Introduction to Project Management Chapter 5 Managing Project Scope Information Systems Project Management: A Process and Team Approach, 1e Fuller/Valacich/George © 2008 Prentice Hall

Five Process Phases of Project Management Initiate Plan Execute Monitor and Control Close © 2008 Prentice Hall

Project Initiation The process of authorizing a new or continuing an existing project Four initiation activities: Identifying information systems development projects Classifying and ranking information systems development projects Selecting information systems development projects Establishing the project charter © 2008 Prentice Hall

1. Identifying Information Systems Development Projects Identification can be made by: Top management or chief executive officer Strategic focus Steering committee Cross-functional focus User department(s) Tactical focus IT development group or IT management System integration focus © 2008 Prentice Hall

Two Basic Project Planning Approaches Isolated – attempts to solve individual organizational problems What procedure (application program) is required to solve this particular problem as it exists today? Dependent on current IT infrastructure © 2008 Prentice Hall

Two Basic Project Planning Approaches (cont.) Planned – systematic identification of project that will provide solutions today and into the future What information (or data) requirements will satisfy the decision-making needs or business processes of the enterprise today and well into the future? Independent of current IT infrastructure constraints © 2008 Prentice Hall

Corporate Strategic Planning An ongoing process that defines the mission, objectives, and strategies of an organization Required if project selection is going to be successful Three-step process The current organization must be reviewed and understood Management decides on future direction Strategic plan is developed for transition from current to future state http://en.wikipedia.org/wiki/Strategic_planning http://en.wikipedia.org/wiki/Core_competency © 2008 Prentice Hall

Strategic Planning Requirements: Mission Statement Statement that makes it clear what business the company is in Objective statements Series of statements that express an organization’s qualitative and quantitative goals for reaching a desired future position Sometimes call Critical Success Factors or Corporate Values Competitive Strategy Method by which an organization attempts to achieve its mission and objectives © 2008 Prentice Hall

Generic Competitive Strategy Description Low-Cost Producer This strategy reflects competing in an industry on the basis of product or service cost to the consumer. For example, in the automobile industry, the South Korea-produced Kia is a product line that competes on the basis of low cost. Product Differentiation This strategy reflects capitalizing on a key product criterion requested by the market (e.g., high quality, style, performance, roominess). In the automobile industry, many manufactures are trying to differentiate their products on the basis of quality (e.g., “At Ford, quality is job one.”). Product Focus or Niche This strategy is similar to both the low-cost and differentiation strategies, but with a much narrower market focus. For example, a niche market in the automobile industry is the convertible sports car market. Within this market, some manufactures may employ a low-cost strategy while others may employ a differentiation strategy based on performance or style. http://en.wikipedia.org/wiki/Porter_generic_strategies © 2008 Prentice Hall

Information Systems Planning An orderly means of assessing the information needs of an organization and defining the systems, databases, and technologies that will best satisfy those needs © 2008 Prentice Hall

Information Systems Planning Three-Step Process © 2008 Prentice Hall

System Service Request © 2008 Prentice Hall

Parallel Activities © 2008 Prentice Hall

Planning Methods Top-Down Bottom-Up Generic information systems planning methodology that attempts to gain a broad understanding of the information system needs of the entire organization Bottom-Up Generic information systems planning methodology that identifies and defines information systems development projects based upon solving operational business problems or taking advantage of some business opportunities © 2008 Prentice Hall

Information Systems Plan Outline © 2008 Prentice Hall

2. Classifying And Ranking Information Systems Development Projects Completed by top management, steering committee, business units, or information systems development groups Criteria varies among organizations © 2008 Prentice Hall

Possible Evaluation Criteria When Classifying And Ranking Projects Description Value Chain Analysis Extent to which activities add value and costs when developing products and/or services Strategic Alignment Extent to which the project is viewed as helping the organization achieve its strategic objectives and long-term goals Potential Benefits Extent to which the project is viewed as improving profits, customer service, and so forth and the duration of these benefits Resource Availability Amount and type of resources the project requires and their availability Project Size / Duration Number of individuals and the length of time needed to complete the project Technical Difficulty / Risks Level of technical difficulty to successfully complete the project within given time and resource constraints © 2008 Prentice Hall

Business Case Justification that presents the economic, technical, operational, schedule, legal and contractual, and political factors influencing a proposed information systems project © 2008 Prentice Hall

