Strategic IT Project Selection: Methods & Criteria

1. Project Management Project Initiation & Selecting

2. Session Objectives • Project initiation • Selecting Projects • Project Charter • Washington Mercy Hospital case study

3. Project Management Processes & IT PM Phases

4. Project Initiation: Strategic Planning • First step in initiating projects: look at the big picture, organization’s strategic plan • Strategic planning involves determining long-term business objectives • IT projects should (must) support strategic & financial business objectives

5. Schwalbe: Why Firms Invest in IT

6. Identifying Potential Projects • Many organizations follow a planning process for selecting IT projects • First develop an IT strategic plan based on organization’s overall strategic plan • Then perform business area analysis • Then define potential projects • Then select IT projects & assign resources

7. IT Planning Process

8. Selecting Projects • Usually more projects than time & resources available to implement them • Important to follow logical process for selecting IT projects to work on • Methods include focusing on broad needs, categorizing projects, financial methods & weighted scoring models

9. Focus on Broad Organizational Needs • Often difficult to provide strong justification for many IT projects, but everyone agrees they have a high value • “It is better to measure gold roughly than to count pennies precisely” • Three important criteria for projects: • There is aneedfor project • There arefunds available • There’s a strong will to make project succeed

10. Financial Analysis of Projects • Financial considerations are often an important consideration in selecting projects • Three primary methods for determining the projected financial value of projects: • Net present value (NPV) analysis • Return on investment (ROI) • Payback analysis

11. Net Present Value Analysis • Net present value (NPV) analysis: method of calculating expected net monetary gain or loss from project by discounting all expected future cash inflows & outflows to present point in time • Projects with positive NPV should be considered if financial value is key criterion • The higher the NPV, the better

12. Schwalbe: Net Present Value Example Excel file

13. Weighted Scoring Model • Weighted scoring model: provides systematic process for selecting projects based on multiple criteria • First identify criteria important to project selection process • Then assign weights (percentages) to each criterion so they add up to 100% • Then assign scores to each criterion for each project • Multiply the scores by weights and get total weighted scores • The higher the weighted score, the better

14. Schwalbe: Sample Weighted Scoring Model for Project Selection Excel file

15. Selecting Projects (cont.) • Buss’ Grid Approach • project selection team • grids with criteria, high-medium-low • criteria generally financial, technical, enhancing core competencies, organizational fit against cost • review proposals, then quick collective judgment • Poor Man’s Hierarchy • grid with criteria • compare each project against each other project • assign 1 or 0, sum results Frame

16. Project Charters • After deciding what project to work on, it’s important to formalize projects • Project Charter is document formally recognizing existence of project & provides direction on project’s objectives & management • Key project stakeholders should sign project charter to acknowledge agreement on need & intent of project

17. Project Charters • Unfortunately authors disagree on the details: • Schwalbe • Marchewka • Verzuh

18. Schwalbe: Sample Project Charter

19. Schwalbe: Sample Project Charter (cont.) Roles and Responsibilities:

20. Purpose of Project Charter (Marchewka) more comprehensive approach • Document the project MOV • Define project infrastructure • Summarize details of project plan • Define roles and responsibilities • Show explicit commitment to project • Set out project control mechanisms

21. What Should be in a Project Charter? • Project Identification • Project Stakeholders • Project Description • Measurable Organizational Value (MOV)

22. What Should be in Project Charter? – cont’d • Project Scope • Project Schedule • Project Budget • Quality Issues • Resources

23. What Should be in a Project Charter?– cont’d • Assumptions and Risks • Project Administration • Acceptance and Approval • References • Terminology

24. Project Rules (Verzuh #4) • Project success demands • goals agreed by all stakeholders • control of scope • management support • Project charter • brief, high level document formally establishing project • understood & signed by all key stakeholders

25. Project Rules (cont.) • Statement of Work (SOW) • NOT usual usage of term • per Verzuh establishes rules of game • goals, constraints, success criteria • negotiate, formally agree • ahead of game? • why not part of planning phase?

26. Project Planning Framework

27. Scope Planning and the Scope Statement • A scope statement is a document used to develop and confirm a common understanding of the project scope. It should include • a project justification • a brief description of the project’s products • a summary of all project deliverables • a statement of what determines project success

28. Establish Initiate • Charter establishes project • Next must compete with other projects for scarce resources • Prioritize – go or no go? • Go ahead • Begin Analysis Phase • needs requirements • detailed SOW

29. Washington Mercy Hospital Case Study • Hospital contract with DCS • State of art patient info system • <3 sec response • Add ambulatory surgery center • Goes to arbitration • Management & project issues • Technical issues • Blame – responsibility?