CH 02

Information Technology Project
Management Fourth Edition

By Jack T. Marchewka
Northern Illinois University
Power Point Slides by Gerald DeHondt
Grand Valley State University
2-1
Copyright 2012 John Wiley & Sons,

Inc.
Conceptualizing and Initializing

the IT Project
Chapter 2
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Learning Objectives
Describe the project life cycle (PLC) and the systems

development life cycle (SDLC), and their relationship.
Define what a methodology is and describe the role it serves

in IT projects.
Identify the phases and infrastructure that make up the IT

project methodology introduced in this chapter.
Develop and apply the concept of a projects measurable

organizational value (MOV).
Describe and be able to prepare a business case.
Distinguish between financial models and scoring models.
Describe the project selection process as well as the

Balanced Scorecard approach.
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A system of broad principles or rules from which specific

methods or procedures may be derived to interpret or solve
different problems within the scope of a particular discipline.
Methodology is the method you used to do something.
Say for example you had to do a research project as a college
assignment, you would plan out what you were going to do
then do it (questionnaires etc) then analyze your data and
write up your results.
When you came to write your methodology, you would
include all the tasks you needed to do to get your results and
the
reasons why
to obtain
your
data
in be
theused
way to
Methodology
is ayou
set chose
of practices.
This
term
may
that
did.
referyou
to practices
which are widely used across an industry
or scientific discipline, the techniques used in a particular
research study, or the techniques used to accomplish a
particular project.
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Information Technology Project Methodology

(ITPM)
Methodology
A strategic-level plan for managing and

controlling the project
Game plan for implementing project and product
lifecycles
Recommends phases, processes, tools, and
techniques for supporting an IT project
Must be flexible and include best practices
learned from experiences over time.
Can be
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Traditional (e.g., Waterfall)

Agile (e.g., XPM, SCRUM)
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The Project Life Cycle and IT

Development
Project Life Cycle
Collection of logical stages or phases that maps

the life of a project from its beginning to define,
build, and deliver the product
Each phase should provide one or more
deliverables
Deliverable
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Tangible and verifiable product of work

Project plan, design specifications, delivered
system

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Project Phases
Phase Exits, Stage Gates, Kill Points
These are the phase-end review of key deliverables

Allows the organization to evaluate project
performance and take immediate action to correct
errors or problems
Fast Tracking
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Starting the next phase of a project before approval

is obtained for the current phase
Can be used to reduce the project schedule
Can be risky and should only be done when the risk
is acceptable
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Generic Project Life Cycle
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Project Life Cycle
Define Project Goal
The project goal should be focused on providing

business value to the organization
Provides a clear focus and drives the other phases of
the project
How will we know if this project is successful given
the time, money, and resources invested?
Plan Project
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Defines the agreed upon scope, schedule, and budget

Used as a tool to gauge the projects performance
throughout the life cycle.
Inc.
Project Life Cycle
Execute Project Plan
Manage the project scope, schedule, budget, and

people to ensure the project achieves its goal
Progress must be documented and compared to
the baseline plan
Project performance must be communicated to all
of the stakeholders
Close Project
Ensures that all of the work is completed as

planned
Final project report and presentation to the client
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Project Life Cycle
Evaluate Project
Lessons learned to determine those things to do

the same and those things to change
Evaluate team member performance
May be audited by an outside third party
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Systems Development Life Cycle (SDLC)
Planning
Identifying and responding to a problem or

opportunity
Incorporates the project management and system
development processes and activities
Ensures that the goal, scope, budget, schedule,
technology, and system development processes,
methods, and tools are in place
Analysis
A closer look at the problem or opportunity

Documents the specific needs and requirements
for the new system
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Systems Development Life Cycle (SDLC)
Design
Implementation
The project team uses the requirements and to be

logical models to design the architecture to support the
new information system
This includes designing the network, hardware
configuration, databases, user interface, and application
programs
The development or construction of the system, testing,
and installation
Training, support, and documentation must also be in
place.
Maintenance and Support
The system is updated to respond to bugs, new features,

or to adjust to a changing business environment.
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Systems Development Life Cycle
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An IT Project Methodology
The Project Management Body of

Knowledge (PMBOK) is a term that
describes knowledge in the
profession of project management.
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Phases
Phase 1: Conceptualize and Initialize

Phase 2: Develop the Project Charter and
Detailed Project Plan defined in terms of
projects:
scope
schedule
budget
quality objectives
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Phases continued
Phase 3: Execute and Control the Project
using approach such as the SDLC.
Phase 4: Close Project
Phase 5: Evaluate Project Success
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Post mortem by project manager and team of

entire project
Evaluation of team members by project manager
Outside evaluation of project, project leader, and
team members
Evaluate projects organizational value

