Project Management Introduction PDF

Chapter 1 Introduction to Project Management Prof. Rashed Salem  Introduction The world as a whole spends nearly $10 trillion of its $40.7 trillion gross product on projects of all kinds More than 16 million people regard project management as their profession...

Chapter 1 Introduction to Project Management Prof. Rashed Salem  Introduction The world as a whole spends nearly $10 trillion of its $40.7 trillion gross product on projects of all kinds More than 16 million people regard project management as their profession 2  Motivation for Studying Information Technology (IT) Project Management IT Projects have a terrible track record, as described in the “What Went Wrong?” 3  Advantages of Using Formal Project Management Better control of financial, physical, and human resources Improved customer relations Shorter development times Lower costs Higher quality and increased reliability Higher profit margins Improved productivity Better internal coordination Higher worker morale 4 What Is a Project? A project is “a temporary endeavor undertaken to create a unique product, service, or result” (PMBOK® Guide, Fifth Edition, 2012) 5 Project Attributes A project has a unique purpose is temporary is developed using progressive elaboration requires resources, often from various areas should have a primary customer or sponsor The project sponsor usually provides the direction and funding for the project involves uncertainty 6 Project and Program Managers Project managers work with project sponsors, project team, and other people involved in a project to meet project goals Program: group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually (PMBOK® Guide, Fifth Edition, 2012) 7 Program and Project Portfolio Management A program is “a group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually” (PMBOK® Guide, Fifth Edition, 2012) A program manager provides leadership and direction for the project managers heading the projects within the program 8 PM Network: What’s in a Name? Programs vs. Projects Should there be a difference? What are the problems with labeling a program as a large project? Are different skills needed to be a program manager compared to a project manager? 9 Project Portfolio Management Organizations group and manage projects and programs as a portfolio of investments that contribute to the entire enterprise’s success 10 Sample Project Portfolio Approach 11 Figure 1-5. Sample Project Portfolio Management Screen Showing Portfolio Optimization 12 Project Management Offices A Project Management Office (PMO) is an organizational group responsible for coordinating the project management function throughout an organization 13 PM Network - PMO 2.0 Why do PMOs fail? What is the primary reason cited for failure? How do you resurrect a failed PMO? How do you ensure longevity of a PMO? When should a PMO just be closed? 14 The Triple Constraint of Project Management 15  What is Project Management? “the application of knowledge, skills, tools and techniques to project activities to meet project requirements” (PMBOK® Guide, Fourth Edition, 2012) Stakeholders Core Functions Facilitating 16 Functions Project Management Knowledge Areas Knowledge areas describe the key competencies that project managers must develop Core Functions Facilitating Functions Integration Function 17  Project Management Tools and Techniques Project management tools and techniques assist project managers and their teams in various aspects of project management network diagram Gantt chart 18  Project Stakeholders Stakeholders are the people involved in or affected by project activities Who are the stakeholders in a project? 19  What Went Right? Improved Project Performance 40% 35% 30% 37% 31% 25% 20% 1994 21% 2010 15% 10% 16% 5% 0% Successful IT Failed Why the Improvements? 20  Improved Project Performance Growth in PMP Certification, 1993-2011 Coincidence? 21 Project Success There are several ways to define project success: Triple Constraint Customer/Sponsor Satisfaction The results of the project met its main objective 22 What Helps Projects Succeed?* 1. User involvement 2. Executive support 3. Clear business objectives 4. Emotional maturity 5. Optimizing scope 6. Agile process 7. Project management expertise 8. Skilled resources 9. Execution 10. Tools and infrastructure 23 *The Standish Group, “CHAOS Activity News” (August 2011). The Role of the Project Manager Job descriptions vary, but most include responsibilities like planning, scheduling, coordinating, and working with people to achieve project goals Remember that 97% of successful projects were led by experienced project managers, who can often help influence success factors 24 Suggested Skills for Project Managers The Project Management Body of Knowledge Application area knowledge, standards, and regulations Project environment knowledge General management knowledge and skills Soft skills or human relations skills 25  Ten Most Important Skills and Competencies for Project Managers 1. People skills 2. Leadership 3. Listening 4. Integrity, ethical behavior, consistent 5. Strong at building trust 6. Verbal communication 7. Strong at building teams 8. Conflict resolution, conflict management 9. Critical thinking, problem solving 10. Understands, balances priorities 26 Importance of Leadership Skills Effective project managers provide leadership by example A leader focuses on long-term goals and big- picture objectives while inspiring people to reach those goals A manager deals with the day-to-day details of meeting specific goals Project managers often take on the role of both leader and manager 27 Different Skills Needed in Different Situations Large projects High uncertainty projects Very novel projects 28 Careers for IT Project Managers In a 2012 survey, IT Employees Rank executives listed the “nine Total Current Growth Rank Job Categories hottest skills” they Big Data / Analyst 6 1 planned to hire for in Business/Systems 3 3 Analyst Database Admin / 7 (tie) 3 (tie) 2013 Analyst Networks / Security 5 5 Project management was Project Management 4 2 second only to 2 6 Software Development 1 7 programming and Other IT Skills( Primarily Help Desk) application development 29  Nine Hottest Skills* Skill Percentage of Respondents Programming and application development 60% Project management 44% Help desk/technical support 35% Networking 35% Business intelligence 23% Data center 18% Web 2.0 18% Security 17% Telecommunications 9% *Source: Rick Saia, “9 Hot IT Skills for 2012,” Computerworld, September 26, 2011. 