Chapter 4: Project Management and Planning Object-Oriented Systems Analysis and Design Joey F. George, Dinesh Batra, Joseph S. Valacich, Jeffrey A. Hoffer

Chapter Objectives Af ter studying this chapter you should be able to:  Describe methods for identifying/selecting projects  Steps involved in initiating, planning, and executing projects.  Explain the System Service Request (SRR) form, the Baseline Project Plan (BPP) documents, and the Statement of Work (SOW),

Chapter Objectives (Continued)  Describe several methods for feasibility assessment.  Describe tangible vs. intangible benefits and costs, and one-time vs. recurring costs.  Perform cost-benefit analysis by performing net present value (NPV), return on investment (ROI), and breakeven (BE) analysis.  Describe the activities and roles in a structured walkthrough.

Identifying Projects Top-down initiatives: – Senior/top management – Steering/planning committees Bottom-up initiatives: – Managers business units/departments – Development/information systems group

System Service Request (SSR) is a form requesting development or maintenance of an information system. It generally includes: - the requesting person/dept. - the type of request - the urgency level - a problem statement - a service request description - an impact statement - a liaison contact information, - a sponsor name & signature - a preliminary high level estimate of effort & dollars

Each stakeholder group brings their own perspective and motivation to the IS decision/selection Selecting Projects

Managing the Project Initiation & Planning Tasks

Feasibility Assessment Economic feasibility Technical feasibility Operational feasibility Schedule feasibility Legal and contractual feasibility Political feasibility

Economic Feasibility Cost-benefit analysis – identify all the financial benefits and costs associated with a project  Benefits – Tangible and intangible  Costs – Tangible and intangible  Costs – One-time vs. recurring costs

Tangible Benefits

One-time Tangible Costs Recurring Tangible Costs

Financial measures for cost-benefit analysis

Net Present Value Calculates time value of money. Present Value (PV) is the value of future FV dollars n years from now, based on an interest rate of i. PV = FV x 1 / (1+i) n The Discount rate is 1 / (1+i) n Net Present Value (NPV) is the sum of all PV of the benefits minus the costs across all the 1..n years. NPV = sum of PV 1..n (benefit – cost)

Net Present Value Example My project will generate a benefit of $35,000 per year for the next 5 years, with a recurring cost of $20,000. The net cash flow per year is $15,000 For year 3 (taken as an example), the present value of $15,000 at a 10% discount rate is $11, ,000 x 1 / (1 +.10) 3 = 11, The Net Present Value for the project for all 5 years is the sum of the PV n for years 1, 2, 3 (bullet 2), 4 and 5 13, , , , ,314 = 56,862

Return On Investment Return on Investment (ROI) is a measure of profitability ratio. It is the ratio of NPV of benefit to cost ROI = (NPV benefit – NPV cost) / NPV cost

Return On Investment Example Over 5 yrs, my project will generate a PV of benefits of $100,000 (Of course this will have to be computed on a year by year basis) Over the same period, the project will cost me a PV $55,000 (Of course this will have to be computed on a year by year basis) The Return on Investment is: (100,000 – 55,000) / 55,000 =.8181 or 81.81%

Break Even Analysis Break Even Analysis (BEA) measures the time it takes a project to become profitable To calculate a Break Even point:  For each year, keep track of PV benefit and PV cost  Compute net cash flow as (PV benefit – PV cost)  Accumulate the cash flow across the years  The year cash flow become positive, is the break even year

Break Even Analysis Example The break even point is in year 3 It is at (Cash Flow – Cumulative Cash Flow) / Cash Flow (15,303 – 9,139) / 15,303 = The exact Break Even is: 2 years = years Year 0Year 1Year 2Year 3Year 4 Annual PV benefits 049,33748,45747,56946,712 Annual PV cost -42,500-30,141-31,317-32,266-33,047 Annual PV Cash Flow -42,50019,19617,14015,30313,665 Cumulative PV Cash Flow -42,500-23,304-6,1649,13922,904

Technical Feasibility Assessing the organization’s ability to construct the proposed system Takes into account various project risk factors, including:  Project size – the larger the project the riskier it will be  Project structure – stable requirements, management commitment  Development staff – familiarity with hardware/software & business  Client staff – familiarity with the business & development process

Other Feasibility & Risks Operational –Will the system achieve the objectives of the project? Schedule –Can the project be accomplished in a reasonable time frame? Legal/Contractual –Are there contractual, legal or governmental obligations that affect the success of the project? Organizational/Political –Will the project have user and management support? –Will there be resistance? Organizational in-fighting?

Baseline Project Plan (BPP) is a document intended primarily to guide the project development team. The BPP contains: - An introduction to the project - A description of the system - Feasibility assessments - List of management items including: team makeup, management, schedule, communication plan, etc.

The Baseline Project Plan - BPP The BPP contains the following sections: Introduction –Project description, objectives, justification, project scope, resource requirements, constraints, expected delivery. Description –System description, input, tasks, processes, output. –Alternative solutions considered. Feasibility Assessments –A list of the various feasibilities undertaken and the risks. Management Items –Defining team members, communication plan, schedule and resources, standards & procedures, review processes, etc.

Project Scope statement is a separate document and will be included as part of the BPP. It describes the system, and identifies: - the problem/opportunity - the project objectives - the business benefits - the various deliverables - and expected duration

Statement of Work - SOW Another artifact in project planning and initiation is a Statement of Work (SOW) document If system will be developed internally, the SOW will be a short high level summary document prepared for the user management. If system will be developed externally, or using consultants, the SOW will be more formal/detailed. The purpose of an SOW is to  Identify the project goals and objectives  What the project will deliver  The work and phases that will be completed  The start date and completion date  The estimated effort / resources involved

Statement of Work - SOW Statement of Work (SOW) is a “contract” between the IT staff and the customer regarding deliverables and time estimates for a system development project

What is a Structured Walkthrough? A peer-group review of any product created during the system development process Intent: ensure quality, review standards and share knowledge Individuals attending can have the following roles: presenter, reviewer, architect, DBA, etc. The process can be applied to the BPP, system specifications, system architecture, logical and physical designs, program code, test procedures, training manuals and documentation

Recap After studying this chapter we learned to: – Select, initiate, plan, and execute projects. – Understand SSR, SOW, and BPP documents. – Perform feasibility assessment. – Perform cost-benefit analysis. – Perform structured walkthroughs.