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IT Project Management Foundation
Project Management
Processes
Project Objectives
Initiating processes
Planning processes
Executing processes
Controlling processes
Closing processes
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IT Project Management Foundation

Tools - e.g. Microsoft Project , Computer
Aided Software Engineering (CASE)
Infrastructure
Organizational Infrastructure
Project Infrastructure
Project Environment
Roles and Responsibilities of team members
Processes and Controls
Technical Infrastructure
Project Management Knowledge Areas
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Inc.
The Business Case
Definition of Business Case: an analysis of the

organizational value, feasibility, costs,
benefits, and risks of the project plan.
Attributes of a Good Business Case
Details all possible impacts, costs, and benefits

Clearly compares alternatives
Objectively includes all pertinent information
Systematic in terms of summarizing findings
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Process for Developing the Business

Case
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Developing the Business Case
Step 1: Select the Core Team

Advantages:
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Credibility
Alignment with organizational goals
Access to the real costs
Ownership
Agreement
Bridge building

Inc.
Step 2: Define Measurable Organizational

Value (MOV) the projects overall goal
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Inc.
Measurable Organizational Value (MOV)

The projects goal
Measure of success
Must be measurable
Provides value to the organization
Must be agreed upon
Must be verifiable at the end of the project
Guides the project throughout its life cycle
Should align with the organizations
strategy and goals
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The IT Value Chain
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Process for Developing the MOV

1.
Identify the desired area of impact
Potential Areas:
Strategic
Customer
Financial
Operational
Social
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Inc.

2.
Identify the desired value of the IT project
Organizational Value:
Better?
Faster?
Cheaper?
Do More? (growth)
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3.
Develop an Appropriate Metric
Should it increase or decrease?
Metrics:
Money ($, , )
Percentage (%)
Numeric Values
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4.
Set a time frame for achieving the MOV
5.
When will the MOV be achieved?
Verify and get agreement from the project stakeholders
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Project manager and team can only guide the process

Inc.

Summarize the MOV in a clear, concise
statement or table
6.
This project will be successful if _________________.
MOV: The Web Site will provide a 20% return on

investment and 500 new customers within the
first year of its operation
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Year
MOV
20% return on investment

500 new customers

1,000 new customers

1,500 new customers
Example MOV Using Table Format

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Project Goal ?
Install new hardware and software to improve

our customer service to world class levels
Respond to 95% of our customers inquiries

within 90 seconds with less than 5% callbacks
about the same problem.
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A Really Good Goal

I
believe that this nation should

commit itself to achieving the goal
before this decade is out, of landing a
man on the moon and returning him
safely to Earth.
John F. Kennedy
May 25, 1961
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Inc.
Step 3: Identify Alternatives
Base Case Alternative

Possible Alternative Strategies
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Change existing process without investing in IT

Adopt/Adapt systems from other organizational areas
Reengineer Existing System
Purchase off-the-shelf Applications package
Custom Build New Solution

Inc.
Step 4: Define Feasibility and Assess Risk

Economic feasibility
Technical feasibility
Organizational feasibility
Other feasibilities
Risk focus on
Identification
Assessment
Response
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Inc.
Step 5: Define Total Cost of Ownership
Step 6: Define Total Benefits of Ownership
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Direct or Up-front costs

Ongoing Costs
Indirect Costs
Increasing high-value work
Improving accuracy and efficiency
Improving decision-making
Improving customer service

Inc.
Step 7: Analyze alternatives using financial

models and scoring models
Payback
Payback Period = Initial Investment

Net Cash Flow
= $100,000
$20,000
= 5 years
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Inc.

Break
Even
Materials (putter head, shaft, grip, etc.)
$12.00
Labor (0.5 hours at $9.00/hr)
$ 4.50
Overhead (rent, insurance, utilities, taxes,

$ 8.50
etc.)
Total
$25.00
If you sell a golf putter for $30.00 and it costs $25.00 to make, you have
a profit margin of $5.00:
Breakeven Point = Initial Investment / Net Profit Margin
= $100,000 / $5.00
= 20,000 units
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Inc.

Return
on Investment
Project ROI =(total expected benefits total expected costs)

total expected costs
= ($115,000 - $100,000)
$100,000
= 15%
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Inc.