30 The Project Management Profession The profession of project management is growing at a very rapid pace It is helpful to understand the history of the field, the role of professional societies like the Project Management Institute, and the growth in project management software 31 Global Issues Several global dynamics are forcing organizations to rethink their practices: Talent development for project and program managers is a top concern Good project portfolio management is crucial in tight economic conditions Basic project management techniques are core competencies Organizations want to use more agile approaches to project management Benefits realization of projects is a key metric 32 Project Management Certification The Project Management Institute (PMI) is an international professional society for project managers with 380,000 members worldwide in 2012 Project Management Professional (PMP) has documented sufficient project experience, agreed to follow a code of ethics, and passed the PMP exam Certified Associate in PM (CAPM) is achievable with less experience CompTIA offers another certification option CompTIA Project+ has less requirements but is not as well recognized as PMP 33 Ethics in Project Management Ethics, loosely defined, is a set of principles that guide our decision making based on personal values of what is “right” and “wrong” Project managers often face ethical dilemmas In order to earn PMP certification, applicants must agree to PMI’s Code of Ethics and Professional Conduct Several questions on the PMP exam are related to professional responsibility, including ethics 34  Project Management Software There are hundreds of different products to assist in performing project management Three main categories of tools: Low-end tools Midrange tools High-end tools 35  Project Management Software Various software includes: BaseCamp Clarizen Collabtive (open source) dotProject (open source) OneDesk Genius Inside PlanBox 36 Course Outline Chapters 1-3 Introduction to project management Project Management Framework Chapters 4-13 Project Management Knowledge Areas Includes integration, scope, time, cost, quality, human resource, communication, risk, procurement, and stakeholder management Healthcare IT Project Management  Class Summary Project Definition Difference between project, program and portfolio Project Management Office Certification Opportunities PMI/PMP CompTIA 38  Chapter 2 Project Management & Information Technology Prof. Rashed Salem Learning Objectives Describe the systems view of project management and how it applies to information technology (IT) projects Understand organizations, including the four frames, organizational structures, and organizational culture Explain why stakeholder management and top management commitment are critical for a project’s success Information Technology Project Management, 2 Seventh Edition Learning Objectives Understand the concept of a project phase and the project life cycle, and distinguish between project development and product development Discuss the unique attributes and diverse nature of IT projects Describe recent trends affecting IT project management, including globalization, outsourcing, virtual teams, and agile project management Information Technology Project Management, 3 Seventh Edition Projects Cannot Be Run In Isolation Projects must operate in a broad organizational environment Project managers need to use systems thinking Senior managers must make sure projects continue to support current business needs 4 A Systems View of Project Management A systems approach emerged in the 1950s to describe a more analytical approach to management and problem solving Includes: Systems philosophy Systems analysis Systems management 5 Three Sphere Model for Systems Management Information Technology Project Management, 6 Seventh Edition Perspectives on Organizations Information Technology Project Management, 7 Seventh Edition  What Went Wrong? In a paper titled “A Study in Project Failure,” two researchers examined the success and failure of 214 IT projects over an eight-year period in several European countries. The researchers found that only one in eight (12.5 percent) were considered successful in terms of meeting scope, time, and cost goals. The authors said that the culture within many organizations is often to blame Among other things, people often do not discuss important leadership, stakeholder, and risk management issues Information Technology Project Management, 8 Seventh Edition  Factors Influencing IT Project Management Organizational Structure Organizational Culture Top Management Commitment Stakeholder Management Commitment to IT IT Governance/Organizational Standards 9 Organizational Structures 3 basic organization structures Functional Project Matrix 10 Organizational Structure Influences on Projects Information Technology Project Management, 11 Seventh Edition Organizational Culture Organizational culture is a set of shared assumptions, values, and behaviors that characterize the functioning of an organization Characteristics of Org. Culture Member identity* Risk tolerance* Group emphasis* Reward criteria* People focus Conflict tolerance* Unit integration* Means-ends orientation Control Open-systems focus* 12 Top Management Commitment People in top management positions are key stakeholders in projects A very important factor in helping project managers successfully lead projects is the level of commitment and support they receive from top management How does Top Management help a project? 