SW Project Management

IT Project Conceptualization
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Dr. Jennifer 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

1.
2.
3.
4.
5.

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

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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

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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

Assess

TCO
Assess TBO
Analyze alternatives
Propose & support
recommendation

The process for

preparing a business
case has about eight
steps
Select

core team
Define MOV
Identify alternatives
Assess feasibility

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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 > 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

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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 paperwork, 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

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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/(1+r)t

Where r=interest rate, t=number 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

= (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 = (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

Metric

Units

Want it

Payback

Years

Small

Breakeven

Items sold

Small

ROI

Percent

Large

NPV

Large & positive

Scoring models None (numeric) Large

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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.valuebasedmanagement.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

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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

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