Net
Present Value
Year 0
Year 1
Year 2
Year 3
Year 4
Total Cash Inflows
$0
$150,000
$200,000
$250,000
$300,000
Total Cash Outflows
$200,000
$85,000
$125,000
$150,000
$200,000
Net Cash Flow
($200,000)
$65,000
$75,000
$100,000
$100,000
NPV = -I0 + (Net Cash Flow / (1 + r)t)

Where:
I = Total Cost or Investment of the Project
r = discount rate
t = time period
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Net
Present Value
Time Period
Calculation
Discounted Cash
Flow
Year 0
($200,000)
($200,000)
Year 1
$65,000/(1 + .08)1
$60,185
Year 2
$75,000/(1 + .08)2
$64,300
Year 3
$100,000/(1 + .08)3
$79,383
Year 4
$100,000/(1 + .08)4
$73,503
Net Present Value (NPV)

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Inc.
$77,371
Weight
Alternative
A
Alternative B
Alternative C
ROI
15%
10
Payback
10%
10
NPV
15%
10
Alignment with
strategic objectives
10%
Likelihood of
achieving projects
MOV
10%
Availability of skilled
team members
5%
Maintainability
5%
Time to develop
5%
Risk
5%
Customer
satisfaction
10%
Increased market
share
10%
100%
2.65
4.85
8.50
Criterion
Financial
Organizational
Project
External
Total Score
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Notes: Risk scores have a reverse scale i.e., higher scores for risk
Inc. imply lower levels of risk
Step
8: Propose and Support the

Recommendation
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Business Case Template
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Project Selection and Approval
The IT Project Selection Process

The Project Selection Decision
Project must map to organization goals

Project must provide verifiable MOV
Selection should be based on diverse measures
such as
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tangible and intangible costs and benefits

various levels throughout the organization

Inc.
Balanced Scorecard Approach
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Reasons Balanced Scorecard Approach

Might Fail
Nonfinancial variables incorrectly identified as

primary drivers
Metrics not properly defined
Goals for improvements negotiated not based
on requirements
No systematic way to map high-level goals
Reliance on trial and error as a methodology
No quantitative linkage between nonfinanacial
and expected financial results
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Inc.
Copyright 2012 John Wiley & Sons, Inc.

All rights reserved. Reproduction or translation of this work beyond that
permitted in section 117 of the 1976 United States Copyright Act without
express permission of the copyright owner is unlawful. Request for further
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& Sons, Inc. The purchaser may make back-up copies for his/her own use
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programs or from the use of the information herein.
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Information Technology Project

Management Fourth Edition

Copyright 2012 John Wiley & Sons,

Conceptualizing and Initializing

Copyright 2012 John Wiley & Sons,

Describe the project life cycle (PLC) and the systems

Define what a methodology is and describe the role it serves

Identify the phases and infrastructure that make up the IT

Develop and apply the concept of a projects measurable

Describe and be able to prepare a business case.

Distinguish between financial models and scoring models.

Describe the project selection process as well as the

Copyright 2012 John Wiley & Sons,

A system of broad principles or rules from which specific

Copyright 2012 John Wiley & Sons,

Information Technology Project Methodology

A strategic-level plan for managing and

Traditional (e.g., Waterfall)

The Project Life Cycle and IT

Project Life Cycle

Collection of logical stages or phases that maps

Tangible and verifiable product of work

Copyright 2012 John Wiley & Sons,

Phase Exits, Stage Gates, Kill Points

These are the phase-end review of key deliverables

Starting the next phase of a project before approval

Generic Project Life Cycle

Copyright 2012 John Wiley & Sons,

Project Life Cycle

Define Project Goal

The project goal should be focused on providing

Defines the agreed upon scope, schedule, and budget

Project Life Cycle

Execute Project Plan

Manage the project scope, schedule, budget, and

Ensures that all of the work is completed as

Copyright 2012 John Wiley & Sons,

Project Life Cycle

Lessons learned to determine those things to do

Copyright 2012 John Wiley & Sons,

Systems Development Life Cycle (SDLC)

Identifying and responding to a problem or

A closer look at the problem or opportunity

Copyright 2012 John Wiley & Sons,

Systems Development Life Cycle (SDLC)

The project team uses the requirements and to be

Maintenance and Support

The system is updated to respond to bugs, new features,

Copyright 2012 John Wiley & Sons,

Systems Development Life Cycle

Copyright 2012 John Wiley & Sons,

The Project Management Body of

Copyright 2012 John Wiley & Sons,

Phase 1: Conceptualize and Initialize

Copyright 2012 John Wiley & Sons,

Post mortem by project manager and team of

Copyright 2012 John Wiley & Sons,

IT Project Management Foundation

Copyright 2012 John Wiley & Sons,

IT Project Management Foundation

Project Management Knowledge Areas

Copyright 2012 John Wiley & Sons,