational value, feasibility, costs, benefits, and risks of the project plan.
Attributes of a Good Business Case
Details all possible impacts, costs, and benefits
Clearly compares alternatives
Documents methods and rationale used to quantify costs and benefits
Objectively includes all pertinent information
Shows explicitly how an investment in IT will lead to an increase in business value
Systematic in terms of summarizing findings
Provides senior management with all the information needed to make an informed decision as to whether a specific project should be funded

18. Process for Developing the Business Case
Figure 2.3

19. Developing the Business Case
Step 1: Select the Core Team
Advantages:
Credibility - all stakeholders and relevant departments involved
Alignment with organizational goals
Access to the real costs
Ownership
Agreement
Bridge building - include critics on the team

20. Developing the Business Case
Step 2: Define Measurable Organizational Value (MOV)
The project’s goal - measure of success
Must be measurable
Provides value to the organization
Must be agreed upon
Must be verifiable at the end of the project
Guides the project throughout its life cycle
Should align with the organization’s strategy and goals

21. The IT Value Chain
Figure 2.4

22. The IT Value Chain
prevent customers from leaving or switching to a competitor
develop tighter linkages with customers
Develop a B2B application to allow customers to do business on-line

23. IT Value Chain
President Kennedy’s mission to the moon – clear and measurable goals without saying how to accomplish the goal
“Our goal is to land a man on the moon and return him safely by the end of the decade”
A human being and not a monkey or unmanned rocket
Get him back safely to earth
Do this by 1970
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24. Process for Developing the MOV
Example: A company wants to develop and implement a B2C e- commerce application to expands its current brick and mortar operations
Identify the desired potential area of impact – why does the organization want to take on the project
Strategic
Customer
Financial
Operational
Social
B2C – PM meet with plan sponsor to determine how the idea for the project came about to understand how and why decisions are made by sponsor’s organization. Strategic & financial – expand b&m operations

26. Process for Developing the MOV
Identify the desired organizational value of the IT project – how will this project help achieve what we want as an organization
Better?
Faster?
Cheaper?
Do More? (growth)
B2C – enable the organization to expand its current operations
Improved customer service and operations would fall under better, faster and cheaper

27. Process for Developing the MOV
Develop an Appropriate Metric - should it increase or decrease?
Company needs a way to determine if project is a success and if their investment paid off
Money ($, £, ¥ )
Percentage (%)
Numeric Values (customers, hits on website)
B2C – plan sponsor has set the metric to be a 20% return on investment and 500 new customers

28. Process for Developing the MOV
Set a time frame for achieving the MOV
When will the MOV be achieved?
Completion of the project does not mean the MOV has been achieved.
MOV can change as time passes
B2C – plan sponsor has set the metric to be a 20% return on investment and 500 new customers within first year. 25% return and 1000 new customers second year, 30% return and 1,500 new customers third year.

29. Process for Developing the MOV
Verify and get agreement from the project stakeholders
Ensure that it is accurate and realistic
Project manager and team can only guide the process, plan sponsor identifies the vale and target metrics
PM should not commit to an unrealistic MOV

30. Process for Developing the MOV
Summarize the MOV in a clear, concise statement or table
Opportunity to get final agreement and verification
Simple and clear directive to the project team
Sets explicit expectation for all project stakeholders
This project will be successful if _________________.
MOV: The B2C project will provide a 20% return on investment and 500 new customers within the first year of its operation
Year
MOV 1
20% return on investment
500 new customers 2
25% return on investment
1,000 new customers 3
30% return on investment
1,500 new customers

31. Developing the Business Case
Step 3: Identify Alternatives
Base Case Alternative – how would the organization would perform under the status quo
Determine costs of maintaining the current system over time
Increased maintenance costs of hardware and software
Possibility of more frequent system failures and downtime
Possible Alternative Strategies
Change existing business processes without investing in IT
Adopt/Adapt systems from other organizational areas
Reengineer existing system
Purchase off-the-shelf applications package
Custom build new solution using internal resources or outsourcing

32. Developing the Business Case
Step 4: Define Feasibility and Asses Risk
Feasible – doable and worth doing
Economic feasibility – too costly and/or not provide expected benefits
Technical feasibility – can infrastructure, IT staff, vendor support the solution
Organizational feasibility – will solution be accepted by staff, will business be disrupted
Other feasibilities - legal/ethical issues considered
Risk
Identification - what can go wrong and what must go right?
Assessment – what is the impact of each risk?
Response – how can the organization avoid or minimize the risk?

