Orange County Convention Center

Orlando, Florida | June 3-5, 2014

Using SAP PS Earned Value to Manage IT Projects

Michael Kim (michael.kim@prpx.com)

AGENDA
What is a typical problem with IT projects?
What is Earned Value (EV)?
How can EV help IT projects?

LEARNING POINTS
Steps to get IT projects ready for Earned Value (EV)
Steps to set up SAP EV in Project System (PS)
How to make the best use of EV for your
organization

TYPICAL PROBLEM WITH IT PROJECTS

Unlike projects that build physical objects such as
buildings or houses, it is hard to measure progress
on IT projects
On IT projects, it is easy to spend money without
knowing where it is being spent
Money is spent with no meaningful or measurable progress
Money & resources are gone and you still have work that is
not complete
By the time you realize your mistakes, it is TOO LATE

You cannot Manage what you cannot Measure

WHAT IS EARNED VALUE (EV)?

Earned Value Management is a project management
technique for measuring project performance and
progress in an objective manner.
EV is commonly used by government contractors
and companies that work on Engineering and
Construction projects, such as Power Plants and
Aircraft Development
NASA, DOD, DOE, Utilities, Aerospace & Defense Contractors
and Construction Companies are some of the biggest EV users

Using the objectivity EV provides, it can help

alleviate the typical IT problem we discussed earlier
For more examples and explanations of EV, please
refer to http://en.wikipedia.org/wiki/Earned_value

Most Reports do not show Progress

Most Plan vs. Actual Reports show planned vs.
actual only
This does not provide enough insight into progress
Is the project shown belowbehind or ahead on schedule
and budget?
140
120
100
80

Cum. Budget

60

Cum. Actual

40
20
0

Period
Cum. Budget
Cum. Actual

1
20
17

2
40
34

3
60
50

4
80

5
100

6
120

EV adds the third dimension, Progress

EV ($54) is greater than Actual Costs ($50), i.e., project
earned more than it spent got more bang for the buck
EV ($54) is less than Plan ($60) project is behind schedule
140
120
100
80

Cum. Budget

60

EV
Cum. Actual

40
20

0
1
Period
Cum. Budget
% Complete
Earned Value
Cum. Actual

2
1
20
15%
18
17

3
2
40
30%
36
34

4
3
60
45%
54
50

4
80

5
5
100

6
6
120

Remarks
BAC (Budget At Completion)
PC (Percent Complete)
EV = PC * BAC

How can EV help IT projects?

Using EV forces Project Manager to use rigor & discipline
Since you cannot manage what you cannot measure, break
up IT deliverables in measurable chunks of work
For each project, come up with a list of deliverables or tasks
in chunks of 80 to 100 hours each
For example, if an Enhancement requires 400 hours of work,
try to divide it down to four 100 hours per deliverable
Use an objective EV method such as Start/Finish (0/100,
20/80, or 50/50) or Milestones to determine progress
If possible, try to avoid Percent Complete (Estimates) method
- it is hard to make this a consistently objective figure
Measure progress every week or two, and identify issues and
risks early on, before these turn into disasters
EV can be used as an early warning system for IT projects.

EV Methods Supported in Standard PS

Eight EV methods are supported in Standard SAP PS
For IT Projects Milestones & Start/Finish Methods
are recommended

Steps to set up SAP EV in Project System

Shown below are the minimum CONFIGURATION
Steps Required
Create a Progress Version (a special CO Version)

100 is a Standard Progress Version reserved for EV, so

this can be used
More than one Progress Version can be used
Set Plan Version, EV basis, Early/Late Dates

Set up PS Value Categories

Labor, Material, ODC, OH, G&A, etc. are recommended

The best way to do this is to map CO CE Groups to PS
Value Categories

Assign Default Methods for WBS, NW Activity,

CO/PM Order, etc.

Steps to set up SAP EV in Project System

Shown below are APPLICATION Steps
Required

Depending on business requirements, more steps may

be required

Use CJ20N to perform the following tasks:

Plan labor, material, and ODC on WBS or Network

Activity
Assign EV methods on WBS or Network Activity
Perform Progress Update on WBS or NWA each period

Use CNE1 to calculate EV

After the EV parameters are set up, CNE1 should run to

update EV figures in ECC

Run EV Reports

CNE5 Tabular Report and Period Drilldown Report

S_ALR_87015124 - Report Painter Report

EV Set Up in Project Builder

Using a typical PS structure, EV can be set up on the
WBS element or NW Activity Level
The Start/Finish 20/80 Method is selected

EV Set Up in Project Builder

The Milestones Method is shown as an example
Milestones method chosen for both Plan & Actual
Prog. Analysis must be checked with POC completed
Multiple Milestones can be set up for WBS/NWA

EV Set Up in Project Builder

Using a typical PS structure, EV can be set up on the
WBS element or NW Activity Level
The Estimates Method is shown as an example

How to make the best use of EV for your team

Resistance from Change Management Perspective

Many PMs will view EV as a tax on their time and resources

How to Handle the Challenge

After Senior Management agrees to implement EV, use a

small number of key projects to implement EV to
demonstrate the following:

EV is a standard solution in SAP it is free and you already have it

You already have it. Why not use it to improve project management
and objectivity in evaluating performance?
Use 3 to 6 pilot projects and savvy Project Analysts to start with
After initial training and set up, EV is simple to maintain
EV - by definition - will enforce discipline among project personnel

Incorporate lessons learned from pilot

Come up with company-wide EV requirements and Rollout to
strategically important projects

SAP PS EV Standard Reports

CNE5 shows the basic three key figures in EV: BCWS, BCWP
and ACWP or Plan EV, Actual EV and Actual Costs.
In CNE5 use Period Drill Down Menu Selection for the Graph

SAP PS EV Standard Reports

S_ALR_87015124 shows the key EV figures as well
as Performance Indicators such as CPI, SPI and EAC
This is a Report Painter Report that can be modified
without ABAP

Steps to get IT projects ready for EV

Get Senior Management Buy In - without this you will fail
Allocate budget for EV implementation it takes time to set
up and maintain
Educate Project Managers and PM Analysts on Earned Value

Align the Charge Numbers - Cost Objects such as WBS,

Network Activity, Internal Order, PM/PP Order, etc. - with
the Work or Work Packages for which you want to
implement EV
Ideally, the charge numbers to work packages should be one
to one
However, in reality, many organizations using one charge
number for multiple work packages and EV can still work if
you set it up properly

Key Learnings
What is Earned Value?
Project Management Technique used by many PMs

How can it help IT projects?

By introducing rigor and discipline, it can be useful as an early
warning system for IT projects

What will it take for EV to be successful for my

organization?

Management Leadership, Commitment, and Support

Business Readiness
Rigor and Discipline
Willingness to put in rigor for meaningful and measurable
progress

FOLLOW US

THANK YOU
THANK YOU FOR PARTICIPATING

Please provide feedback on this session by completing

a short survey via the event mobile application.
SESSION CODE: 2204
For ongoing education on this area of focus,
visit www.ASUG.com