13  Stakeholder Management Project managers must take time to identify, understand, and manage relationships with all project stakeholders Using the four frames of organizations can help meet stakeholder needs and expectations Who is often considered one of the most important stakeholders? 14 Organizational Commitment to IT If the organization has a negative attitude toward IT, it will be difficult for an IT project to succeed Having a Chief Information Officer (CIO) at a high level in the organization helps IT projects Assigning non-IT people to IT projects also encourage more commitment Information Technology Project Management, 15 Seventh Edition IT Governance / Standards IT governance addresses the authority and control for key IT activities in organizations, including IT infrastructure, IT use, and project management Standards PMO or simply having templates/forms Example: Texas Tech IT PM Standards 16 Project Phases and the Project Life Cycle A project life cycle is a collection of project phases that defines what work will be performed in each phase what deliverables will be produced and when who is involved in each phase, and how management will control and approve work produced in each phase A deliverable is a product or service produced or provided as part of a project Information Technology Project Management, 17 Seventh Edition Phases of the Traditional Project Life Cycle 18  Product Life Cycles The Systems Development Life Cycle (SDLC) is a framework for describing the phases involved in developing and maintaining information systems Systems development projects can follow Predictive life cycle Adaptive Software Development (ASD) life cycle 19 Examples of Predictive Life Cycle Models Waterfall model Spiral model Incremental build model Prototyping model Rapid Application Development (RAD) model 20 Agile Software Development Agile software development has become popular to describe new approaches that focus on close collaboration between programming teams and business experts 21 The Importance of Project Phases and Management Reviews A project should successfully pass through each of the project phases in order to continue on to the next Management reviews, also called phase exits or kill points, should occur after each phase to evaluate the project’s progress, likely success, and continued compatibility with organizational goals 22 What Went Right? "The real improvement that I saw was in our ability toin the words of Thomas Edisonknow when to stop beating a dead horse.…Edison's key to success was that he failed fairly often; but as he said, he could recognize a dead horse before it started to smell...In information technology we ride dead horsesfailing projectsa long time before we give up. But what we are seeing now is that we are able to get off them; able to reduce cost overrun and time overrun. That's where the major impact came on the success rate.”* Many organizations, like Huntington Bancshares, Inc., use an executive steering committee to help keep projects on track. *Cabanis, Jeannette, "'A Major Impact': The Standish Group's Jim Johnson On Project Management and IT Project Success," PM Network, PMI, Sep.1998, p23.7 The Context of IT Projects Diverse in terms of size, complexity, products produced, application area, and resource requirements Diverse IT Project Team Members Diverse Technologies 24 Article: Tech Project and Direction What have they been doing due to the recession and what direction are the moving into? What are some of the top projects? What industries are seeing growth in major IT projects? 25 Article: Project Management & Software Development Software development projects have distinct characteristics not found in other projects Based on the article, what are some of these characteristics? Which did you feel was the number one mistake a PM could do in software development projects? 26  Closer to home….State Projects Were state IT projects considered to be successful? What were some of the main issues with state IT projects? What are the recommendations for the review board? Do you feel these are sufficient to fix the issues? Information Technology Project Management, 27 Seventh Edition  Improving Likelihood of Success for IT Projects Value-Driven Approach Socio-Technical Approach Commit to Project Management Principles (Chaos Report) Knowledge-Management Approach 28 Recent Trends Affecting IT Project Management Globalization Outsourcing Virtual teams Information Technology Project Management, 29 Seventh Edition Important Issues and Suggestions Related to Globalization Issues Communications Trust Common work practices Tools Suggestions Employ greater project discipline Think global but act local Keep project momentum going Use newer tools and technology 30  Outsourcing Organizations remain competitive by using outsourcing to their advantage, such as finding ways to reduce costs Their next challenge is to make strategic IT investments with outsourcing by improving their enterprise architecture to ensure that IT infrastructure and business processes are integrated and standardized 31 Virtual Teams: Advantages/Disadvantages Advantages: Increasing competiveness and responsiveness Lowering costs Increased expertise and flexibility Increased work/life balance Disadvantages: Isolation &Interpersonal Relationships Communication Problems Dependence on Technology 32  Approaches and Philosophy eXtreme Project Management (XPM) Holistic veiw of planning and managing Projects don’t always fit traditional scheduling and formal techniques (they are chaotic) Focuses on the “human side” of PM Agile Project Management Iterative, incremental approach Popular http://www.pmi.org/Certification/New-PMI-Agile- Certification.aspx 33 Discussion Given our past two lectures, do you feel it is harder to manage an IT project compared to a traditional project? Name a few approaches you would use to manage stakeholders. Information Technology Project Management, 34 Seventh Edition Chapter Summary Systems approach when working on projects Organization frames: structural, human resources, political, and symbolic Project managers need to consider several factors due to the unique context of information technology projects Recent trends affecting IT project management include globalization, outsourcing, virtual teams, and Agile Information Technology Project Management, 35 Seventh Edition  Chapter 3.1 Agile Project Management Prof. Rashed Salem  Agile Project Management “Gartner predicts that by the end of 2012, agile development will be used on 80% of all software development projects.” What does this mean? Why is it gaining popularity? Gaining ground in PM community with certifications APMG-International PMI – Agile Certified Practitioner Certified Scrum Master 2 Agile Makes Sense for Some Projects, But Not All “Agile will be seen for what it is … and isn’t …. Project management organizations embracing Agile software and product development approaches will continue to grow while being faced with the challenge of demonstrating ROI through Agile adoption.”