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INFO 420Chapter 2 1 SW Project Management IT Project Conceptualization INFO 420 Glenn Booker.

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Presentation on theme: "INFO 420Chapter 2 1 SW Project Management IT Project Conceptualization INFO 420 Glenn Booker."— Presentation transcript:

1 INFO 420Chapter 2 1 SW Project Management IT Project Conceptualization INFO 420 Glenn Booker

2 Chapter 22 INFO 420 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

3 Chapter 23 INFO 420 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

4 Chapter 24 INFO 420 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

5 Chapter 25 INFO 420 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.

6 Chapter 26 INFO 420 ITPM phases and deliverables 1. Conceptualize and initialize project – delivers the business case 2. Develop project plan and charter – delivers them 3. Execute & control project – follows an SDLC, and delivers the completed system 4. Close project – delivers a final project report and presentation 5. Evaluate project – delivers a project evaluation and lessons learned

7 Chapter 27 INFO 420 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

8 Chapter 28 INFO 420 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

9 Chapter 29 INFO 420 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?

10 Chapter 210 INFO 420 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

11 Chapter 211 INFO 420 Phase 3 Also need to provide:  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

12 Chapter 212 INFO 420 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

13 Chapter 213 INFO 420 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

14 Chapter 214 INFO 420 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?

15 Chapter 215 INFO 420 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)

16 Chapter 216 INFO 420 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

17 Chapter 217 INFO 420 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

18 Chapter 218 INFO 420 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

19 Chapter 219 INFO 420 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)

20 Chapter 220 INFO 420 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.

21 Chapter 221 INFO 420 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

22 Chapter 222 INFO 420 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

23 Chapter 223 INFO 420 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

24 Chapter 224 INFO 420 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

25 Chapter 225 INFO 420 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

26 Chapter 226 INFO 420 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

27 Chapter 227 INFO 420 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

28 Chapter 228 INFO 420 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)

29 Chapter 229 INFO 420 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

30 Chapter 230 INFO 420 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

31 Chapter 231 INFO 420 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.

32 Chapter 232 INFO 420 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

33 Chapter 233 INFO 420 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…

34 Chapter 234 INFO 420 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)

35 Chapter 235 INFO 420 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

36 Chapter 236 INFO 420 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

37 Chapter 237 INFO 420 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?

38 Chapter 238 INFO 420 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?

39 Chapter 239 INFO 420 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?

40 Chapter 240 INFO 420 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

41 Chapter 241 INFO 420 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.

42 Chapter 242 INFO 420 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…

43 Chapter 243 INFO 420 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

44 Chapter 244 INFO 420 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

45 Chapter 245 INFO 420 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

46 Chapter 246 INFO 420 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

47 Chapter 247 INFO 420 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

48 Chapter 248 INFO 420 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!

49 Chapter 249 INFO 420 NPV The NPV of the project is the sum of all discounted cash flows, minus the initial investment  NPV =  (discounted cash flow) – investment You want NPV to be positive, and as large as possible

50 Chapter 250 INFO 420 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 =  (w i c i )  Where w i is the weighting percentage for each score, and c i is the score value  The sum of all weighting percentages = 100%  The highest total score generally wins

51 Chapter 251 INFO 420 Cash flow metrics summary MetricUnitsWant it PaybackYearsSmall BreakevenItems soldSmall ROIPercentLarge NPV$Large & positive Scoring modelsNone (numeric)Large

52 Chapter 252 INFO 420 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

53 Chapter 253 INFO 420 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.

54 Chapter 254 INFO 420 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 projectsBalanced Scorecard

55 Chapter 255 INFO 420 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

56 Chapter 256 INFO 420 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

57 Chapter 257 INFO 420 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

58 Chapter 258 INFO 420 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.

59 Chapter 259 INFO 420 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

60 Chapter 260 INFO 420 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

61 Chapter 261 INFO 420 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

62 Chapter 262 INFO 420 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

63 Chapter 263 INFO 420 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 reportingSarbanes-Oxley Act of 2002

64 Chapter 264 INFO 420 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

65 Chapter 265 INFO 420 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

66 Chapter 266 INFO 420 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

67 Chapter 267 INFO 420 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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