Information Technology Project Management – Third Edition

By Jack T. Marchewka Northern Illinois University
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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 Traditional (e.g., Waterfall)

Can be

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. project team What is the scope. how much  The project’s scope. and quality objectives are defined in detail 6 . technologies. budget. tools. value to the org How long. plan sponsor. resources. schedule.

testing plan. change management plan. risk plan. communication plan. etc. quality management plan.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.  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 .

project leader.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 Identify strengths and opportunities for improvement to help maximize each person’s potential  Evaluation of team members by project manager    Outside evaluation of project. and team members Evaluate project’s organizational value .

services or results of the project or phase Regularly measuring and monitoring progress to ensure that the project objectives are met Formalizing acceptance of the project or phase.Project Management Process Groups    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 Coordinating people and resources to carry out the various plans and produce the products. closing out contracts. documenting lessons learned  Executing processes   Monitoring and controlling processes   Closing processes  9 .

Level of Activity and Overlap of Process Groups Over Time 10 .

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® Guide Note that there are activities from each knowledge area under the planning and monitoring and controlling process groups Information Technology 11 .

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     Project Objectives   Initiating processes Planning processes Executing processes Controlling processes Closing processes 15 .

IT Project Management Foundation   Tools . reporting relationships of the PM and team members.e. Computer Aided Software Engineering (CASE) Infrastructure  Organizational Infrastructure   How projects are supported and managed How resources are allocated. 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 16 .g. Microsoft Project ®.

costs.The Business Case   Definition of Business Case: an analysis of the organizational value. and risks of the project plan. 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 17 . Attributes of a Good Business Case       Details all possible impacts. benefits. costs. feasibility.

Process for Developing the Business Case Figure 2.3 18 .

Developing the Business Case   Step 1: Select the Core Team Advantages:       Credibility .include critics on the team 19 .all stakeholders and relevant departments involved Alignment with organizational goals Access to the real costs Ownership Agreement Bridge building .

measure 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 .Developing the Business Case Step 2: Define Measurable Organizational Value (MOV)  The project’s goal .

4 21 .The IT Value Chain Organizational Vision & Mission Drives Supports Organizational Strategy Drives Supports Project’s Organizational Measurable Value (MOV) Figure 2.

The IT Value Chain prevent customers from leaving or Organizational Vision & Mission switching to a competitor Drives Supports develop tighter Organizational linkages with Strategy customers Drives Supports Project’s Develop a B2B Organizational application to allow Measurable customers Valueto do business on-line (MOV) 22 .

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 http://www.com/watch?v=E8zejVPn30&feature=fvwp&NR=1 23 .youtube.

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 .

¥ ) 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 .should it increase or decrease? Company needs a way to determine if project is a success and if their investment paid off Money ($.Process for Developing the MOV c)     Develop an Appropriate Metric . £.

500 new customers third year.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. 28 . 30% return and 1. 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.

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 .

000 new customers 30% return on investment 1.Process for Developing the MOV f)    Summarize the MOV in a clear. MOV: The B2C project will provide a 20% return on investment and 500 new customers within the first year of its operation Year 1 2 3 MOV 20% return on investment 500 new customers 25% return on investment 1. 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 This project will be successful if _________________.500 new customers 30 .

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 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  Possible Alternative Strategies      .

will business be disrupted Other feasibilities .legal/ethical issues considered Identification .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.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?  Risk    32 . vendor support the solution Organizational feasibility – will solution be accepted by staff.

maintaining and supporting the application over its useful life    Direct or Up-front costs – initial cost of hardware. telecomm equipment. downtime cost. development. installation.Developing the Business Case  Step 5: Define Total Cost of Ownership  Total cost of acquiring. developing. supplies. upgrades. QA. software. post-implementation reviews. auditing equipment. etc. maintenance. etc. Ongoing Costs – salaries. 33 . training. Indirect Costs – initial loss of productivity. outside consultants.

duplication. time to complete a business process Getting timely and accurate information New products/services.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 Reduction in errors. etc An EDI application enables faster collection of A/R. faster or more reliable service. benefit which can be valued in terms of investing that money 34 . etc Try to quantify them by linking them to tangible benefits that can be linked to efficiency gains   Improving accuracy and efficiency   Improving decision-making   Improving customer service   Intangible benefits   Corporate wide directory on an intranet improves communications and reduces paper documents. printing.

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 = 5 years 35 .000 $20.

