PROJECT MANAGEMENT AND OUTSOURCING CHAPTER 12 PROJECT MANAGEMENT AND OUTSOURCING CLASSROOM OPENER Project Advice It is fine to celebrate success but it is more important to heed the lessons of failure. Good judgment is usually the result of experience. And experience is frequently the result of bad judgment. But to learn from the experience of others requires those who have the experience to share the knowledge with those who follow.

CHAPTER TWELVE OVERVIEW SECTION 12.1 – PROJECT MANAGEMENT Project Management Project Management Fundamentals Change Management Fundamentals Risk Management Fundamentals SECTION 12.2 – OUTSOURCING Outsourcing The Outsourcing Phenomenon Outsourcing Options Offshore Outsourcing The Challenges of Outsourcing Future Outsourcing Trends

SECTION 12.1 PROJECT MANAGEMENT

PROJECT MANAGEMENT Project management – the application of knowledge, skills, tools, and techniques to project activities in order to meet or exceed stakeholder needs and expectations from a project Project management software – supports the long-term and day-to-day management and execution of the steps in a project Project management offers a strategic framework for coordinating the numerous activities associated with organizational projects

PROJECT MANAGEMENT Project management interdependent variables These three variables are interdependent You cannot change one without changing the others For example, decreasing a project’s timeframe means either increasing the cost of the project or decreasing the scope of the project to meet the new deadline Increasing a project’s scope means either increasing the project’s timeframe or increasing the project’s cost – or both – to meet the increased scope changes Project management is the science of making intelligent trade-offs among time, cost, and scope

PROJECT MANAGEMENT Common reasons why IT projects fall behind schedule or fail A recent survey concluded that the failure rate of IT projects is much higher in organizations that do not exercise disciplined project management A successful project is typically on time, within budget, meets the business’s requirements, and fulfills the customer’s needs The Hackett Group analyzed its client database and discovered: 3 in 10 projects failed 21 percent of companies state that they cannot adjust rapidly to market changes 1 in 4 validate a business case for an IT project after its completion

PROJECT MANAGEMENT Expected growth for project management software Ask your students how many of them are currently involved in projects or are project mangers Ask them which types of technologies they use to manage projects

PROJECT MANAGEMENT FUNDAMENTALS Project – a temporary endeavor undertaken to create a unique product or service Project management – the application of knowledge, skills, tools, and techniques to project activities in order to meet or exceed stakeholder needs and expectations Have you ever worked on a project? What worked well What went wrong What could you have done to ensure the success of the project? Project management

PROJECT MANAGEMENT FUNDAMENTALS Project deliverable – any measurable, tangible, verifiable outcome, result, or item that is produced to complete a project or part of a project Project milestone – represents key dates when a certain group of activities must be performed Project manager – an individual who is an expert in project planning and management, defines and develops the project plan, and tracks the plan to ensure all key project milestones are completed on time What is the relationship between project deliverables, project milestones, and project managers? Project deliverables are usually project milestones Project milestones and project deliverables defined and monitored by the project manager

PROJECT MANAGEMENT FUNDAMENTALS Project management role Project managers must take all of the activities above and ensure they flow smoothly to develop and deliver a successful project Which activity listed above is the most important? Which activity listed above is the least important?

Choosing Strategic Projects Organizations must determine which projects to pursue Three common techniques for selecting projects Focus on organizational goals Categorize projects Perform a financial analysis Given the following list of projects, how would you prioritize them? Implementation of a(n): Accounting system Marketing system Sales system Logistics system Knowledge management system Each of the above projects would need to be prioritized based on the business goals, which could change for each business

Choosing Strategic Projects Techniques for choosing strategic projects Focus on organizational goals Categorize projects Perform a financial analysis Which technique is the most important when choosing strategic projects? Techniques for Choosing Strategic Projects Focus on organizational goals—Managers are finding tremendous value in choosing projects that align with the organization’s goals. Projects that address organizational goals tend to have a higher success rate since they are important to the entire organization. Categorize projects—There are various categories that an organization can group projects into to determine a project’s priority. One type of categorization includes problem, opportunity, and directives. Problems are undesirable situations that prevent an organization from achieving its goals. Opportunities are chances to improve the organization. Directives are new requirements imposed by management, government, or some other external influence. It is often easier to obtain approval for projects that address problems or directives because the organization must respond to these categories to avoid financial losses. Perform a financial analysis—A number of different financial analysis techniques can be performed to help determine a project’s priority. A few of these include net present value, return on investment, and payback analysis. These financial analysis techniques help determine the organization’s financial expectations for the project