33. Developing the Business Case
Step 5: Define Total Cost of Ownership
Total cost of acquiring, developing, maintaining and supporting the application over its useful life
Direct or Up-front costs – initial cost of hardware, software, telecomm equipment, development, installation, outside consultants, etc.
Ongoing Costs – salaries, training, upgrades, supplies, maintenance, etc.
Indirect Costs – initial loss of productivity, downtime cost, QA, auditing equipment, post-implementation reviews.

34. Developing the Business Case
Step 6: Define Total Benefits of Ownership
Increasing high-value work
Sales force spends less time on paperwork and more time on calls to customers
Improving accuracy and efficiency
Reduction in errors, duplication, time to complete a business process
Improving decision-making
Getting timely and accurate information
Improving customer service
New products/services, faster or more reliable service, etc
Intangible benefits
Try to quantify them by linking them to tangible benefits that can be linked to efficiency gains
Corporate wide directory on an intranet improves communications and reduces paper documents, printing, etc
An EDI application enables faster collection of A/R, benefit which can be valued in terms of investing that money

35. Developing the Business Case
Step 7: Analyze alternatives using financial models and scoring models – compare all models the same way
Payback – how long will it take to recover the initial investment
Payback Period = Initial Investment
Net Cash Flow (or Return) per year
= $100,000
$20,000
= 5 years

36. Developing the Business Case

37. Developing the Business Case
Break Even
Materials (putter head, shaft, grip, etc.)
$12.00
Labor (0.5 hours at $9.00/hr)
$ 4.50
Overhead (rent, insurance, utilities, taxes, etc.)
$ 8.50
Total
$25.00
If you sell a golf putter for $30.00 and it costs $25.00 to make, you have a profit margin of $5.00:
Breakeven Point = Initial Investment / Net Profit Margin
= $100,000 / $5.00
= 20,000 units

38. Developing the Business Case
Return on Investment
shows the relationship between a project’s cost and benefits
returns must arise as a direct result of the initial investment
Project ROI =(total expected benefits – total expected costs)
total expected costs
= ($115,000 - $100,000)
$100,000
= 15%

39. Developing the Business Case
Net Present Value – time value of money
Discounts streams of cash flows in the future so that it can be determined if investing the time, money and resources is worth the wait
Outflows – Year 0: cost to build; Years 1- 4: support and maintenance
When comparing alternatives, higher NPV is more desirable
Year 0
Year 1
Year 2
Year 3
Year 4
Total Cash Inflows $0
$150,000
$200,000
$250,000
$300,000
Total Cash Outflows
$85,000
$125,000
Net Cash Flow
($200,000)
$65,000
$75,000
$100,000
NPV = -I0 +  (Net Cash Flow / (1 + r)t)
Where:
I = Total Cost or Investment of the Project
r = discount rate
t = time period

40. Developing the Business Case
Net Present Value
Time Period
Calculation
Discounted Cash Flow
Year 0
($200,000)
Year 1
$65,000/( )1
$60,185
Year 2
$75,000/( )2
$64,300
Year 3
$100,000/( )3
$79,383
Year 4
$100,000/( )4
$73,503
Net Present Value (NPV)
$77,371

41. Net Present Value Analysis
$943.39 41

42. Developing the Business Case
Internal Rate of Return
The discount rate that makes the net present value of investment zero.
It is an indicator of the efficiency of an investment, as opposed to NPV, which indicates value or magnitude.
The IRR is the annualized effective compounded return rate which can be earned on the invested capital, i.e., the yield on the investment.
A project is a good investment proposition if its IRR is greater than the rate of return that could be earned by alternate investments (investing in other projects, buying bonds, even putting the money in a bank account).
Thus, the IRR should be compared to any alternate costs of capital including an appropriate risk premium.

