Presentation on theme: "Information Technology Project Management – Third Edition"— Presentation transcript:
1 Information Technology Project Management – Third Edition By Jack T. MarchewkaNorthern Illinois UniversityCopyright 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 projectGame plan for implementing project and product lifecyclesRecommends phases, deliverables, processes, tools, and knowledge areas for supporting an IT projectMust 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 organizationCan beTraditional (e.g., Waterfall)Agile (e.g., XPM, SCRUM)
5 Phases Phase 1: Conceptualize and Initialize Define the overall goal of the project – most important step in the ITPMProject is undertaken for a specific purpose and that purpose must be to add tangible value to the organizationAids in defining the project’s scope, guides decisions throughout the project life cycle and will be used to evaluate the project’s successIdentify alternatives along with the costs, benefits, feasibility and risksThe project’s goal and analysis of alternatives that support the goal are summarized in a deliverable called the business caseSenior 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 phaseDefines how the project will be organized and implementedIdentifies and gives authority to a PM to begin carrying out the processes and tasks associated with the SDLCThe project plan provides all the tactical details concerningWho is the PM, plan sponsor, project teamWhat is the scope, resources, tools, technologies, value to the orgHow long, how muchThe 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 productThe project team uses a set of systems analysis and design tools for implementing the SDLCMust have people with appropriate skills on board, risk plan, quality management plan, change management plan, testing plan, communication plan, etc.Phase 4: Close ProjectFormal acceptance should transfer control from the project team to the client or project sponsorProject 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 projectDocument lessons learned and best practices to improve organization’s methodology for future projectsEvaluation of team members by project managerIdentify strengths and opportunities for improvement to help maximize each person’s potentialOutside evaluation of project, project leader, and team membersEvaluate project’s organizational value
9 Project Management Process Groups A process is a series of actions directed toward a particular resultProject management can be viewed as a number of interlinked processesThe project management process groups include:Initiating processesDefining and authorizing a project or project phasePlanning processesDevising and maintaining a workable scheme to ensure that the project addresses the organization’s needsExecuting processesCoordinating people and resources to carry out the various plans and produce the products, services or results of the project or phaseMonitoring and controlling processesRegularly measuring and monitoring progress to ensure that the project objectives are metClosing processesFormalizing 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® GuideNote that there are activities from each knowledge area under the planning and monitoring and controlling process groupsInformation Technology Project Management, Sixth Edition
15 IT Project Management Foundation Project Management Process GroupsInitiating processesPlanning processesExecuting processesControlling processesClosing processesProject Objectives
16 IT Project Management Foundation Tools - e.g. Microsoft Project ®, Computer Aided Software Engineering (CASE)InfrastructureOrganizational InfrastructureHow projects are supported and managedHow resources are allocated, reporting relationships of the PM and team members, role of projectProject Infrastructure – supports the project team in terms of:Project EnvironmentRoles and Responsibilities of team membersProcesses and ControlsTechnical Infrastructurehardware and software tools to support the project teamProject Management Knowledge Areas
17 The Business CaseDefinition of Business Case: an analysis of the organizational value, feasibility, costs, benefits, and risks of the project plan.Attributes of a Good Business CaseDetails all possible impacts, costs, and benefitsClearly compares alternativesDocuments methods and rationale used to quantify costs and benefitsObjectively includes all pertinent informationShows explicitly how an investment in IT will lead to an increase in business valueSystematic in terms of summarizing findingsProvides 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 TeamAdvantages:Credibility - all stakeholders and relevant departments involvedAlignment with organizational goalsAccess to the real costsOwnershipAgreementBridge building - include critics on the team
20 Developing the Business Case Step 2: Define Measurable Organizational Value (MOV)The project’s goal - measure of successMust be measurableProvides value to the organizationMust be agreed uponMust be verifiable at the end of the projectGuides the project throughout its life cycleShould align with the organization’s strategy and goals
22 The IT Value Chainprevent customers from leaving or switching to a competitordevelop tighter linkages with customersDevelop a B2B application to allow customers to do business on-line
23 IT Value ChainPresident 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 rocketGet him back safely to earthDo this by 1970zejVPn30&feature=fvwp&NR=1
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 operationsIdentify the desired potential area of impact – why does the organization want to take on the projectStrategicCustomerFinancialOperationalSocialB2C – 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 organizationBetter?Faster?Cheaper?Do More? (growth)B2C – enable the organization to expand its current operationsImproved 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 offMoney ($, £, ¥ )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 MOVWhen will the MOV be achieved?Completion of the project does not mean the MOV has been achieved.MOV can change as time passesB2C – 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 stakeholdersEnsure that it is accurate and realisticProject manager and team can only guide the process, plan sponsor identifies the vale and target metricsPM should not commit to an unrealistic MOV
30 Process for Developing the MOV Summarize the MOV in a clear, concise statement or tableOpportunity to get final agreement and verificationSimple and clear directive to the project teamSets explicit expectation for all project stakeholdersThis 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 operationYearMOV120% return on investment500 new customers225% return on investment1,000 new customers330% return on investment1,500 new customers
31 Developing the Business Case Step 3: Identify AlternativesBase Case Alternative – how would the organization would perform under the status quoDetermine costs of maintaining the current system over timeIncreased maintenance costs of hardware and softwarePossibility of more frequent system failures and downtimePossible Alternative StrategiesChange existing business processes without investing in ITAdopt/Adapt systems from other organizational areasReengineer existing systemPurchase off-the-shelf applications packageCustom build new solution using internal resources or outsourcing