* When not to use Agile PM *J. Leroy Ward, “The Top Ten Project Management Trends for 2011,” projecttimes.co3m (January 24, 2011). Agile Makes Sense for Some Projects, But Not All Not 4 3 Clear Goal (ends) Clear 1 2 Not Clear Clear Solution (means) *Fernandez & Fernandez (2009), “Agile Project Management – Agilism versus Traditional Approach,” Journal of Computer Information Systems. 4  PM Network: At Odds? Myths surrounding Agile PM: Agile is All or Nothing Impacts are only felt in Development Dept. PM Principles are at odds with Agile 5  Manifesto for Agile Software Development “We are uncovering better ways of developing software by doing it and helping others do it. Through this work we have come to value: Individuals and interactions over processes and tools Working software over comprehensive documentation Customer collaboration over contract negotiation Responding to change over following a plan *Agile Manifesto, www.agilemanifesto.org. 6  7 From: https://platinumedge.com/blog/agile-roadmap-to-value  Scrum According to the Scrum Alliance, Scrum is the leading agile development method for completing projects with a complex, innovative scope of work. (State of Scrum Report) 8  Scrum Roles Primary Roles Product owner ScrumMaster Scrum team or development team Other potential Roles Stakeholders Agile mentor Scrum Artifacts An artifact is a useful object created by people Scrum artifacts include: Product backlog Sprint backlog Burndown chart Information Technology Project 10 Management, Seventh Edition  Scrum Ceremonies Sprint planning session Daily Scrum Sprint reviews Sprint retrospectives Information Technology Project 11 Management, Seventh Edition Scrum Framework Information Technology Project Management, 12 Seventh Edition Product Backlog From jazz.net Sprint Backlog From www.scrumalliance.com Product vs. Sprint Backlog Item Product Backlog Sprint Backlog Level of detail Less detailed Very detailed Estimation units Story Points Hours Document ownership Product Owner Team Revised Weekly Daily Duration Project Sprint Workbook Product Backlog workbook Iteration Backlog workbook From msdn.microsoft.com Burndown Chart PM Network: Agile to the Rescue How was this an Agile Project? What does Holacracy mean in projects? What were some of the roadblocks to using Agile methodologies in Chile? Information Technology Project Management, 17 Seventh Edition Agile, the PMBOK® Guide, and a New Certification The PMBOK® Guide describes best practices for what should be done to manage projects. Agile is a methodology that describes how to manage projects. The Project Management Institute (PMI) recognized the increased interest in Agile, and introduced a new certification in 2011 called Agile Certified Practitioner (ACP). Information Technology Project Management, 18 Seventh Edition  Chapter 3.2 Process Groups: Case Study Information Technology Project Management, Seventh Edition  Project Management Process Groups Project management process groups include initiating processes planning processes executing processes monitoring and controlling processes closing processes 2 Percentage of Time Spent on Each Process Group Information Technology Project Management, 3 Seventh Edition  IRS and PM Process Philip A. Pell, PMP, commented on how the U.S. IRS needed to improve its project management process. “Pure and simple, good, methodology-centric, predictable, and repeatable project management is the SINGLE greatest factor in the success (or in this case failure) of any project… The project manager is ultimately responsible for the success or failure of the project.”* U.S. Internal Revenue Service (IRS) *Comments posted on CIO Magazine Web site on article “For the IRS, There’s No EZ Fix,” (April 1, 2004). 4 Information Technology Project Management, Seventh Edition  Process Groups & Knowledge Areas Process groups vs. knowledge areas Knowledge areas cross the various process groups including some key distinctions Planning Process includes all KAs Emphasis on planning Integration Management Knowledge Areas crosses all processes 5 Information Technology Project Management, Seventh Edition Project Management Process Groups and Knowledge Area Mapping 6 Project Management Process Groups and Knowledge Area Mapping 7  Developing an IT Project Management Methodology A methodology describes how things should be done; a standard describes what should be done Project mgmt methodologies: PRINCE2 : This is a structured and flexible approach that emphasizes control and accountability. Agile: This is an iterative and incremental approach that focuses on flexibility and adaptability. RUP: (Rational Unified Process): This is a phased approach that emphasizes software development. Six Sigma: This is a data-driven approach that focuses on quality improvement. 8  Case Study: JWD Consulting’s Project Management Intranet Site Case Background PM, Sponsor, Stakeholders Project Description The acronym “JWD” stands for “Just What’s Needed” Consulting. 9  Project Pre-initiation Senior managers often perform several pre- initiation tasks, including the following: Determine the scope, time, and cost constraints for the project Identify the project sponsor Select the project manager Develop a business case for a project Meet with the project manager to review the process and expectations for managing the project Determine if the project should be divided into two or more smaller projects 10  JWD Pre-initiation What did JWD do for Pre-Initiation? 