43. Developing the Business Case

44. Developing the Business Case
Weighted Scoring Models
A tool that provides a systematic process for selecting projects based on many criteria
Identify criteria important to the project selection process
Can combine both qualitative and non-qualitative items
Weights and scores can be largely subjective
Assign weights (percentages) to each criterion so they add up to 100%
Assign scores to each criterion for each project
Multiply the scores by the weights and get the total weighted scores
The higher the weighted score, the better

45. Criterion
Weight
Alternative A
Alternative B
Alternative C
Financial
ROI
15% 2 4 10
Payback
10% 3 5
NPV
Organizational
Alignment with strategic objectives 8
Likelihood of achieving project’s MOV 6 9
Project
Availability of skilled team members 5%
Maintainability 7
Time to develop
Risk
External
Customer satisfaction
Increased market share
Total Score
100%
2.65
4.85
8.50
Notes: Risk scores have a reverse scale – i.e., higher scores for risk imply lower levels of risk

46. Developing the Business Case
Step 8: Propose and Support the Recommendation
Recommend one of the options, must be supported by your analysis
Opportunity to make an impression on the client or plan sponsor
Use template on next slide

47. Business Case Template
Figure 2.5

48. Project Selection and Approval
The IT Project Selection Process
Organization needs a balance of projects in its project portfolio with varying degrees of risk, technological complexity, size and strategic intent.
Due to limited resources, what a company wants to do is not always feasible
Committee decides which projects to approve and project manager is assigned
The Project Selection Decision
IT project must map to organization goals
IT project must provide verifiable MOV
Selection should be based on diverse measures such as
tangible and intangible costs and benefits
various levels throughout the organization (individual, dept, enterprise)

49. Project Selection and Approval
Balanced Scorecard
Balances traditional financial measures with operational metrics across four different perspectives
Finance
Customer satisfaction,
Internal business processes
The organization’s ability to innovate and learn
The organization must create a set of measurements or key performance indicators for each of the perspectives
The measures are used to create a scorecard that allows management to keep score of the organization’s performance
Provides a balanced approach in terms of tangible and intangible benefits, long and short-term objectives and how each perspective’s desired outcomes and drivers impact the other perspectives

50. Project Selection and Approval
Balanced Scorecard
Financial performance is linked to customer focused initiatives, internal operations and investments in employees and the infrastructure to support their performance
Measures for customer satisfaction can be linked to financial rewards
Customer satisfaction can be achieved through improved internal operational activities which leads to improved financial performance
Organization relies heavily on its employees to provide continuous improvement and innovation in the first three perspectives.

51. Balanced Scorecard Approach

52. Reasons Balanced Scorecard Approach Might Fail
Nonfinancial variables incorrectly identified as primary drivers
Metrics not properly defined
Goals for improvements negotiated not based on requirements
Reliance on trial and error as a methodology
No quantitative linkage between nonfinanacial and expected financial results

53. MOV and the Organization’s Scorecard
MOV supports the balanced scorecard approach in terms of how it supports the perspectives
Figure 2.6

54. IT Governance
Focuses on the processes that coordinate and control an organization’s resources, actions, and decisions to help prevent people from making bad investments, acting unethically, or doing something illegal
For many organizations, IT governance started with project management, but today it also includes change management, application life-cycle management, asset and resource management (i.e., IT investment/project approval), portfolio management, and security management

55. IT Governance Best Practices
Identify strategic value
Organizations are often faced with a stack of potential IT projects, so it is important to compare them in terms of their business value as well as their costs and potential risks
Top business managers should set IT priorities
Many organizations rely on a committee of business and IT leaders to determine how the IT budget will be spent. Helps align IT with organizational objectives and increase shared accountability.
Communicate priorities and progress clearly
The priorities defined by the top IT and business managers must be communicated clearly to the rest of the organization to ensure that everyone is aware of and understands how the governance process works
Monitor projects regularly
An organization needs to track each project’s progress on a regular basis to protect the value of its investment. Summary of key project metrics, spotlight potential issues or problems early on

56. The Project Management Office (PMO)
Can be a critical component for supporting IT governance
Its role is to provide support and collect project-related data while providing tools and methodologies.
Information collected about projects across the organization provides a means to study the organization’s portfolio of IT projects.
Historical information can be used as an audit trail to conform to regulatory requirements
Also can be used as a basis for estimating and conducting reality checks for projects.
A PMO can become center of excellence for project management.

57. Benefits of a PMO
Points out minefields in project processes, such as time and cost estimation
Enforces priorities and/or controls that keep the project on track
Coordinates cross-functional projects that may stumble as a result of organizational politics that often arise when intra-organizational boundaries are crossed
Provides a standardized way for all projects to be planned, managed, and reported
Can show the real value of projects by comparing projected costs and benefits with actual results
Can coordinate more and larger projects than the organization could handle in the past
Allows IT to support its requests for additional staff or resources