McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved CHAPTER 12 PROJECT MANAGEMENT AND OUTSOURCING

12-2 CHAPTER TWELVE OVERVIEW SECTION 12.1 – PROJECT MANAGEMENT –Project Management –Project Management Fundamentals –Change Management Fundamentals –Risk Management Fundamentals SECTION 12.2 – OUTSOURCING –Outsourcing –The Outsourcing Phenomenon –Outsourcing Options –Offshore Outsourcing –The Challenges of Outsourcing –Future Outsourcing Trends

McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved SECTION 12.1 PROJECT MANAGEMENT

12-4 LEARNING OUTCOMES 1.Describe the three primary activities performed by a project manager 2.Describe the three common techniques an organization can use to select good projects 3.List and describe the characteristics of a well-defined project plan

12-5 LEARNING OUTCOMES 4.Explain change management and how an organization can prepare for change 5.Explain risk management and how an organization can mitigate risk 6.Summarize the different strategies a project manager can use to ensure a successful project

12-6 PROJECT MANAGEMENT Project management – the application of knowledge, skills, tools, and techniques to project activities in order to meet or exceed stakeholder needs and expectations from a project Project management software – supports the long-term and day-to-day management and execution of the steps in a project

12-7 PROJECT MANAGEMENT Project management interdependent variables

12-8 PROJECT MANAGEMENT Common reasons why IT projects fall behind schedule or fail

12-9 PROJECT MANAGEMENT Expected growth for project management software

12-10 PROJECT MANAGEMENT FUNDAMENTALS Project – a temporary endeavor undertaken to create a unique product or service Project management – the application of knowledge, skills, tools, and techniques to project activities in order to meet or exceed stakeholder needs and expectations

12-11 PROJECT MANAGEMENT FUNDAMENTALS Project deliverable – any measurable, tangible, verifiable outcome, result, or item that is produced to complete a project or part of a project Project milestone – represents key dates when a certain group of activities must be performed Project manager – an individual who is an expert in project planning and management, defines and develops the project plan, and tracks the plan to ensure all key project milestones are completed on time

12-12 PROJECT MANAGEMENT FUNDAMENTALS Project management role

12-13 Choosing Strategic Projects Organizations must determine which projects to pursue Three common techniques for selecting projects 1.Focus on organizational goals 2.Categorize projects 3.Perform a financial analysis

12-14 Choosing Strategic Projects Techniques for choosing strategic projects –Focus on organizational goals –Categorize projects –Perform a financial analysis

12-15 Setting The Project Scope Project scope – defines the work that must be completed to deliver a product with the specified features and functions, and typically includes: –Project product –Project objectives –Project deliverables –Project exclusions

12-16 Setting The Project Scope SMART criteria are useful reminders on how to ensure that the project has created understandable and measurable objectives

12-17 Managing Resources and Maintaining the Project Plan Project plan – a formal, approved document that manages and controls project execution A well-defined project plan should be: –Easy to understand and read –Communicated to all key participants –Appropriate to the project’s size, complexity, and criticality –Prepared by the team, rather than by the individual project manager

12-18 Managing Resources and Maintaining the Project Plan Two primary diagrams used in project planning include PERT and Gantt charts –PERT (Program Evaluation and Review Technique) chart – is a graphical network model that depicts a project’s tasks and the relationships between those tasks (Dependencies and Critical paths are found in PERT charts) –Gantt chart – a simple bar chart that depicts project tasks against a calendar

12-19 Managing Resources and Maintaining the Project Plan

12-20 Managing Resources and Maintaining the Project Plan PERT Chart EXPERT – PERT Chart Example

12-21 Managing Resources and Maintaining the Project Plan MS Project – Gantt Chart Example

12-22 CHANGE MANAGEMENT FUNDAMENTALS Good project managers understand the fundamentals of project management and how to effectively deal with change management and risk management

