SW Project Management IT Project Conceptualization

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SW Project ManagementIT Project Conceptualization

• INFO 420
• Glenn Booker

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Project conceptualizing and initiation

• Now well expand on the project life cycle, and
  examine its first phase in detail
• The IT project methodology used throughout the
  text is fairly typical as a foundation, but every
  project tailors its base methodology to meet its
  own needs

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Project conceptualizing and initiation

• This chapter focuses on defining the goal for a
  project, and several objectives to help meet that
  goal
• Then well expand on the business case concept,
  including MOV and feasibility
• The higher level governing structure to choose IT
  projects will be discussed

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IT Project Methodology (ITPM)

• A project methodology provides the overall
  strategy for managing and controlling them
• This describes the overall game plan
• The methodology recommends phases, deliverables,
  processes, tools to support projects but your
  projects needs may differ!
• Sharing a common foundation also makes CMMI
  level 3 happy

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ITPM

• Using a common methodology also helps managers
  decide which projects should be supported, and
  makes cross-project measurements feasible
• The ITPM is flexible to accommodate any SDLC, and
  may be further adjusted for the skill level of
  the project team, project size, application type,
  etc.

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ITPM phases and deliverables

• Conceptualize and initialize project delivers
  the business case
• Develop project plan and charter delivers them
• Execute control project follows an SDLC, and
  delivers the completed system
• Close project delivers a final project report
  and presentation
• Evaluate project delivers a project evaluation
  and lessons learned

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Phase 1

• Conceptualize and initialize project defines the
  goal of the project, and how it will add value to
  the organization
• Do so by comparing project to possible
  alternatives, and making a cost/benefit,
  feasibility, and risk analysis to prove which
  choice is best
• This produces the projects business case

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Phase 2

• Develop project plan and charter
• The project charter defines the project
  organization, and how the project will be
  implemented
• It clarifies the project goal in terms of scope,
  schedule, budget, and quality standards
• The project plan answers the who/what/
  where/when/why/how questions

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Phase 2

• The business case (phase 1) and project plan
  (phase 2) are kept separate
• The business case focuses on how well the project
  matches the business strategy
• Should the project be done at all?
• The project plan focuses on how the project will
  be achieved more tactical concerns
• How will we make the project happen?

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Phase 3

• Execute control project carries out the project
  plan
• Project manager must make sure the resources and
  infrastructure are available to the project team
• People, technical infrastructure
• Development methods and tools

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Phase 3

• Also need to provide
• Work environment
• Controls over scope, schedule, budget, and
  quality
• Human resources system

• And use plans for
• Risk management
• Procurement
• Quality management
• Change management
• Communications
• Testing
• Implementation

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Phase 4

• Close project transfers control from the
  development team to the client or sponsor
• Team should make a final project report and
  presentation to document everything was
  accomplished
• Allows final project cost and schedule to be
  measured
• Archive project files, release resources

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Phase 5

• Evaluate project success, often called a
  post-mortem review
• Project manager and team review what worked, what
  didnt
• Record lessons learned, look for broader best
  practices
• Can review individual performance

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Phase 5 - Third party review

• Can get third party review of the project
• Will project meet its goal?
• How about scope, schedule, budget, and quality
  objectives?
• Did we deliver everything promised?
• Is the client happy?

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Phase 5 - Third party review

• Did we follow our own processes and methodology?
• How did we handle risks and problems?
• How well did we work with the sponsor?
• Did we behave ethically and professionally?
• Did the project provide value to the
  organization? (if you can tell yet)

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ITPM Foundation

• The ITPM is based on having five sets of
  resources available to the team
• PM process groups
• Objectives for this project
• Tools
• Infrastructure
• And the PMBOK knowledge areas

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PM process groups

• These groups of processes are the activities
  needed to carry out the project life cycle
• Initiating processes
• Planning processes
• Executing processes
• Controlling processes
• Closing processes

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Objectives for this project

• The objectives for this project, taken together,
  ensure the project goal is met
• The objectives typically address four areas
• Scope
• Schedule
• Budget
• Quality

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Tools

• Tools support the project processes, and creation
  of the product itself
• Could include estimation tools, requirements
  management tools, cost/schedule tools, quality
  tools, etc.
• The development environment (IDE, CASE tools) are
  in this category too
• (Yes,some consider this part of infrastructure)

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Infrastructure

• This includes three categories of infrastructure
• Organizational define project organization,
  roles, reporting structure
• Project the physical environment, processes,
  and controls
• Technical general tools email, Office suite,
  Internet access, PM software, etc.