11 Project Initiation Initiating a project includes recognizing and starting a new project or project phase 12 JWD Project Charters and Kick-off Meetings Charters are normally short and include key project information and stakeholder signatures Kick-Off Meeting 13 JWD Stakeholder Mgmt Output: Register and Strategy Register Management 15 Strategy Project Planning Primary Purpose: Guide Execution Every knowledge area includes planning information Key outputs included in the JWD project. Document Location PM Software Wiki 15 Figure 3-4. JWD Consulting Intranet Site Project Baseline Gantt Chart 16  List of Prioritized Risks 17 Information Technology Project Management, Seventh Edition  Project Executing Usually takes the most time and resources JWD Milestone Report 18 Information Technology Project Management, Seventh Edition  Execution processes Acquiring project team and resources to carry out various plans and various tasks Conduct procurement Manage stakeholder expectations Produce product, services, or results of the project or phase Perform quality assurance 19  Project Monitoring and Controlling Involves measuring progress toward project objectives, monitoring deviation from the plan, and taking correction actions Measure progress against all plans Take corrective actions when there is deviation Ensure that progress meet project objectives Ensure that the project meets stakeholders’ needs and quality standards Reporting performance to stakeholders Stakeholder can identify any necessary changes to keep project on track 20 Information Technology Project Management, Seventh Edition  Project Closing Involves gaining stakeholder and customer acceptance of the final products and services End the project efficiently Archiving project files Closing out contracts Document lessons learned Receiving formal acceptance of the delivered work from customers 21 Information Technology Project Management, Seventh Edition Chapter Summary The five project management process groups are initiating, planning, executing, monitoring and controlling, and closing Information Technology Project Management Note: See the text itself for full citations. Copyright 2014 2  Project integration management involves coordinating all of the other project management knowledge areas throughout a project’s life cycle.  Many new project managers have trouble looking at the “big picture” and want to focus on too many details (See opening case for a real example)  Project integration management is not the same thing as software integration Copyright 2014 3 1. Developing the project charter involves working with stakeholders to create the document that formally authorizes a project—the charter. 2. Developing the project management plan involves coordinating all planning efforts to create a consistent, coherent document—the project management plan. 3. Directing and managing project work involves carrying out the project management plan by performing the activities included in it. Copyright 2014 4 4. Managing project knowledge involves using existing knowledge and creating new knowledge to achieve project objectives while also contributing to organizational learning. 5. Monitoring and controlling project work involves overseeing activities to meet the performance objectives of the project 6. Performing integrated change control involves identifying, evaluating, and managing changes throughout the project life cycle. 7. Closing the project or phase involves finalizing all activities to formally close the project or phase. Copyright 2014 5 Copyright 2014 6  Strategic planning involves determining long-term objectives, predicting future trends, and projecting the need for new products and services  Organizations often perform a SWOT analysis ◦ analyzing Strengths, Weaknesses, Opportunities, and Threats  As part of strategic planning, organizations ◦ identify potential projects ◦ use realistic methods to select which projects to work on (ex. Weight scoring model, Net present value NPV analysis) ◦ formalize project initiation by issuing a project charter Copyright 2014 7   There are usually more projects than available time and resources to implement them  Methods for selecting projects include: ◦ Focusing on broad organizational needs ◦ Categorizing information technology projects ◦ Performing net present value or other financial analyses ◦ Using a weighted scoring model ◦ Implementing a balanced scorecard 8 Copyright 2014   It is 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 a need for the project ◦ There are funds available ◦ There’s a strong will to make the project succeed 9 Copyright 2014   One categorization is whether the project addresses: ◦ A problem ◦ An opportunity ◦ A directive  Another categorization is how long it will take to do and when it is needed  Another is the overall priority of the project 10 Copyright 2014   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 Copyright 2014   Net present value (NPV) analysis is a method of calculating the expected net monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time  Projects with a positive NPV should be considered if financial value is a key criterion  The higher the NPV, the better 12 Copyright 2014  Note that totals are equal, but NPVs are not because of the time value of money 13 Information Technology Project Management, Fifth Edition, Copyright 2007 13 Multiply by the discount factor each year, then take cum. benefits – costs to get NPV Note: See the template called business_case_financials.xls 14 Information Technology Project Management, Fifth Edition, Copyright 2007 14   Determine estimated costs and benefits for the life of the project and the products it produces  Determine the discount rate (check with your organization on what to use)  Calculate the NPV (see text for details)  Note: Some organizations consider the investment year as year 0, while others