Selected Feasibility Factors Economic Technical Operational Schedule Legal and contractual Political © 2008 Prentice Hall

Economic Feasibility Identify the financial benefits and costs associated with a development project Benefits (Return) Tangible or intangible Costs (Investment) © 2008 Prentice Hall

Benefits Tangible – benefit derived from the creation of an information system that can be measured in dollars and with certainty Cost reduction and avoidance; error reduction; increased flexibility; increased speed of activity; improvement of management planning and control; opening new markets and increasing sales opportunities Intangible – benefit derived from the creation of an information system that cannot be easily measured in dollars or with certainty Competitive necessity; increased organizational flexibility; increased employee morale; promotion of organizational learning and understanding; more timely information © 2008 Prentice Hall

Cost Types Tangible cost Intangible cost Recurring cost One-Time cost Cost associated with an information system that can be measured in dollars and with certainty Intangible cost Cost associated with an information system that cannot be easily measured in terms of dollars or with certainty Recurring cost Cost resulting from the ongoing evolution and use of a system One-Time cost Cost associated with project start-up and development or system start-up © 2008 Prentice Hall

Cost-Benefit Analysis The use of a variety of analysis techniques for determining the financial feasibility of a project It uses financial analysis tools http://en.wikipedia.org/wiki/Cost-benefit_analysis http://www.mindtools.com/pages/article/newTED_08.htm © 2008 Prentice Hall

Capital Budgeting The systematic planning process to evaluate a firm’s long term investments The most widely used approaches are: Break-Even Analysis (Payback Period) Net-Present Value (NPV) © 2008 Prentice Hall

Break-Even Analysis (Payback Period) Finds the amount of time required for the cumulative cash from a project to equal its initial investment. The number of periods needed to recover a project’s initial investment. The payback period for a project is the initial fixed investment divided by the estimated annual net cash inflows from the project. The ratio of these quantities is the number of years required for the project to repay its initial fixed investment. © 2008 Prentice Hall

Payback Period Example A project requires an initial investment of $200,000 and will generate cash savings of $75,000 each year for the next five years. What is the payback period? Divide the cumulative amount by the cash flow amount in the third year and subtract from 3 to find out the moment the project breaks even. Year Cash Flow Cumulative ($200,000) 1 $75,000 ($125,000) 2 ($50,000) 3 $25,000 © 2008 Prentice Hall

Time Value of Money (TVM) Time Value of Money: Money earned today is worth more than money expected to earn in the future Since money has a time-dated value, the amounts of money received at different periods of time must be converted into a common date in order to be compared. Present Value (PV): A future cash flow's value at time 0, i.e. The current value of a future cash flow Future Value (FV): The amount that today’s investment will be after a stated number of periods at a stated periodic rate of return Rate of Return (i): Ratio of net income to investment Number of periods (n): months, quarters, or years © 2008 Prentice Hall

Net Present Value The Net Present Value (NPV) is the sum of the present values of all cash inflows and outflows associated with a project. NPV uses a discount rate determined from the company’s cost of capital to establish the present value of both cash receipts and outlays. © 2008 Prentice Hall

Net Present Value Higher NPV values are better!

Net Present Value Example Should you invest $60,000 in a project that will return $15,000 per year for five years? You have a minimum return of 8% and expect inflation to hold steady at 3% over the next five years. The NPV column total is negative, so don’t invest! Year Net flow Discount NPV -$60,000 1.0000 -$60,000.00 1 $15,000 0.9009 $13,513.51 2 0.8116 $12,174.34 3 0.7312 $10,967.87 4 0.6587 $9,880.96 5 0.5935 $8,901.77 -$4,561.54 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall

Technical Feasibility Process of assessing the development organization's ability to construct a proposed system © 2008 Prentice Hall

Technical Project Risk Assessment Factors Project Size – Large projects are riskier than small projects Project Structure – A system in which the requirements are easily obtained and highly structured will be less risky than one in which requirements are messy, ill-structured, ill-defined or subject to the judgment of an individual. Development Group – The development of a system employing commonly used or standard technology will be less risky than one employing novel or nonstandard technology. User Group – A project is less risky when the user group is familiar with the systems development process and application area. © 2008 Prentice Hall