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PMBOK knowledge areas

• The lessons learned from past projects feeds into
  the PMBOK knowledge areas,
• This can refine your project methodology to suit
  your needs, culture, and environment

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Business case

• Now well look in detail at how to develop a
  business case for a project
• What reasons might be used to justify an IT
  project?
• Reduce cost, create new product, improve customer
  service, processes, reporting, communication,
  decision making, create stronger connection to
  suppliers or customers, meet legal requirements

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Business case process

• The process for preparing a business case has
  about eight steps
• Select core team
• Define MOV
• Identify alternatives
• Assess feasibility

• Assess TCO
• Assess TBO
• Analyze alternatives
• Propose support recommendation

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Select core team

• The team to develop the business case should come
  from multiple perspectives business, technical,
  management, etc.
• Provides a better balanced viewpoint
• Enhances credibility, gets buy-in across org.
• Better alignment with organizational goals
• Better access to detailed supporting data

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Define MOV

• MOV is Measurable Organizational Value
• The MOV must be some characteristics that can be
  objectively measured, to prove the project
  provided real value to the org
• MOV proves success or failure of the project
• All key stakeholders must agree on MOV
• MOV must also support the orgs strategy

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Define MOV

• There are six steps to defining MOV(Yes, all
  within step 2 of writing a business case)
• Identify desired area of impact
• Identify desired value of the project
• Develop an appropriate metric
• Set a time frame for achieving MOV
• Get agreement from stakeholders
• Summarize MOV in a statement

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Identify desired area of impact

• Where will this project affect the organization?
  (could be more than one)
• Strategic new markets, products services
• Customer better products services, better
  loyalty, higher satisfaction
• Financial increased profits, profit margins
• Operational lower costs, higher efficiency
• Social education, health, safety, environment

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Identify desired value of the project

• Ok, now within each area of impact, what will the
  project do to provide value?
• Will it help you do something
• Better? (e.g. quality, effectiveness)
• Faster? (speed, efficiency, cycle time)
• Cheaper? (reduce cost!)
• Or do more in some way? (new markets, products)

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Develop an appropriate metric

• So how will you measure that value?
• - generate x in new sales
• Percentage - reaching at least a certain number
  (customer satisfaction gt 95)
• Numbers have at least y new customers
• Dont get fancy simple, clear measures are
  often the best

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Develop an appropriate metric

• Make it clear how the measure will be collected
• Might need surveys, competitor data, etc.
• Make sure the measure really addresses the value
  you wish to measure
• Some things like loyalty or satisfaction are hard
  to nail down

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Set a time frame for achieving MOV

• Determine how long itll take to achieve the MOV
• Could have multiple time objectives reach x by
  6 months, y by 12 months, etc.

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Get agreement from stakeholders

• Yup, easy to say, much harder to achieve
• Everyone (project manager, sponsor, etc.) needs
  to agree the MOV is realistic
• Don Quixote may like impossible dreams, but most
  techies hate impossible goals

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Summarize MOV in a statement

• So whats the output from all this work?
• A sentence or two, or maybe a short table, to
  summarize the MOV (or MOVs if there are multiple)
  and it/their time frames
• Project XYZ will achieve the MOV within the
  time frame after its completion
• Or something vaguely like that

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Identify alternatives

• Now back to the overall business case, step 3 -
  Identify alternatives
• Most problems can be solved more than one way, so
  your job is to brainstorm and find several
  plausible ways to address the problem
• One can be the change-nothing answer