start in year 1; some people enter costs as negative numbers, while others do not ◦ Check with your organization for their preferences 15 Copyright 2014   Return on investment (ROI) is calculated by subtracting the project costs from the benefits and then dividing by the costs ROI = (total discounted benefits - total discounted costs) / discounted costs  The higher the ROI, the better  Many organizations have a required rate of return or minimum acceptable rate of return on investment for projects  Internal rate of return (IRR) can by calculated by finding the discount rate that makes the NPV equal to zero 16 Copyright 2014   Another important financial consideration is payback analysis  The payback period is the amount of time it will take to recoup, in the form of net cash inflows, the total dollars invested in a project  Payback occurs when the net cumulative discounted benefits equals the costs  Many organizations want IT projects to have a fairly short payback period 17 Copyright 2014 18 Information Technology Project Management, Fifth Edition, Copyright 2007 18   A weighted scoring model is a tool that provides a systematic process for selecting projects based on many criteria 1. Identify criteria important to the project selection process 2. Assign weights (percentages) to each criterion so they add up to 100% 3. Assign scores to each criterion for each project 4. Multiply the scores by the weights and get the total weighted scores  The higher the weighted score, the better 19 Copyright 2014 20 Information Technology Project Management, Fifth Edition, Copyright 2007 20   Drs. Robert Kaplan and David Norton developed this approach to help select and manage projects that align with business strategy  A balanced scorecard: ◦ Is a methodology that converts an organization’s value drivers, such as customer service, innovation, operational efficiency, and financial performance, to a series of defined metrics  See www.balancedscorecard.org for more information 21 Copyright 2014  After deciding what project to work on, it is important to let the rest of the organization know  A project charter is a document that formally recognizes the existence of a project and provides direction on the project’s objectives and management  Key project stakeholders should sign a project charter to acknowledge agreement on the need and intent of the project; a signed charter is a key output of project integration management Copyright 2014 22  A project statement of work: a document that describes the products or services to be created by the project  A business case: many projects require a business case to justify their investment. Information in the business case, such as the project objective, high-level requirements, and time and cost goals, is included in the project charter.  Agreements  Enterprise environmental factors including governments or industry standards  Organizational process assets, which include formal and informal plans, policies, procedures, guidelines, information systems, financial systems, management systems, lessons learned, and historical information Copyright 2014 23 Copyright 2014 24 Copyright 2014 25  A project management plan is a document used to coordinate all project planning documents and help guide a project’s execution and control  Plans created in the other knowledge areas are subsidiary parts of the overall project management plan Copyright 2014 26  Introduction or overview of the project  Description of how the project is organized  Management and technical processes used on the project  Work to be done, schedule, and budget information Copyright 2014 27  Involves managing and performing the work described in the project management plan  The majority of time and money is usually spent on execution Copyright 2014 28  Project planning and execution are intertwined and inseparable activities  Those who will do the work should help to plan the work  Project managers must solicit input from the team to develop realistic plans Copyright 2014 29  Project managers must lead by example to demonstrate the importance of creating and then following good project plans  Organizational culture can help project execution by ◦ providing guidelines and templates ◦ tracking performance based on plans  Project managers may still need to break the rules to meet project goals, and senior managers must support those actions Copyright 2014 30  It is often helpful for IT project managers to have prior technical experience  On small projects, the project manager may be required to perform some of the technical work or mentor team members to complete the projects  On large projects, the project manager must understand the business and application area of the project Copyright 2014 31  Expert judgment: Experts can help project managers and their teams make many decisions related to project execution  Meetings: Meetings allow people to develop relationships, pick up on important body language or tone of voice, and have a dialogue to help resolve problems.  Project management information systems: There are hundreds of project management software products available on the market today, and many organizations are moving toward powerful enterprise project management systems that are accessible via the Internet Copyright 2014 32  Basic types of knowledge ◦ Explicit knowledge: easily explained using words, pictures, or numbers and is easy to communicate, store, and distribute ◦ Tacit knowledge: difficult to express and highly personal  Knowledge management should be done before, during, and after projects are completed ◦ Often very difficult to accomplish Copyright 2014 33  Changes are inevitable on most projects, so it’s important to develop and follow a process to monitor and control changes  Monitoring project work includes collecting, measuring, and disseminating performance information  A baseline is the approved project management plan plus approved changes Copyright 2014 34  Integrated change control involves identifying, evaluating, and managing changes throughout the project life cycle.  