Setting The Project Scope Project scope – defines the work that must be completed to deliver a product with the specified features and functions, and typically includes: Project product Project objectives Project deliverables Project exclusions Project product – a description of the characteristics the product or service has undertaken Project objectives – quantifiable criteria that must be met for the project to be considered a success Project deliverables – any measurable, tangible, verifiable outcome, result, or item that is produced to complete a project or part of a project Project exclusions – products, services, or processes that are not specifically a part of the project Define the scope to build a basic calculator The calculator must have numbers between 0 and 9 and be able to add, multiply, divide, and subtract Notice that the scope is the 30,000 foot view – it doesn’t define the style, color, layout, materials, etc.

Setting The Project Scope SMART criteria are useful reminders on how to ensure that the project has created understandable and measurable objectives Ask your students what happens when objectives are not SMART If an objective is not specific then it is open to interpretation If an objective is not measurable then there is no way to determine if the project is on track If an objective is not agreed upon then chances are high the project will fail If an objective is not realistic then chances are high that the project will fail If an objective does not include a time frame then there is no way to determine if the project is on track Why is the following not SMART? I will work hard this semester to achieve my goals? Does not state what the goals are Does not state how to measure working hard Might not be realistic depending on the goals Does have a time frame of a semester

Managing Resources and Maintaining the Project Plan Project plan – a formal, approved document that manages and controls project execution A well-defined project plan should be: Easy to understand and read Communicated to all key participants Appropriate to the project’s size, complexity, and criticality Prepared by the team, rather than by the individual project manager A project plan should be prepared by the team, rather than by the individual project manager Ask your students why this is important How would they feel if a project manager handed them a plan? Would they work hard to meet the deadlines? Probably not because the timeframes required to finish the task were forced upon them. They did not participate in the initial estimates and do not feel any ownership on the project. How would they feel about a project plan that they created along with the project manger? Would they work hard to meet the deadline? Probably, because they defined the timeframes they required to finish the tasks.

Managing Resources and Maintaining the Project Plan Two primary diagrams used in project planning include PERT and Gantt charts PERT (Program Evaluation and Review Technique) chart – is a graphical network model that depicts a project’s tasks and the relationships between those tasks (Dependencies and Critical paths are found in PERT charts) Gantt chart – a simple bar chart that depicts project tasks against a calendar Dependency – a logical relationship between the project tasks, or between a project task and a milestone Critical path – a path from the start to the finish that passes through all the tasks that are critical to completing the project in the shortest amount of time Why do you need to create dependencies? Dependencies inform the project manager of tasks associated with or affected by another task

Managing Resources and Maintaining the Project Plan

Managing Resources and Maintaining the Project Plan PERT Chart EXPERT – PERT Chart Example The red boxes denote the critical path Why is the critical path important? It informs a project manager of the shortest timeframe the project could possibly be completed in

Managing Resources and Maintaining the Project Plan MS Project – Gantt Chart Example This Gantt chart displays simple start and finish dates and resource names A Gantt chart is one of the most common tools used by project managers MS Project offers many additional tracking components such as Actual Start date, Budget, and Percent Complete When reviewing the Gantt chart can you point out the three interdependent project management tasks? Resources Timeframe Scope - tasks

CHANGE MANAGEMENT FUNDAMENTALS Good project managers understand the fundamentals of project management and how to effectively deal with change management and risk management Ask your students to provide some examples of changes they have dealt with in their professional lives Change at your school Change to your major Change at your job How hard was it to deal with the change? What tools and resources did you use to deal with the change? What could you have done different to make dealing with the change easier? Would a project plan have helped you deal with the change?