32 Developing the Business Case Step 4: Define Feasibility and Asses RiskFeasible – doable and worth doingEconomic feasibility – too costly and/or not provide expected benefitsTechnical feasibility – can infrastructure, IT staff, vendor support the solutionOrganizational feasibility – will solution be accepted by staff, will business be disruptedOther feasibilities - legal/ethical issues consideredRiskIdentification - 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 OwnershipTotal cost of acquiring, developing, maintaining and supporting the application over its useful lifeDirect 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 OwnershipIncreasing high-value workSales force spends less time on paperwork and more time on calls to customersImproving accuracy and efficiencyReduction in errors, duplication, time to complete a business processImproving decision-makingGetting timely and accurate informationImproving customer serviceNew products/services, faster or more reliable service, etcIntangible benefitsTry to quantify them by linking them to tangible benefits that can be linked to efficiency gainsCorporate wide directory on an intranet improves communications and reduces paper documents, printing, etcAn 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 wayPayback – how long will it take to recover the initial investmentPayback Period = Initial InvestmentNet Cash Flow (or Return) per year= $100,000$20,000= 5 years
37 Developing the Business Case Break EvenMaterials (putter head, shaft, grip, etc.)$12.00Labor (0.5 hours at $9.00/hr)$ 4.50Overhead (rent, insurance, utilities, taxes, etc.)$ 8.50Total$25.00If 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 Investmentshows the relationship between a project’s cost and benefitsreturns must arise as a direct result of the initial investmentProject 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 moneyDiscounts streams of cash flows in the future so that it can be determined if investing the time, money and resources is worth the waitOutflows – Year 0: cost to build; Years 1- 4: support and maintenanceWhen comparing alternatives, higher NPV is more desirableYear 0Year 1Year 2Year 3Year 4Total Cash Inflows$0$150,000$200,000$250,000$300,000Total Cash Outflows$85,000$125,000Net Cash Flow($200,000)$65,000$75,000$100,000NPV = -I0 + (Net Cash Flow / (1 + r)t)Where:I = Total Cost or Investment of the Projectr = discount ratet = time period
40 Developing the Business Case Net Present ValueTime PeriodCalculationDiscounted Cash FlowYear 0($200,000)Year 1$65,000/( )1$60,185Year 2$75,000/( )2$64,300Year 3$100,000/( )3$79,383Year 4$100,000/( )4$73,503Net Present Value (NPV)$77,371
42 Developing the Business Case Internal Rate of ReturnThe 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.
44 Developing the Business Case Weighted Scoring ModelsA tool that provides a systematic process for selecting projects based on many criteriaIdentify criteria important to the project selection processCan combine both qualitative and non-qualitative itemsWeights and scores can be largely subjectiveAssign weights (percentages) to each criterion so they add up to 100%Assign scores to each criterion for each projectMultiply the scores by the weights and get the total weighted scoresThe higher the weighted score, the better
45 CriterionWeightAlternative AAlternative BAlternative CFinancialROI15%2410Payback10%35NPVOrganizationalAlignment with strategic objectives8Likelihood of achieving project’s MOV69ProjectAvailability of skilled team members5%Maintainability7Time to developRiskExternalCustomer satisfactionIncreased market shareTotal Score100%2.654.858.50Notes: 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 RecommendationRecommend one of the options, must be supported by your analysisOpportunity to make an impression on the client or plan sponsorUse template on next slide
48 Project Selection and Approval The IT Project Selection ProcessOrganization 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 feasibleCommittee decides which projects to approve and project manager is assignedThe Project Selection DecisionIT project must map to organization goalsIT project must provide verifiable MOVSelection should be based on diverse measures such astangible and intangible costs and benefitsvarious levels throughout the organization (individual, dept, enterprise)
49 Project Selection and Approval Balanced ScorecardBalances traditional financial measures with operational metrics across four different perspectivesFinanceCustomer satisfaction,Internal business processesThe organization’s ability to innovate and learnThe organization must create a set of measurements or key performance indicators for each of the perspectivesThe measures are used to create a scorecard that allows management to keep score of the organization’s performanceProvides 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 ScorecardFinancial performance is linked to customer focused initiatives, internal operations and investments in employees and the infrastructure to support their performanceMeasures for customer satisfaction can be linked to financial rewardsCustomer satisfaction can be achieved through improved internal operational activities which leads to improved financial performanceOrganization relies heavily on its employees to provide continuous improvement and innovation in the first three perspectives.
52 Reasons Balanced Scorecard Approach Might Fail Nonfinancial variables incorrectly identified as primary driversMetrics not properly definedGoals for improvements negotiated not based on requirementsReliance on trial and error as a methodologyNo 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 perspectivesFigure 2.6
54 IT GovernanceFocuses 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 illegalFor 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 valueOrganizations 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 risksTop business managers should set IT prioritiesMany 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 clearlyThe 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 worksMonitor projects regularlyAn 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 governanceIts 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 requirementsAlso 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 PMOPoints out minefields in project processes, such as time and cost estimationEnforces priorities and/or controls that keep the project on trackCoordinates cross-functional projects that may stumble as a result of organizational politics that often arise when intra-organizational boundaries are crossedProvides a standardized way for all projects to be planned, managed, and reportedCan show the real value of projects by comparing projected costs and benefits with actual resultsCan coordinate more and larger projects than the organization could handle in the pastAllows IT to support its requests for additional staff or resources