Information Technology Project Management

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Information Technology

Project Management

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

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ction 117 of the
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ion 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
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pro
grams or from the
use of the information contained herein.

1

Conceptualizing and Initializing
the Project

Chapter 2

2

Information Technology Project Methodology


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)


3

An IT Project Methodology

Figure 2.1

4

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

5

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


6

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


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





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

Project Management Process Groups

9

Level of Activity and Overlap of Process
Groups Over Time

10


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

Mapping the Process Groups to the
Knowledge Areas

11

Information Technology Project
Management, Sixth Edition

Process Groups and Knowledge Area Mapping

12

Process Groups and Knowledge Area Mapping

13

Process Groups and Knowledge Area Mapping

14

IT Project Management Foundation



Project Management
Process Groups



Initiating processes



Planning processes



Executing processes



Controlling processes



Closing processes



Project Objectives


15


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

IT Project Management Foundation


16

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


17


Process for Developing the Business Case

Figure 2.3

18

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

19

Developing the Business Case


Step 2: Define Measurable Organizational Value (MOV)


The project’s goal
-

m
easure 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

20

The IT Value Chain

Organizational
Strategy
Project’s
Organizational
Measurable
Value
(MOV)
Organizational
Vision & Mission
Drives
Drives
Supports
Supports
Figure 2.4

21

The IT Value Chain

Organizational
Strategy
Project’s
Organizational
Measurable
Value
(MOV)
Organizational
Vision & Mission
Drives
Drives
Supports
Supports
22

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

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


Short version
http://www.youtube.com/watch?v=2yHKWblDK3g


Long version
http://www.youtube.com/watch?v=TuW4oGKzVKc





23

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

a)
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


24

25

Process for Developing the MOV

b)
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


26

Process for Developing the MOV

c)
Develop an Appropriate Metric
-

s
hould 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


27

Process for Developing the MOV

d)
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.


28

Process for Developing the MOV

e)
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

29

Process for Developing the MOV

f)
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

MOV: The
B2C project will
provide a 20% return on
investment and
500 new
customers within
the first
year of its operation

This
project will be successful if _________________.

30

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

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


31

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?

32

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.

33

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


34

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


35

36

Developing the Business Case

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

37

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%

38

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

$
200
,
000

$
85
,
000

$
125
,
000

$
150
,
000

$
200
,
000

Net

Cash

Flow

(
$
200
,
000
)

$
65
,
000

$
75
,
000

$
100
,
000

$
100
,
000

NPV =
-
I
0

+


(Net Cash Flow / (1 + r)
t
)

Where
:

I = Total Cost or Investment of the Project

r = discount rate

t = time period

39

Developing the Business Case


Net Present Value


Time Period

Calculation

Discounted Cash
Flow

Year 0

($200,000)

($200,000)

Year 1

$65,000/(1 + .08)
1

$60,185

Year 2

$75,000/(1 + .08)
2

$64,300

Year 3

$100,000/(1 + .08)
3

$79,383

Year 4

$100,000/(1 + .08)
4

$73,503

Net Present Value (NPV)

$77,371

40

41

Net Present Value Analysis

$943.39

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.


42

Developing the Business Case

43

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


44

Criterion

Weight

Alternative
A

Alternative B

Alternative C

Financial

ROI

15%

2

4

10

Payback

10%

3

5

10

NPV

15%

2

4

10

Organizational

Alignment with
strategic objectives

10%

3

5

8

Likelihood of
achieving project

s
MOV

10%

2

6

9

Project

Availability of skilled
team members

5%

5

5

4

Maintainability

5%

4

6

7

Time to develop

5%

5

7

6

Risk

5%

3

5

5

External

Customer
satisfaction

10%

2

4

9

Increased market
share

10%

2

5

8

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

45

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

46

Business Case Template

Figure 2.5

47

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)

48

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

49

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.

50

Balanced Scorecard Approach

51

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 nonfinancial and
expected financial results

52

MOV and the Organization’s Scorecard

Figure 2.6

53


MOV supports the balanced scorecard approach in terms
of how it supports the perspectives

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



54

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





55

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.



56

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

57