CHANGE MANAGEMENT FUNDAMENTALS Change management – a set of techniques that aid in evolution, composition, and policy management of the design and implementation of a system Change management system – a collection of procedures to document a change request and define the steps necessary to consider the change based on the expected impact of the change Change control board (CCB) – responsible for approving or rejecting all change requests Ask your students to explain techniques they use to help manage change

CHANGE MANAGEMENT FUNDAMENTALS Ask your students to define additional reasons why change occurs A resources quits or becomes ill Company changes strategic direction Leadership changes Technology changes Environment changes Regulations or laws change

Preparing for Change Three important guidelines fore effectively dealing with change management Institute change management polices Anticipate change Seek change What can you do to anticipate and deal with change? Change control board Monitor change Project plan Three Important Guidelines for Effectively Dealing with Change Management Institute change management polices - Create clearly defined policies and procedures that must be followed each time a request for change is received Anticipate change - View change as an opportunity and embrace it Seek change - Every 6 to 12 months look for changes that may be windows of opportunity. Review successes and failures to determine if there are any opportunities for innovation

RISK MANAGEMENT FUNDAMENTALS Project risk – an uncertain event or condition that, if it occurs, has a positive or negative effect on a project objective Risk management – the process of proactive and ongoing identification, analysis, and response to risk factors What types of risks do you face today? Bad grades Running out of money Losing a job Running out of time What can you do to mitigate these risks? Elements of Risk Management Risk identification - Determining which risks might affect the project and documenting their characteristics Qualitative risk analysis - Performing a qualitative analysis of risks and conditions to prioritize their effects on project objectives Quantitative risk analysis - Measuring the probability and consequences of risks as well as estimating their implications for the project objectives Risk response planning - Developing procedures and techniques to enhance opportunities and reduce threats to the project’s objectives

RISK MANAGEMENT FUNDAMENTALS CLASSROOM EXERCISE Managing Risk Break your students into groups and ask them to organize the common project risk factors from greatest risk to least risk Have your students present their listing to the entire class This makes for a great class debate

RISK MANAGEMENT FUNDAMENTALS

Mitigating Risk Actions to improve risk management capabilities Promote project leadership skills Learn from previous experience Share knowledge Create a project management culture Define two additional actions to improve risk management capabilities Actions to Improve Risk Management Capabilities Promote project leadership skills—Hire individuals with strong project management and project leadership skills as well as business management skills. These individuals can be extremely helpful in advisory and steering committee roles as well as coaching roles. Learn from previous experience—Over many years of collective experiences, organizations have encountered hundreds of large IT projects. Document and revisit development methodologies, software tools, and software development best practices in order to share this vital information across the organization. Share knowledge—Working in team or group environments tends to yield the most successful projects since individuals can share their unique learning experiences. Create a project management culture—Orient people from day one on the importance of project management, change management, and risk management. Be sure to measure and reward project management skills and promote individuals based on successful projects.

Successful Project Management Strategies Top five successful project management strategies Define project success criteria Develop a solid project plan Divide and conquer Plan for change Manage project risk Organize the top five successful project management strategies from greatest factor for success to least factor for success Be sure to justify why This makes for an excellent class debate Top Five Successful Project Management Strategies 1. Define project success criteria. At the beginning of the project, make sure the stakeholders share a common understanding of how they will determine whether the project is successful. Too often, meeting a predetermined schedule is the only apparent success factor, but there are certainly others. Some examples are increasing market share, reaching a specified sales volume or revenue, achieving specific customer satisfaction measures, retiring a high maintenance legacy system, and achieving a particular transaction processing volume and correctness. 2. Develop a solid project plan. The hard part of developing a plan is the thinking, negotiating, balancing, and communication project managers will have to do to develop a solid and realistic plan. The time they spend analyzing what it will take to solve the business problem will reduce the number of changes later in the project. 3. Divide and conquer. Break all large tasks into multiple small tasks to provide more accurate estimates, reveal hidden work activities, and allow for more accurate, fine-grained status tracking. 4. Plan for change. Things never go precisely as planned on a project; therefore, the budget and schedule should include some contingency buffers at the end of major phases to accommodate change. 5. Manage project risk. Failure to identify and control risks will allow the risks to control the project. Be sure to spend significant time during project planning to brainstorm possible risk factors, evaluate their potential threat, and determine the best way to mitigate or prevent them.

