Chapter 4: Project Management and Planning

1. Chapter 4:Project Management and Planning Object-Oriented Systems Analysis and Design Joey F. George, Dinesh Batra, Joseph S. Valacich, Jeffrey A. Hoffer

2. Chapter Objectives • After studying this chapter you should be able to: • Describe methods for identifying/selecting projects • Steps involved in initiating, planning, and executing projects. • Explain the System Service Request (SRR) form, the Baseline Project Plan (BPP) documents, and the Statement of Work (SOW),

3. Chapter Objectives (Continued) • Describe several methods for feasibility assessment. • Describe tangible vs. intangible benefits and costs, and one-time vs. recurring costs. • Perform cost-benefit analysis by performing net present value (NPV), return on investment (ROI), and breakeven (BE) analysis. • Describe the activities and roles in a structured walkthrough.

5. Identifying Projects • Top-down initiatives: • Senior/top management • Steering/planning committees • Bottom-up initiatives: • Managers business units/departments • Development/information systems group

7. System Service Request (SSR) is a form requesting development or maintenance of an information system. It generally includes: - the requesting person/dept. - the type of request • - the urgency level • a problem statement- a service request description • an impact statement - a liaison contact information, - a sponsor name & signature • - a preliminary high level estimate of effort & dollars

8. Selecting Projects Each stakeholder group brings their own perspective and motivation to the IS decision/selection

10. Managing the ProjectInitiation & Planning Tasks

11. Feasibility Assessment • Economic feasibility • Technical feasibility • Operational feasibility • Schedule feasibility • Legal and contractual feasibility • Political feasibility

12. Economic Feasibility • Cost-benefit analysis – identify all the financial benefits and costs associated with a project • Benefits – Tangible and intangible • Costs – Tangible and intangible • Costs – One-time vs. recurring costs

13. Tangible Benefits

14. One-time Tangible Costs Recurring Tangible Costs

15. Financial measures for cost-benefit analysis

16. Net Present Value • Calculates time value of money. • Present Value (PV) is the value of future FVdollars n years from now, based on an interest rate of i. • PV = FV x1 / (1+i)n • The Discount rate is • 1 / (1+i)n • Net Present Value (NPV) is the sum of all PVof the benefits minus the costs across all the 1..n years. • NPV= sum of PV1..n (benefit – cost)

17. Net Present Value Example • My project will generate a benefit of $35,000 per year for the next 5 years, with a recurring cost of $20,000. The net cash flow per year is $15,000 • For year 3 (taken as an example), the present value of $15,000 at a 10% discount rate is $11,269.70 15,000 x 1 / (1 + .10) 3 = 11,269.70 • The Net Present Value for the project for all 5 years is the sum of the PVn for years 1, 2, 3 (bullet 2), 4 and 5 13,636 + 12,397 + 11,269 + 10,245 + 9,314 = 56,862

18. Return On Investment • Return on Investment (ROI) is a measure of profitability ratio. • It is the ratio of NPV of benefit to costROI = (NPV benefit – NPV cost) / NPV cost

19. Return On Investment Example • Over 5 yrs, my project will generate a PV of benefits of $100,000 (Of course this will have to be computed on a year by year basis) • Over the same period, the project will cost me a PV $55,000(Of course this will have to be computed on a year by year basis) • The Return on Investment is: (100,000 – 55,000) / 55,000 = .8181 or 81.81%

20. Break Even Analysis • Break Even Analysis (BEA) measures the time it takes a project to become profitable • To calculate a Break Even point: • For each year, keep track of PV benefit and PV cost • Compute net cash flow as (PV benefit – PV cost) • Accumulate the cash flow across the years • The year cash flow become positive, is the break even year

21. Break Even Analysis Example • The break even point is in year 3 • It is at (Cash Flow – Cumulative Cash Flow) / Cash Flow • (15,303 – 9,139) / 15,303=0.403 • The exact Break Even is: 2 years + 0.403 = 2.403years

23. Technical Feasibility • Assessing the organization’s ability to construct the proposed system • Takes into account various project risk factors, including: • Project size – the larger the project the riskier it will be • Project structure – stable requirements, management commitment • Development staff – familiarity with hardware/software & business • Client staff – familiarity with the business & development process

25. Other Feasibility & Risks • Operational • Will the system achieve the objectives of the project? • Schedule • Can the project be accomplished in a reasonable time frame? • Legal/Contractual • Are there contractual, legal or governmental obligations that affect the success of the project? • Organizational/Political • Will the project have user and management support? • Will there be resistance? Organizational in-fighting?

26. Baseline Project Plan (BPP) is a document intended primarily to guide the project development team. The BPP contains: - An introduction to the project - A description of the system- Feasibility assessments- List of management items including: team makeup, management, schedule, communication plan, etc.

27. The Baseline Project Plan - BPP The BPP contains the following sections: • Introduction • Project description, objectives, justification, project scope, resource requirements, constraints, expected delivery. • Description • System description, input, tasks, processes, output. • Alternative solutions considered. • Feasibility Assessments • A list of the various feasibilities undertaken and the risks. • Management Items • Defining team members, communication plan, schedule and resources, standards & procedures, review processes, etc.

28. Project Scope statement is a separate document and will be included as part of the BPP.It describes the system, and identifies:- the problem/opportunity - the project objectives- the businessbenefits- the various deliverables- and expected duration

29. Statement of Work - SOW • Another artifact in project planning and initiation is a Statement of Work (SOW) document • If system will be developed internally, the SOW will be a short high level summary document prepared for the user management. • If system will be developed externally, or using consultants, the SOW will be more formal/detailed. • The purpose of an SOW is to • Identify the project goals and objectives • What the project will deliver • The workandphasesthat will be completed • Thestart date and completiondate • The estimated effort / resources involved

30. Statement of Work - SOW Statement of Work (SOW) is a “contract” between the IT staff and the customer regarding deliverables and time estimates for a system development project

31. What is a Structured Walkthrough? • A peer-group review of any product created during the system development process • Intent: ensure quality, review standards and share knowledge • Individuals attending can have the following roles: presenter, reviewer, architect, DBA, etc. • The process can be applied to the BPP, system specifications, system architecture, logical and physical designs, program code, test procedures, training manuals and documentation

32. Recap • After studying this chapter we learned to: • Select, initiate, plan, and execute projects. • Understand SSR, SOW, and BPP documents. • Perform feasibility assessment. • Perform cost-benefit analysis. • Perform structured walkthroughs.