SW Project Management
IT Project Conceptualization
INFO 420
Dr. Jennifer Booker
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Project conceptualizing and
initiation
Now we’ll 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 we’ll 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 project’s 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 project’s 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 didn’t
 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
– define project organization,
roles, reporting structure
 Project – the physical environment,
processes, and controls
 Technical – general tools: email, Office suite,
Internet access, PM software, etc.
 Organizational
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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 we’ll 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 org’s 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

Don’t 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 it’ll take to achieve
the MOV
have multiple time objectives – reach x
by 6 months, y by 12 months, etc.
 Could
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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 what’s 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

feasibility – a full cost/benefit
analysis is nice, but at least determine if the
cost of each alternative is within reach
 Economic
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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
alternative’s 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
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.
 Direct
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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 it’s 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
year’s expenses
CF = net cash flow/(1+r)t
 Where r=interest rate, t=number of years
 Discounted
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

= S(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 = S(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

 We’ll
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 you’re 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 organization’s
processes help achieve its financial and
customer goals
 So this boils down to the efficiency and
effectiveness of the organization’s
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
shouldn’t be; or no connection between
them and finance measure
 Metrics poorly defined
 Goals not based on stakeholder req’ts
 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 organization’s 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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