OUTSOURCING SECTION 12.2 CLASSROOM OPENER GREAT BUSINESS DECISIONS – Rupert Murdoch Builds a Printing Plant without a Union Rupert Murdoch built a new printing plant in the East of London that, for the first time, did not require union labor. On January 28, 1986, four million newspapers were produced at the plant. Thousands of picketers, from the print unions and others, attempted to close the plant and end nonunionized printing. The violent protests raged throughout most of the 1990s. Eventually, Murdoch paid the union $96 million to disappear and was left with a highly efficient and effective printing plant, which substantially reduced costs. Valuations of his company soared from $300 million to $1 billion. Murdoch’s confrontation with the union is a defining moment in his career and in the history of British unions. Murdoch’s win over the unions changed the face of the British newspaper industry and catapulted his empire. Regardless of what you are outsourcing, where you are outsourcing, or how you are outsourcing, there are advantages and disadvantages.

OUTSOURCING Outsourcing – an arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house This section focuses on businesses’ need to undertake every effort to re-think and re-adopt new processes This is an interesting lecture given by Tom Friedman at MIT on his book The World is Flat and the power of outsourcing http://mitworld.mit.edu/video/266/ CLASSROOM OPENER Outsourcing Gone Wrong Story 1: "The Customer is Never Right" We supplied the contract house with everything they needed to get the job done. The first thing they did was tell us how our tools and equipment were out-dated, and besides we were using them incorrectly. (Due to legacy issues and budget restrictions, constant hardware and software upgrades are not a way of life here.) The next thing they did was re-format all of the code on the project, including code outside the scope of their portion, to meet their own formatting preferences. Any request for information was like pulling teeth. They made me and everyone on my team feel like we were imposing anytime we asked them about the project (usually technical questions.) The most appalling thing is that towards the end of the project, they debated us on how a portion of our system worked!!! It was very insulting to have them infer that they understood our system better than we did. They have been blacklisted from our entire corporation. Story 2: "The Underbid" The contract house gave us a very competitive fixed-bid on a project. This raised some concerns, but not enough to rule them out - money talks, and we were trying to spend as little as possible. In retrospect, going with them was a big mistake, but hindsight is always 20-20, right? As they got further into the project, the scope of the project "grew". Why? Because they did not give the project's complexity any credit when they bid. We were not adding features or functionality - they were just beginning to realize the scope of the work. It was clear their sales force had over-committed their engineering staff in a terrible way. Their engineers resented us and their own management, and it showed in their dealings with us. Not even halfway through the project, they admitted they had underbid - now they needed more money to complete the project. (Ironic, since one of the primary factors in choosing them was the attractive pricetag.) The project was completed by our own staff in-house once we decided we'd cut our losses and sever our relationship. I don't know if we would outsource again. I feel like we bought software development services from a used-car salesman.

OUTSOURCING Insourcing (in-house-development) – a common approach using the professional expertise within an organization to develop and maintain the organization's information technology systems Discuss the Allied Office Products example in the text Insourcing has been instrumental in creating a viable supply of IT professionals and in fact in creating a better quality workforce combining both technical and business skills

OUTSOURCING In some cases, the entire IT department is outsourced, including planning and business analysis as well as the installation, management, and servicing of the network and workstations This is an interesting clip on outsourcing and tutoring kids in the United States http://www.npr.org/templates/story/story.php?storyId=4497026 

OUTSOURCING Reasons companies outsource Tom Friedman on the Daily Show http://www.comedycentral.com/motherload/index.jhtml?ml_video=70490 (takes a while to load). 

OUTSOURCING Factors driving outsourcing growth include: Core competencies Financial savings Rapid growth Industry changes The Internet Globalization CLASSROOM EXERCISE The Outsourcing Debate Print and cut out the below companies. Assign the companies to your students. Each company has an argument for or against outsourcing. Have your student’s debate for or against outsourcing. Team size can vary.