Three main objectives are: ◦ Influencing the factors that create changes to ensure that changes are beneficial ◦ Determining that a change has occurred ◦ Managing actual changes as they occur Copyright 2014 35  Former view: The project team should strive to do exactly what was planned on time and within budget  Problem: Stakeholders rarely agreed up-front on the project scope, and time and cost estimates were inaccurate  Modern view: Project management is a process of constant communication and negotiation  Solution: Changes are often beneficial, and the project team should plan for them Copyright 2014 36  A change control system is a formal, documented process that describes when and how official project documents and work may be changed  Describes who is authorized to make changes and how to make them Copyright 2014 37  A change control board is a formal group of people responsible for approving or rejecting changes on a project  CCBs provide guidelines for preparing change requests, evaluate change requests, and manage the implementation of approved changes  Includes stakeholders from the entire organization Copyright 2014 38  Some CCBs only meet occasionally, so it may take too long for changes to occur  Some organizations have policies in place for time-sensitive changes ◦ “48-hour policy” allows project team members to make decisions, then they have 48 hours to reverse the decision pending senior management approval ◦ Delegate changes to the lowest level possible, but keep everyone informed of changes Copyright 2014 39  Configuration management ensures that the descriptions of the project’s products are correct and complete  Involves identifying and controlling the functional and physical design characteristics of products and their support documentation Copyright 2014 40  To close a project or phase, you must finalize all activities and transfer the completed or cancelled work to the appropriate people  Main outputs include ◦ Final product, service, or result transition ◦ Organizational process asset updates Copyright 2014 41  Several types of software can be used to assist in project integration management ◦ Documents can be created with word processing software ◦ Presentations are created with presentation software ◦ Tracking can be done with spreadsheets or databases ◦ Communication software like e-mail and Web authoring tools facilitate communications ◦ Project management software can pull everything together and show detailed and summarized information ◦ Business Service Management (BSM) tools track the execution of business process flows Copyright 2014 42  Project integration management involves coordinating all of the other knowledge areas throughout a project’s life cycle  Main processes include ◦ Develop the project charter ◦ Develop the project management plan ◦ Direct and manage project execution ◦ Manage project Knowledge ◦ Monitor and control project work ◦ Perform integrated change control ◦ Close the project or phase Copyright 2014 43  Chapter 5.2 PMI Knowledge Areas Project Scope Management What is Project Scope Management? Scope refers to all the work involved in creating the products of the project and the processes used to create them 2 Copyright 2014 Project Scope Management Processes Process Integration Management Major Group Process Output Scope Mgmt Plan P1: Plan Scope Management Requirement Mgmt Plan Req. Documentation P2: Collect Requirements Req. Traceability Matrix Planning Project Scope Stmt P3: Define Scope Project Docs Update Scope Baseline P4: Create WBS Project Docs Update Accept Deliverables MC1: Validate Scope Change Requests Monitoring Work Performance Info and Controlling Change Requests MC2: Control Scope Project Mgmt Plan Updates 3 Org, Process Asset Updates Copyright 2014 Project Scope Management Processes Planning scope Collecting requirements Defining scope Creating the WBS Validating scope Controlling scope 4 Copyright 2014 P4: Creating the Work Breakdown Structure (WBS) A WBS is a deliverable-oriented grouping of the work involved in a project that defines the total scope of the project 5 Copyright 2014 P4: Sample Intranet WBS (Organized by Product ) 6 Copyright 2014 P4: Sample Intranet WBS (Organized by Phase) 7 Copyright 2014 P4: Sample Intranet WBS (Organized by Phase) Level 2 Level 3 Level 4 8 Copyright 2014 PMI Practice Standard for WBS 100 % Rule WBS should include 100% of the work defined by the project scope and capture ALL deliverables (internal, external, interim) in terms of work to be completed 9 Copyright 2014 P4: Intranet WBS and Gantt Chart in MS Project 10 Copyright 2014 P4: Intranet Gantt Chart Organized by Project Management Process Groups 11 Copyright 2014 P4: Executing Tasks for JWD Consulting’s WBS 12 Copyright 2014  Approaches to Developing a WBS Using guidelines: Some organizations, like the DOD, provide guidelines for preparing WBSs analogy approach top-down approach bottom-up approach Mind-mapping approach 13 Copyright 2014 Figure 5-7. Sample Mind-Mapping Approach for Creating a WBS 14 Copyright 2014 Figure 5-8. Gantt Charts With WBS Generated From a Mind Map 15 Copyright 2014 The WBS Dictionary and Scope Baseline Many tasks are vague and must be explained more so people know what to do and can estimate how long it will take and what it will cost WBS Dictionary 16 Copyright 2014 Advice for Creating a WBS and WBS Dictionary Unit of work should appear only once in WBS. Work content of WBS item is sum of items below Limit responsibility of a WBS item to one individual (even though many people may be working on it) Project team member involvement in developing Document WBS items in WBS Dictionary 17 Copyright 2014  Validating Scope Scope validation involves formal acceptance of the completed project deliverables Acceptance is often achieved by a customer inspection and then sign-off on key deliverables 18 Copyright 2014 Controlling Scope Scope control involves controlling changes to the project scope 19 Copyright 2014 Controlling Scope Goals of scope control influence the factors that cause scope changes assure changes are processed according to procedures developed as part of integrated change control manage changes when they occur Variance is the difference between planned and actual performance 20 Copyright 2014 Avoiding Scope Creep Scope creep may occur as a result of: Poor change control Lack of proper initial identification and/or documentation of the features that are required for the achievement of project objectives Weak project manager or executive sponsor 21 Copyright 2014 Scope Creep To mitigate these types of issues, the proposed solutions are the following: Define requirements as “must-haves” and “nice to haves” Set project expectations Agree on deliverables, and document Document and review business requirements 22 Copyright 2014 Best Practices - Avoiding Scope Problems 1. Keep the scope realistic. Don’t make projects so large that they can’t be completed. 