Risk Assessment Matrix © 2008 Prentice Hall

Potential Technical Risks Failure to attain expected benefits from the project Inaccurate project cost estimates Inaccurate project duration estimates Failure to achieve adequate system performance levels Failure to adequately integrate the new system with existing hardware, software, or organizational procedures © 2008 Prentice Hall

Operational Feasibility Process of assessing the degree to which a proposed system will solve business problems or takes advantage of business opportunities What impact will the proposed system have on the organization’s structures and procedures? It is important to understand how an information system will fit into an organization’s current day-to-day operation. © 2008 Prentice Hall

Schedule Feasibility Process of assessing the degree to which the potential time frame and completion dates for all major activities within a project meet organizational deadlines and constraints for affecting change © 2008 Prentice Hall

Legal and Contractual Feasibility Process of assessing potential legal and contractual ramifications due to the construction of a system Copyright or nondisclosure agreements, labor laws, foreign trade regulations, etc. © 2008 Prentice Hall

Political Feasibility Process of evaluating how key stakeholders within the organization view the proposed system © 2008 Prentice Hall

3. Information Systems Development Selection © 2008 Prentice Hall

Popular Selection Methods Value Chain Analysis The process of analyzing an organization's activities to determine where value is added to products and/or services and the costs incurred for doing so Multi-Criteria Analysis A project selection method that uses weighted scoring for a variety of criteria to contrast alternative projects or system features © 2008 Prentice Hall

Value Chain Analysis http://en.wikipedia.org/wiki/Value_chain © 2008 Prentice Hall

Multi-Criteria Analysis http://en.wikipedia.org/wiki/Multi-Criteria_Decision_Analysis © 2008 Prentice Hall

4. Establish a Project Charter A short document prepared for the customer during project initiation that describes what the project will deliver and outlines generally at a high level all work required to complete the project Typically contains: Project title and date of authorization Project manager name and contact information Customer name and contact information Projected start and completion dates Key stakeholders, project roles, and responsibilities Project objectives and description Key assumptions or approach Signature section for key stakeholders © 2008 Prentice Hall

Project Scope Planning Process of progressively elaborating and documenting the project work plan in order to effectively manage a project Occurs once a project has been formally selected for development © 2008 Prentice Hall

Project Scope Planning Activities Project workbook created Project scope statement written Baseline project plan is developed © 2008 Prentice Hall

Project Workbook Serves as the central repository for all project-related documents and information Contains all project correspondence, inputs, outputs, deliverables, procedures, and standards established by the project team Workbook can be paper or electronic A project Web site can be created to access all project documents © 2008 Prentice Hall

Project Scope Statement Document prepared for the customer that describes what the project will deliver and outlines generally at a high level all work required to complete the project Addresses: What problem or opportunity does the project address? What are the quantifiable results to be achieved? What needs to be done? How will success be measured? How will the end of the project be identified? © 2008 Prentice Hall

Baseline Project Plan Documents the best estimate of a project's scope, benefits, costs, risks, and resource requirements Four sections: Introduction System Description Feasibility Assessment Management Issues © 2008 Prentice Hall

Baseline Project Plan Introduction Provides a brief overview of the entire document and outlines a recommended course of action for the project © 2008 Prentice Hall

Baseline Project Plan System Description Documents possible alternative solutions in addition to the one deemed most appropriate for the given situation © 2008 Prentice Hall

Baseline Project Plan Feasibility Assessment Project costs and benefits, technical difficulties, and other such concerns are outlined Gantt charts and network diagrams illustrate high-level project schedules © 2008 Prentice Hall

Baseline Project Plan Management Issues Documents management concerns related to the project Typical issues include: Team configuration and management Communication plan Project standards and procedures Other project-specific topics © 2008 Prentice Hall

Project Scope Definition Process of subdividing the major project deliverables – as identified in the project scope statement – into smaller, more manageable activities in order to make more accurate cost, task duration, and resource estimates © 2008 Prentice Hall

Project Scope Verification Process of obtaining formal acceptance of a project’s scope from the project stakeholders © 2008 Prentice Hall

Project Scope Change Control Formal process for assuring that only agreed- upon changes are made to the project’s scope Submitted change request should address: Project specifications Project schedules Budgets Resources © 2008 Prentice Hall

Scope Creep Progressive, uncontrolled increase in project scope © 2008 Prentice Hall

Questions? © 2008 Prentice Hall