(for homework, at least three)
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Identify alternatives

• Alternatives can examine many possible
  approaches, such as
• Change processes but keep the existing systems
• Reengineer an existing system
• Buy something off the shelf to replace an
  existing system
• Start over, and make a new system

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Assess feasibility

• Step 4 is to assess the feasibility and risks of
  each alternative
• Feasibility assessment consists of considering
  three dimensions
• Economic feasibility a full cost/benefit
  analysis is nice, but at least determine if the
  cost of each alternative is within reach

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Assess feasibility

• Technical feasibility measures whether the
  alternative can be accomplished
• Do you have the infrastructure, skills,
  equipment, experience, etc. to implement each
  alternative?
• If not, can the deficiencies be met reasonably?
• Would you need to consider outsourcing or other
  outside sources?

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Assess feasibility

• Organizational feasibility considers each
  alternatives impact on your organization
• Would it result in major changes?
• Will jobs be affected?
• Will people welcome a new approach?
• Other possible areas of feasibility could include
  legal or ethical concerns
• Are there, e.g. union conflicts or labor law
  concerns?

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Assess feasibility

• The risk assessment should identify major
  plausible risks to the success of the project
• Not the success of the product produced
• What could keep the project from reaching its
  conclusion on time and within budget?

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Assess feasibility

• Identify each risk
• Estimate the impact on the project how much
  effort or money would it cost to fix?
• How likely is the risk? Estimate the percent
  chance of it happening
• Determine how the project could respond to the
  risk to reduce (mitigate) its impact

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Assess TCO

• Determine the Total Cost of Ownership (TCO) of
  each alternative, which is the sum of
• Direct costs the cost of implementing the
  project
• Ongoing costs the cost of maintaining the
  system
• Indirect costs the cost of lost productivity
  during development, unexpected system down time,
  etc.

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Assess TBO

• Determine the Total Benefits of Ownership (TBO)
  what are the benefits of each alternative?
• What is the value of time not spent on
  paper-work, of reduced errors, of getting
  information faster, of sales of new products,
  etc.?
• Tangible benefits are easy to estimate,
  intangible ones take more assumptions

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Analyze alternatives

• Step 7, analyze alternatives to see which has the
  most value for the organization
• There are five cash flow metrics most often used
  to answer that most value question payback,
  breakeven, ROI, NPV, and scoring models
• Typically use a few of them for a given project

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Payback

• Payback is the amount of time (years) needed for
  an investment to pay for itself in new cash flow
  (or other benefit)
• Payback initial investment / cash flow
• Initial investment is in dollars
• Cash flow is in /yr typically
• A smaller payback period is good

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Breakeven

• Breakeven is like payback, but its typically
  expressed in terms of the number of units sold to
  recoup the investment, based on knowing a net
  profit margin per unit sold
• Breakeven initial investment / net profit
  margin
• The dimensions of breakeven are units sold, as
  in, We have to sell 20 cars this weekend to
  break even from our ads on TV
• Want a smaller breakeven point

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ROI

• Return on Investment is probably the best known
  cash flow measure
• It describes the percent by which project total
  benefits will exceed costs
• ROI 100(total benefits-total costs)/(total
  costs)
• Want a larger ROI
• Often tricky to measure benefits

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NPV

• Net Present Value reminds us that, in a good
  economy, money can be invested over time to earn
  a profit the time value of money
• To calculate NPV, need the expenses and benefits
  of the project, year by year, for its life

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NPV

• First find the net cash flow each year
• Net cash flow outflow inflow
  expenses benefits
• Then find the discounted cash flow of each years
  expenses
• Discounted CF net cash flow/(1r)t
• Where rinterest rate, tnumber of years

The interest rate used here is a critical
assumption!
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NPV

• The NPV of the project is the sum of all
  discounted cash flows, minus the initial
  investment
• NPV S(discounted cash flow) investment
• You want NPV to be positive, and as large as
  possible