12-23 CHANGE MANAGEMENT FUNDAMENTALS Change management – a set of techniques that aid in evolution, composition, and policy management of the design and implementation of a system –Change management system – a collection of procedures to document a change request and define the steps necessary to consider the change based on the expected impact of the change –Change control board (CCB) – responsible for approving or rejecting all change requests

12-24 CHANGE MANAGEMENT FUNDAMENTALS

12-25 Preparing for Change Three important guidelines fore effectively dealing with change management 1.Institute change management polices 2.Anticipate change 3.Seek change

12-26 RISK MANAGEMENT FUNDAMENTALS Project risk – an uncertain event or condition that, if it occurs, has a positive or negative effect on a project objective –Risk management – the process of proactive and ongoing identification, analysis, and response to risk factors

12-27 RISK MANAGEMENT FUNDAMENTALS

12-28 RISK MANAGEMENT FUNDAMENTALS

12-29 Mitigating Risk Actions to improve risk management capabilities –Promote project leadership skills –Learn from previous experience –Share knowledge –Create a project management culture

12-30 Successful Project Management Strategies Top five successful project management strategies 1.Define project success criteria 2.Develop a solid project plan 3.Divide and conquer 4.Plan for change 5.Manage project risk

12-31 OPENING CASE QUESTIONS Change at Toyota 1.What would be the impact on Toyota’s business if it failed to implement a project management solution and managed its projects using a myriad of spreadsheets and Word documents? 2.Why would Opportunity, Resources, and Time & Expense Manager applications be of value to a company like Toyota? 3.Why would Toyota find it important to focus on implementing good project management techniques? 4.Why are project management, change management, and risk management critical to a global company such as Toyota?

12-32 OPENING CASE QUESTIONS Change at Toyota 5.Why would Toyota find it important to focus on implementing solid risk management techniques? 6.Why would Toyota find it important to focus on implementing solid change management techniques? 7.Describe the ramifications to Toyota’s business if it failed to anticipate change 8.Explain the potential issues facing Toyota if it failed to analyze risk

McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved SECTION 12.2 OUTSOURCINGOUTSOURCING

12-34 LEARNING OUTCOMES 7.Identify the three primary outsourcing options 8.Explain the business benefits of outsourcing 9.Identify the leading offshore outsourcing countries 10.Identify the up-and-coming offshore outsourcing countries

12-35 LEARNING OUTCOMES 11.Identify the rookie offshore outsourcing countries 12.Assess the reasons for developing strategic outsourcing partnerships

12-36 OUTSOURCING Outsourcing – an arrangement by which one organization provides a service or services for another organization that chooses not to perform them in-house This section focuses on businesses’ need to undertake every effort to re-think and re-adopt new processes

12-37 OUTSOURCING Insourcing (in-house-development) – a common approach using the professional expertise within an organization to develop and maintain the organization's information technology systems

12-38 OUTSOURCING

12-39 OUTSOURCING Reasons companies outsource

12-40 OUTSOURCING Factors driving outsourcing growth include: –Core competencies –Financial savings –Rapid growth –Industry changes –The Internet –Globalization

12-41 THE OUTSOURCING PHENOMENON According to research firm IDC, the worldwide IT outsourcing market will reach $230 billion by 2009 According to PricewaterhouseCoopers “Businesses that outsource are growing faster, larger, and more profitable than those that do not”

12-42 THE OUTSOURCING PHENOMENON Most organizations outsource their noncore business functions, such as payroll and IT

12-43 THE OUTSOURCING PHENOMENON Outsourcing growth drivers –Globalization –The Internet –Growing economy and low unemployment rate –Technology –Deregulation

12-44 Outsourcing Benefits Outsourcing benefits include: –Increased quality and efficiency –Reduced operating expenses –Outsourcing non-core processes allows focus on core competencies –Reduced exposure to risk –Service providers economies of scale, expertise, and best practices –Access to advanced technologies –Increased flexibility –Avoid costly outlay of capital funds –Reduced headcount and associated overhead expense –Reduced frustrations and expense related to hiring/retaining employees –Reduced time to market for products or services

