Information Technology Project

Management Third Edition

By Jack T. Marchewka
Northern Illinois University

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1
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information contained herein.
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
3
Can be
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 projects scope, guides decisions
throughout the project life cycle and will be used to
evaluate the projects success
Identify alternatives along with the costs, benefits,
feasibility and risks
The projects goal and analysis of alternatives that
support the goal are summarized in a deliverable
called the business case
Senior management uses the business case5 during the
selection process to determine whether the project
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
6
The projects scope, schedule, budget, and quality
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
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 organizations methodology for future
projects
Evaluation of team members by project
manager
Identify strengths and opportunities for
improvement to help maximize each persons
potential
Outside evaluation of project, project leader,
and team members
Evaluate projects organizational value
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 organizations 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
9
Formalizing acceptance of the project or phase, closing out
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

11
Information Technology
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 Objectives
Project Management

Process Groups
Initiating processes
Planning processes
Executing processes
Controlling processes
Closing processes

15
IT Project Management Foundation
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 the16project team

 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 17
to whether
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

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Developing the Business Case
Step 2: Define Measurable Organizational
Value (MOV)
The projects goal - 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 organizations strategy
and goals

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 The IT Value Chain

Figure 2.4
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The IT Value Chain
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

22
IT Value Chain
President Kennedys 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.youtube.com/watch?v=E8-z
23
ejVPn30&feature=fvwp&NR=1
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 sponsors organization.
24
Strategic & financial expand b&m operations
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
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Process for Developing the MOV
c) Develop an Appropriate Metric - should
it increase or decrease?
Company needs a way to determine if project is
a success and if their investment paid of
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
Thisstakeholders
project will be successful if _________________.

MOV: The B2C project Year MOV

will provide a 20% 1 20% return on investment
500 new customers
return on investment
2 25% return on investment
and 500 new 1,000 new customers
customers within the 3 30% return on investment
first year of its 1,500 new customers
operation 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
Possible Alternative Strategies
Change existing business processes without investing in
IT
Adopt/Adapt systems from other organizational areas
Reengineer existing system
Purchase of-the-shelf applications package
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Custom build new solution using internal resources or
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 staf, vendor
support the solution
Organizational feasibility will solution be accepted by
staf, 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
Developing the Business Case

36
 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,

$ 8.50
etc.)

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 projects 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 = -I0 + (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
Discounted Cash
Time Period Calculation
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
Net Present Value Analysis

$943.3
9

41
 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
 Weight Alternative Alternative B Alternative C
Criterion
A
ROI 15% 2 4 10
Financial Payback 10% 3 5 10
NPV 15% 2 4 10
Alignment with
strategic objectives 10% 3 5 8
Organizational Likelihood of
achieving projects 10% 2 6 9
MOV
Availability of skilled
team members 5% 5 5 4

Project Maintainability 5% 4 6 7
Time to develop 5% 5 7 6
Risk 5% 3 5 5
Customer
satisfaction 10% 2 4 9
External
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 lower45levels of risk
 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 diferent
perspectives
Finance
Customer satisfaction,
Internal business processes
The organizations 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 organizations
performance
Provides a balanced approach in terms of tangible
49 and
intangible benefits, long and short-term objectives and how
 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
MOV and the Organizations Scorecard
MOV supports the balanced scorecard
approach in terms of how it supports the
perspectives

Figure 2.6 53
IT Governance
Focuses on the processes that coordinate and
control an organizations 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 projects 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
organizations 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.
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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 staf or
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resources