Week 11
Monday, April 10
• Portfolio Approach to Managing IT Projects
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
1
Profolio
• Selecting and prioritizing projects
– Which projects have the greatest impact?
• Organization’s strategy
• Internal processes
– Which projects have the greatest risk?
– Which projects have the greatest payoff?
• In terms of dollars, tangible and
intangible benefits
– Which projects are required?
– What is the value of information?
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
2
Portfolio
Organization Strategic Plan
IT Strategic Plan
• Corporate infrastructure
• IT infrastructure
Corporate Initiatives
Portfolio
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
• Long-term projects
• “Low-hanging fruit”
Project
Implementation
3
Project Risk
• Serious deficiencies in IT management
– Failure to assess the implementation risk of a project
at the time it is funded
– Failure to consider the aggregate implementation risk
of the portfolio of projects
– Failure to recognize that different projects require
different managerial approaches
Payoff
Risk
Potential
The greater the risk, the greater the payoff (benefit)
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
4
Project Dimension and Risk
• Project size – The larger the project (budget, staffing
levels, duration, number of departments affected), the
larger the risk
• Experience with technology – Unfamiliarity with the
technology (hardware, software, etc.) increases risk
• Requirements volatility – Stable requirements reduce the
risk; “evolving” projects pose greater risks
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
5
Effect of Increasing Risk Components
Project
Risk
Project size
Experience with technology
Requirements volatility
Risk
Very High Risk
High Risk
Moderate Risk
1
2
Number of Risk Factors
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
3
6
Implementation Risk Categories
Less Project Size
High Requirements
Volatility
Low
Technology
High
Technology
Low Requirements
Volatility
Spreadsheet support for
budgeting (low tech
application,
requirements unknown)
Year 2000 compliance
(low tech application,
requirements known)
Online graphic support
for advertising copy
(high tech application,
requirements unknown)
AI-driven bond
trading (high tech
application,
requirements known)
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
7
Implementation Risk Categories
Technology
Low
High
Spreadsheet support for
budgeting (low tech
application,
requirements unknown)
Year 2000 compliance
(low tech application,
requirements known)
Online graphic support
for advertising copy
(high tech application,
requirements unknown)
AI-driven bond
trading (high tech
application,
requirements known)
High
Requirements Volatility
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
Large
Small
Low
8
Dimensions Influencing Risk
• Project size
• Experience with technology
• Requirements volatility (structured vs. unstructured)
Small structured project
with new technology
“Low hanging
fruit”
Large, unstructured
project with new
technology
Low
Experience
Large, structured project
with known technology
High
Structured
Large
Project size
Small
Unstructured
Requirements Volatility
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
9
Dimensions Influencing Risk
• Project size
• Experience with technology
• Requirement volatility (structured vs. unstructured)
Medium risk (structured,
low experience, large project)
Low risk (unstructured, high
experience, small project)
High
Experience
Low
Structured
Large
Project size
Small
Unstructured
Requirements Volatility
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
10
Dimensions Influencing Risk
• Project size
• Experience with technology
• Requirement volatility (structured vs. unstructured)
High risk (unstructured, low
experience, small project)
Very High risk
(unstructured, low experience,
large project)
High
Experience
Low
Structured
Large
Project size
Small
Unstructured
Requirements Volatility
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
11
Risk Assessment Based on the Strategic Grid
High
Factory
Operational IT
Impact of
Existing IT
applications
Support
Basic elements
Strategic
Strategic IT plan,
initiatives
Turnaround
Gradual adoption
Low
Low
Impact of Future IT
applications
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
High
12
Risk Portfolio
New core
value
Very high
New
benefits
Improved
benefits
Variation
Breakthrough systems
Project Risk
New platforms
High
Derivative systems
Medium
Low-hanging fruit
Low
Portfolio composed of different projects
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
13
Project Management:
A Contingency Approach
“There is no single correct approach to all projects”
• Management tools
– External integration – Link project team
to system users
– Internal integration – Ensure project team
Use depends
operates as an integrated unit
on the
– Formal planning – Structure sequence of
project
tasks, estimate time, money and resources
– Formal result controls – Evaluate progress
and flag potential problems
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
14
Implementation Risk Categories
High Requirements
Volatility
Low
Technology
High
Technology
Low Requirements
Volatility
Low-risk profiles
• External integration critical
• Internal integration necessary
• Formal planning tools,
traditional
• Results controls necessary
Projects easy to manage
• External integration necessary
• Internal integration less
necessary
• Formal planning tools,
traditional
• Results controls necessary
Extremely difficult and should
not be taken lightly
• External integration critical
• Internal integration necessary
• Formal planning tools, less
predictive value (due to
uncertainties)
• Results controls necessary
Projects not easy to manage
• External integration not crucial
• Internal integration crucial