Developing the Business Case 36 .

5 hours at $9.50 etc. grip. etc.00: Breakeven Point = Initial Investment / Net Profit Margin = $100.00 = 20. you have a profit margin of $5. insurance.00 and it costs $25.00 to make. shaft. utilities. taxes.) Total $25.Developing the Business Case  Break Even Materials (putter head.) Labor (0.000 / $5.50 Overhead (rent.00 $ 4.000 units 37 .00/hr) $12. $ 8.00 If you sell a golf putter for $30.

000) $100.000 = 15% 38 .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.$100.000 .

000) Year 1 $150.000 $85.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.000 Year 4 $300.000 $75.000 $200.000 Year 3 $250.000 $125.4: support and maintenance  When comparing alternatives.000 $100.000 ($200.000 $100. money and resources is worth the wait Outflows – Year 0: cost to build.000 Year 2 $200.000 NPV = -I0 +  (Net Cash Flow / (1 + r)t) Where: I = Total Cost or Investment of the Project r = discount rate t = time period 39 . Years 1.000 $150. higher NPV is more desirable  Year 0 Total Cash Inflows Total Cash Outflows Net Cash Flow $0 $200.000 $65.

371 Net Present Value (NPV) 40 .Developing the Business Case  Net Present Value Time Period Year 0 Year 1 Year 2 Calculation ($200.08)4 $79.383 $73.000/(1 + .503 $77.000/(1 + .000) $65.300 Year 3 Year 4 $100.08)3 $100.000/(1 + .000) $60.185 $64.08)2 Discounted Cash Flow ($200.000/(1 + .08)1 $75.

Net Present Value Analysis $943.39 41 .

42 .e.  Thus. buying bonds. i. the yield on the investment. the IRR should be compared to any alternate costs of capital including an appropriate risk premium. even putting the money in a bank account). which indicates value or magnitude.Developing the Business Case  Internal Rate of Return     The discount rate that makes the net present value of investment zero.. as opposed to NPV. It is an indicator of the efficiency of an 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. The IRR is the annualized effective compounded return rate which can be earned on the invested capital.

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 .

higher scores for risk imply lower levels of risk .65 6 7 5 4 5 4.50 45 External Total Score Notes: Risk scores have a reverse scale – i.e.85 7 6 5 9 8 8..Criterion Weight Alternative A Alternative B Alternative C ROI Financial Payback NPV Alignment with strategic objectives Organizational 15% 10% 15% 10% 10% 5% 2 3 2 3 2 5 4 5 4 5 6 5 10 10 10 8 9 4 Likelihood of achieving project’s MOV Availability of skilled team members Project Maintainability Time to develop Risk Customer satisfaction Increased market share 5% 5% 5% 10% 10% 100% 4 5 3 2 2 2.

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 .

dept. technological complexity. enterprise) 48 .Project Selection and Approval  The IT Project Selection Process    Organization needs a balance of projects in its project portfolio with varying degrees of risk. what a company wants to do is not always feasible Committee decides which projects to approve and project manager is assigned IT project must map to organization goals IT project must provide verifiable MOV Selection should be based on diverse measures such as    The Project Selection Decision    tangible and intangible costs and benefits various levels throughout the organization (individual. size and strategic intent. Due to limited resources.

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  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.

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 nonfinanacial and expected financial results 52 .

6 53 .MOV and the Organization’s Scorecard  MOV supports the balanced scorecard approach in terms of how it supports the perspectives Figure 2.

portfolio management. or doing something illegal For many organizations. asset and resource management (i. IT investment/project approval).IT Governance   Focuses on the processes that coordinate and control an organization’s resources. application life-cycle management.e. actions. and security management 54 .. IT governance started with project management. acting unethically. and decisions to help prevent people from making bad investments. but today it also includes change management.

Helps align IT with organizational objectives and increase shared accountability. so it is important to compare them in terms of their business value as well as their costs and potential risks Many organizations rely on a committee of business and IT leaders to determine how the IT budget will be spent.IT Governance Best Practices  Identify strategic value  Organizations are often faced with a stack of potential IT projects.  Top business managers should set IT priorities   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 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  Monitor projects regularly  55 .

  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.  Information collected about projects across the organization provides a means to study the organization’s portfolio of IT projects.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. 56 .

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 intraorganizational 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 57 resources .Benefits of a PMO        Points out minefields in project processes.

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