THE OUTSOURCING PHENOMENON According to research firm IDC, the worldwide IT outsourcing market will reach $230 billion by 2009 According to PricewaterhouseCoopers “Businesses that outsource are growing faster, larger, and more profitable than those that do not” Best Buy is the number one U.S. specialty retailer for consumer electronics, personal computers, entertainment software, and appliances Best Buy outsourced its enterprise systems to Accenture The results of this outsourcing arrangement included a 20 percent increase in revenue which translated into a $25 million profit

THE OUTSOURCING PHENOMENON Most organizations outsource their noncore business functions, such as payroll and IT For each industry, determine the benefits and challenges of outsourcing CLASSROOM EXERCISE Outsourcing Issues There are many issues and obstacles to outsourcing such as time zone differences and accents. Break your students into groups and ask them to research the Internet to find examples of companies that have experiences issues with outsourcing. Ask your students to present their findings to the class and offer a small prize to the team that finds the most outrageous example. There is also a great video by Thomas Friedman on his famous book The World is Flat. The video can be found at www.mit.com. The video lasts around 40 minutes.

THE OUTSOURCING PHENOMENON Outsourcing growth drivers Globalization The Internet Growing economy and low unemployment rate Technology Deregulation Globalization – As markets open worldwide, competition increases The Internet – Barriers to entry are reduced by the Internet, such as a bookstore without an actual store (Amazon.com) Growing economy and low unemployment rate – Building a competitive workforce is harder and more expensive Technology – Technology is advancing at such an accelerated rate that companies often lack the resources, workforce, or expertise to keep up Deregulation – As private industries deregulate (telecommunications, energy) markets open and competition increases

Outsourcing Benefits Outsourcing benefits include: Increased quality and efficiency Reduced operating expenses Outsourcing non-core processes allows focus on core competencies Reduced exposure to risk Service providers economies of scale, expertise, and best practices Access to advanced technologies Increased flexibility Avoid costly outlay of capital funds Reduced headcount and associated overhead expense Reduced frustrations and expense related to hiring/retaining employees Reduced time to market for products or services Are there any additional outsourcing benefits not mentioned in the text?

OUTSOURCING OPTIONS Onshore outsourcing – engaging another company within the same country for services Nearshore outsourcing – contracting an outsourcing arrangement with a company in a nearby country Offshore outsourcing – using organizations from developing countries to write code and develop systems Discuss the three different types of outsourcing options and determine which one would be ideal for each of the following: Production of a new cereal Development of a new CRM system Development and maintenance of a KM system Production of a new sneaker Deployment of a logistics system

OUTSOURCING OPTIONS Big selling point for offshore outsourcing “inexpensive good work” Does outsourcing always guarantee inexpensive good work? CLASSROOM EXERCISE Categories In a group research the Internet and find examples of outsourcing arrangements that have gone bad Was the arrangement onshore, nearshore, or offshore If offshore, was the arrangement a leader, up-and-comer or a rookie?

OFFSHORE OUTSOURCING Three categories of outsourcing countries: leaders, up-and-comers, rookies The Leaders are displayed in brown The Up-and-Comers are displayed in green The rookies are displayed in yellow

THE CHALLENGES OF OUTSOURCING Outsourcing challenges include Contract length Difficulties in getting out of a contract Problems in foreseeing future needs Problems in reforming an internal IT department after the contract is finished Competitive edge Confidentiality Scope definition Contract length – Most outsourcing contracts span several years and cause the issues discussed above Competitive edge – Effective and innovative use of IT can be lost when using an outsourcing service provider Confidentiality – Confidential information might be breached by an outsourcing service provider, especially one that provides services to competitors Scope definition – Scope creep is a common problem with outsourcing agreements

FUTURE OUTSOURCING TRENDS Outsourcing is becoming less of a cost-saving strategy and more an overall context for business Outsourcing is approaching commodity status Companies should look for value-based pricing rather than the lowest possible price Multisourcing – a combination of professional services, mission-critical support, remote management, and hosting services that are offered to customers How will outsourcing affect your career? Your job could be outsourced Competition for your job will be higher Your salary might decrease because your job could be outsourced and performed for a cheaper rate