• Formal planning tools, less
predictive value
• Results controls limited,
personnel monitoring important
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
15
Risk Management
From Sprague and McNurlin
• Types of risk
– Technical – failure due to technology
– Business – failure do due organizational issues
• Assessment of risks
– Project’s leadership – commitment, experience,
abilities, formal and informal management skills
– Employee’s perspective – acceptance to change
– Scope and urgency – extent of change (breadth and
depth), need to implement change
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
16
Risk Management
Employees’
Perspective
Leadership
Likelihood of
Business Recommended
Project Scope
Change Project Method
and Urgency
High
Big Bang
+
+
Guided Evolution
+
+
+
-
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
Top-down
Coordination
-
-
Championed
Dealmaker
Championed
Improvision
+
Champion Guided
Evolution
-
Migrate or Kill
the Project
+
Low
More Risky
-
-
Less Risky
Improvisation
-
17
Other Aspects of IT Project Management
Based on a Survey of 10 Executives in Sacramento
• Develop and compare feasibility, complexity, scalability
and cost of possible solutions
• Project portfolio – investing in the right projects
• Aligning projects and initiatives to strategic objectives
• Risk management – risk considerations, factors and
plans
– Contingency plans
• Managing multiple vendors and workflow
• Regulatory and compliance issues
• Leveling resources over projects – human, financial,
technical
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
18
Other Aspects of IT Project Management
Based on a Survey of 10 Executives in Sacramento
• Project planning, execution and scheduling – Prioritizing,
defining performance measures, tracking processes to
ensure performance, schedule resources, project
monitoring, change and service controls, quality
assurance and testing, identify key drivers
• Project leadership – Assessing change and change
management, communication and organizational skills
• Adoption issues
• Identify and understanding stakeholders
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
19
Good IT Project Management
•
•
•
•
•
•
•
•
•
•
Deliver on time
Successful project
Come in or under budget
characteristics
Meet the original objectives
Establish ground rules
Foster discipline, planning, documentation and
management
Obtain and document the “final” user requirements
Obtain tenders from all appropriate potential vendors
Include suppliers in decision making
Convert existing data
Follow through after implementation
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
20
Value of a System or Application
• Benefits the business will receive from the IT
– IT by itself provides no benefits or advantages
• Measuring benefits
– Distinguish between the different roles of the systems
– support role, integral to strategy, or product/service
offering
– Measure what is important to management
– Assess investments across organizational levels
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
21
Measuring Benefits: Role of System
• Measuring organizational performance – ability to
support the organization and its users with their tasks
• Measuring business value – help meeting organizational
and business goals
• Measuring a product or service – profitability of product
or service
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
22
Measuring Benefits: Importance to
Management
• IT is usually not viewed as a revenue generator
– Investment to improve the business
• Corporate effectiveness
• Less tangible benefits includes
– Customer relations (satisfaction)
– Employee morale
– Time to complete an assignment
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
23
Measuring Benefits: Across the Organization
Sources of Value
• Potential benefits differ at
various organizational levels
• Dimensions
– Economic performance
payoffs (market measures
of performance)
– Organizational processes
impact (measures of
process change)
– Technology impacts
(impacts on key
functionality)
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
Assess IT’s impact
in each cell
24
Value of IT Investments to Investors
• Brynjolfsson, Hitt and Yang study
– Every $1 of installed computer capital yielded up to
$17 in stock market value, and no less than $5
– Led to organizational changes that created $16 worth
of “intangible assets”
– Past IT investments correlated with higher current
market value
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
25
Value of IT Investments to Investors
• Brynjolfsson and Hitt study
– Organizational factors correlated to and
complemented IT investments
• Use of teams and related incentives
• Individual decision-making authority
• Investments in skills and education
• Team-based initiatives
– Businesses making the highest IT investments not
only invest in IS but also invest in making
organizational changes to complement the new IS
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
26
Value of IT Investments to Investors
• Brynjolfsson and Hitt study (cont.)
– Led to adoption of decentralized work practices
• Frequent use of teams
• Employees empowered (i.e., given broader
decision-making authority)
• Offer more employee training
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
27
Value of IT Investments to Investors
• Brynjolfsson, Hitt and Yang study
– Companies with the highest market valuation had the
largest IT investments and decentralized work
practices
– Market value of investing in IT is substantially higher
in businesses that use these decentralized practices
because each dollar of IT investment is associated
with more intangible assets because the IT
investments complement the work practices
Other resource
IT
Leveraging
R. Ching, Ph.D. • MIS Area • California State University, Sacramento
28