Chapter 2: Project Initiation, Project Management & Requirements Determination

Key Ideas
When do projects begin? When someone sees an opportunity to create business value from using information technology.

Key Ideas
New systems usually originate from some business need. Understanding technology is secondary to understanding the business.

Key Ideas
Feasibility analysis is used to aid in the decision of whether or not to proceed with the project.
Technical feasibility Economic feasibility Organizational pros and cons

Key Ideas
The project sponsor is a key person proposing the new system.
Who should be the project sponsor?

The approval committee reviews many proposals. They decide which ones to commit to developing.

IDENTIFYING BUSINESS VALUE

System Request
Lists key elements of the project
Project name Project sponsor Business need Functionality Expected value Special issues or constraints

Business Need
Describes why the system should be built Why the project should be funded Should be clear and concise Probably not completely defined

Functionality
What the system will do High level explanation to the approval committee Tell about the features and capabilities

Expected Value
Tangible value
A quantifiable value

Intangible value
Intuitive believe why the system will help the company

Expected Value
Costs Tangible * * * * * * * * * * * * Benefits

Intangible

Special Issues
Identify special issues or constraints
Budget constraints Deadline Legal requirements

Elements of a System Request

Project sponsor
Primary point of contact for the project

Business need
Reason prompting the project

Business requirements
Business capabilities the system will need to have

Business value
Benefits the organization can expect from the project

Special issues
Anything else that should be considered

FEASIBILITY ANALYSIS
A detailed business case

Feasibility Analysis
Detailing Expected Costs and Benefits
Technical feasibility
Can we build it?

Economic feasibility
Should we build it?

Organizational feasibility
If we build it, will they come?

Technical Feasibility: Can We Build It?

Familiarity with application
Knowledge of business domain Need to understand improvements Need to recognize pitfalls and bad ideas

Familiarity with technology

Is technology new to this organization? Is this a brand new technology? Extension of existing firm technologies

Technical Feasibility: Can We Build It?

Project size
Number of people, time, and features

Compatibility with existing systems

Systems are not built in a vacuum Needs to integrate with current systems and data

Economic Feasibility Should We Build It?

Identify costs
Development costs Annual operational costs

Identify Benefits
Tangible (quantifiable) benefits

Identify Intangible costs and benefit

Economic Feasibility
Assign values to costs & benefits
Hard to do! Need to rely on experts Include intangible costs and benefits Example:
"Improve customer service" Decrease complaints by 10% over 3 yrs $200,000 spent on support staff/HW

Cost-Benefit Analysis Cash Flow

Project costs and benefits over several years (3 5) Use normal growth rates for sales etc. Total added to determine Overall Benefits =
Total Benefits Total Costs

Higher number is better

Some Formulas
Present Value (PV)
The amount of an investment today compared to the same amount n years in the future PV = Amount (1 + Interest Rate)n

Some Formulas
Net Present Value (NPV) NPV = PV Benefits PV Costs

Some Formulas
Return on Investment (ROI)
Amount of revenue or savings resulting form an investment ROI = Total Benefits Total Costs Total Costs

Some Formulas
Break Even Point
Point in time when costs equal the value it has delivered Yearly NPV* Cumulative NPV Yearly* NPV

* Use the yearly NPV amount from the first year in which
project has positive cash flow

ROI Calculation

3,204,752  2,575,331 2,575,331 ! 0.2444

NPV Calculation

3,204,752  2,575,331

! 629,421

Break-Even Point

Organizational Feasibility
If we build it, will they come?

Strategic Alignment
How well does the project match up with the business strategy?

Organizational Feasibility
If we build it, will they come?

Stakeholder analysis considers

Project champion(s) Organizational management System users Anybody affected by the change

Stakeholder analysis considers

Project champion(s)
High-level non-IS executive Shepherds project to completion It's good to have more than one

Organizational management
Need this support to sell system to organization

System users
In the loop so end system meets needs

Organizational Feasibility Political Considerations

Everyone tends to resist change
New system may change the power structure of organization

PROJECT SELECTION

Project Selection
Project portfolio management
A process that optimizes project selection and sequencing in order to best support business goals Business goals are expressed in terms of
Quantitative economic measures Business strategy goals IT strategy goals

Once selected, projects enter the project management process

How Not to Select a Project

First in, first out Political clout of project inventor Squeaky wheel getting the grease Any other method that does not involve a deliberate course of action analysis
A recent analysis found that between 2% and 15% of projects taken on by IT departments are not strategic to the business.