12-45 OUTSOURCING OPTIONS Onshore outsourcing – engaging another company within the same country for services Nearshore outsourcing – contracting an outsourcing arrangement with a company in a nearby country Offshore outsourcing – using organizations from developing countries to write code and develop systems

12-46 OUTSOURCING OPTIONS Big selling point for offshore outsourcing “inexpensive good work”

12-47 OFFSHORE OUTSOURCING Three categories of outsourcing countries: leaders, up-and- comers, rookies

12-48 The Leaders Canada India Ireland Israel Philippines

12-49 The Leaders Canada

12-50 The Leaders India

12-51 The Leaders Ireland

12-52 The Leaders Israel

12-53 The Leaders Philippines

12-54 The Up-and-Comers Brazil China Malaysia Mexico Russia South Africa

12-55 The Up-and-Comers Brazil

12-56 The Up-and-Comers China

12-57 The Up-and-Comers Malaysia

12-58 The Up-and-Comers Mexico

12-59 The Up-and-Comers Russia

12-60 The Up-and-Comers South Africa

12-61 The Rookies Argentina Chile Costa Rica New Zealand Thailand Ukraine

12-62 The Rookies Argentina

12-63 The Rookies Chile

12-64 The Rookies Costa Rica

12-65 The Rookies New Zealand

12-66 The Rookies Thailand

12-67 The Rookies Ukraine

12-68 THE CHALLENGES OF OUTSOURCING Outsourcing challenges include –Contract length 1.Difficulties in getting out of a contract 2.Problems in foreseeing future needs 3.Problems in reforming an internal IT department after the contract is finished –Competitive edge –Confidentiality –Scope definition

12-69 FUTURE OUTSOURCING TRENDS Outsourcing is becoming less of a cost-saving strategy and more an overall context for business Outsourcing is approaching commodity status Companies should look for value-based pricing rather than the lowest possible price Multisourcing – a combination of professional services, mission-critical support, remote management, and hosting services that are offered to customers

12-70 OPENING CASE QUESTIONS Change at Toyota 9.How could Toyota benefit from outsourcing? 10.If you had to choose a country to recommend for outsourcing, which country would it be and why? 11.Explain the issues facing Toyota from its internal IT department if it decided to outsource the project management of the development of a new system

12-71 OPENING CASE QUESTIONS Change at Toyota 12.What types of ethical issues might Toyota encounter when considering outsourcing? 13.What types of security issues might Toyota encounter when considering outsourcing?

12-72 CLOSING CASE ONE Toronto Transit 1.Describe Gantt charts and explain how TTC could use one to communicate project status 2.Describe PERT charts and explain how TTC could use one to communicate project status 3.How could TTC use its Master Schedule to gain efficiencies in its supply chain? 4.How could TTC use its Master Schedule to identify change management and risk management issues?

12-73 CLOSING CASE TWO Circuit City 1.Explain why anticipating change would have helped Circuit City remain as an industry leader 2.Why are project management, change management, and risk management critical to a global company such as Circuit City? 3.Assess the impact on Circuit City’s business if it failed to implement change management strategies as it revamped its global organization

12-74 CLOSING CASE TWO Circuit City 4.What are some of the potential risks facing Circuit City’s new business model? 5.Why would Opportunity, Resource, and Time & Expense applications be of value to a company like Circuit City? 6.Why would Circuit City benefit from implementing good risk management and change management techniques?

12-75 CLOSING CASE THREE Outsourcing Brew 1.Describe an alternative approach that Coors could have used instead of outsourcing to EDS 2.What would be the advantages of offshore outsourcing Coors’ IT department? 3.What are some other reasons Coors outsourced its information technology functions that were not mentioned in the case? 4.Describe some of the factors causing Coors to be “forced” to outsource its information technology functions