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Scoring models

• This is a catchall category, when you want to
  combine different measures to come up with an
  overall score for each alternative
• Total score S(wici)
• Where wi is the weighting percentage for each
  score, and ci is the score value
• The sum of all weighting percentages 100
• The highest total score generally wins

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Cash flow metrics summary
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Propose support recommendation

• Ok, so we survived cash flow metrics, picked a
  couple of them, and calculated them for each
  alternative
• Now comes the easy part the conclusion
• Based on this analysis, pick the alternative with
  the most value to the organization
• Page 59 in the text has a nice business case
  outline

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Project selection approval

• Everything so far is focused on making a case for
  one IT project
• On a larger scale, an organization typically
  develops a project portfolio all the projects
  it supports
• Depending on the org, it may select all low risk
  projects, or a mix of technologies, etc.

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Project selection approval

• All organizations have limited resources, so the
  decision to allow a project or not is a common
  and critical one
• There are many possible processes upon which to
  base a decision
• Well focus on Balanced Scorecard, which is also
  used to manage active projects

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Balanced Scorecard

• A key feature is that it uses more than just
  financial measures
• Financial perspective
• Customer perspective
• Internal process perspective
• Innovation learning perspective
• You define measures for each perspective

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Financial perspective

• While traditional finance measures (ROI, NPV) can
  be useful, BS also encourages
• Customer-focused finance measures
• Measures of internal operations
• Investments in employees or infrastructure
• A new measure often used is EVA, economic value
  added

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EVA

• EVA determines if youre earning more money than
  the cost of capital
• EVA (net operating after taxes profit) minus
  (opportunity cost of the capital invested)
• So positive EVA is good

Formula adapted from http//www.valuebasedmanageme
nt.net/methods_eva.html
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Customer perspective

• This includes all dimensions of customer
  satisfaction, including satisfaction with how the
  products/services were delivered, processes used
  to create them, support, etc.

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Internal process perspective

• This measures how well the organizations
  processes help achieve its financial and customer
  goals
• So this boils down to the efficiency and
  effectiveness of the organizations processes

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Innovation learning perspective

• This recognizes that investments in people and
  infrastructure help achieve the other three
  perspectives
• Support individual learning and growth
• Encourage training, certifications
• Care about employee satisfaction
• Strive for continuous improvement

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Why all this BS?

• The main point is to avoid making key decisions
  based solely on
• It encourages a broader perspective on project
  go/no-go decisions
• The MOV can also be reviewed in the context of BS
  
• See how MOV supports BS perspectives

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BS can still fail if

• Non-finance measures are the focus and shouldnt
  be or no connection between them and finance
  measure
• Metrics poorly defined
• Goals not based on stakeholder reqts
• No clue how to get to high level goals
• Rely on trial and error for improvement

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IT governance

• In general, governance manages processes to avoid
  doing something unethical, illegal, or just daft
• So HR governance helps avoid discrimination
• IT governance helps comply with laws, like the
  Sarbanes-Oxley Act of 2002 (SOX) for financial
  reporting

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IT governance

• IT governance starts with project management
  duties, but can also include change, life-cycle,
  asset/resource, portfolio, and security
  management
• Best practices for IT governance include
• Identify strategic value of potential projects,
  not just costs risks

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IT governance

• Top business management sets IT priorities, not
  just IT managers this helps keep everyone on the
  same page
• Communicate priorities and progress clearly (e.g.
  BS status updates)
• Monitor projects regularly traffic light
  dashboard reports are common

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PMO

• A Project Management Office (PMO) can be a key IT
  governance body they
• Help coordinate the projects that are proposed
  and accepted
• Help collect data across projects
• Manage the organizations portfolio
• Collect audit trail history (e.g. for SOX)
• Improve estimation for future projects

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Summary

• The IT Project Methodology phases and
  deliverables
• How to develop a business case, calculate MOV,
  assess feasibility and calculate cash flow
  metrics
• Balanced Scorecard
• IT governance and the PMO