2. Involve users in project scope management. 3. Use off-the-shelf hardware and software whenever possible. 4. Follow good project management processes. 23 Copyright 2014  Scope Problems -> Project Failures A project scope that is too broad and grandiose can cause severe problems FoxMeyer Drug McDonalds 24 Copyright 2014 Improving User Input Develop a good project selection process and insist that sponsors are from the user organization Have users on the project team in important roles Have regular meetings with defined agendas, and have users sign off on key deliverables presented at meetings 25 Copyright 2014 Improving User Input Deliver something to users and sponsors on a regular basis Don’t promise to deliver when you know you can’t Co-locate users with developers 26 Copyright 2014 Reduce Incomplete and Changing Requirements Requirements management process Use techniques to get user involvement Document and maintain requirements Create a requirements management database Testing throughout the project life cycle Review changes from a systems perspective 27 Copyright 2014  Using Software to Assist in Project Scope Management Word-processing software helps create several scope- related documents Spreadsheets help to perform financial calculations, weighed scoring models, and develop charts and graphs Communication software like e-mail and the Web help clarify and communicate scope information Project management software helps in creating a WBS, the basis for tasks on a Gantt chart Specialized software is available to assist in project scope management 28 Copyright 2014 Chapter Summary Project scope management Main processes include: Define scope management Collect requirements Define scope (scope statement) Create WBS Validate scope Control scope 29 Copyright 2014   Managers often cite delivering projects on time as one of their biggest challenges  Time has the least amount of flexibility; it passes no matter what happens on a project  Schedule issues are the main reason for conflicts on projects, especially during the second half of projects Information Technology Project Management, Seventh Edition Copyright 2014 2   Some people prefer to follow schedules and meet deadlines while others do not  Difference cultures and even entire countries have different attitudes about schedules Information Technology Project Management, Seventh Edition Copyright 2014 3  Process Time Management Major Group Process Output P1: Defining Activities Activity List Project Schedule Network P2: Sequence Activities Diagram Planning P3: Estimate Activity Resources Activity Resource Reqs. P4: Estimate Activity Duration Activity Duration Estimates P5: Develop Schedule Project Schedule Monitoring Work Performance and MC1: Control Schedule Measuerments Controlling Information Technology Project Management, Seventh Edition Copyright 2014 4   Planning schedule management: determining the policies, procedures, and documentation that will be used for planning, executing, and controlling the project schedule  Defining activities: identifying the specific activities that the project team members and stakeholders must perform to produce the project deliverables  Sequencing activities: identifying and documenting the relationships between project activities  Estimating activity resources: estimating how many resources a project team should use to perform project activities  Estimating activity durations: estimating the number of work periods that are needed to complete individual activities  Developing the schedule: analyzing activity sequences, activity resource estimates, and activity duration estimates to create the project schedule  Controlling the schedule: controlling and managing changes to the project schedule Information Technology Project Management, Seventh Edition Copyright 2014 5 Information Technology Project Management, Seventh Edition Copyright 2014 6   The project team uses expert judgment, analytical techniques, and meetings to develop the schedule management plan  A schedule management plan includes: ◦ Project schedule model development: Many projects include a schedule model, which contains project activities with estimated durations, dependencies, and other planning information that can be used to produce a project schedule. ◦ Level of accuracy and units of measure: This section discusses how accurate schedule estimates should be and determines whether time is measured in hours, days, or another unit. ◦ Rules of performance measurement: For example, if team members are expected to track the percentage of work completed, this section specifies how to determine the percentages. ◦ Reporting formats: This section describes the format and frequency of schedule reports required for the project. ◦ Process descriptions: how all of the schedule management processes will be performed. Information Technology Project Management, Seventh Edition Copyright 2014 7   An activity or task is an element of work normally found on the work breakdown structure (WBS) that has an expected duration, a cost, and resource requirements  Activity definition involves developing a more detailed WBS and supporting explanations to understand all the work to be done so you can develop realistic cost and duration estimates Information Technology Project Management, Seventh Edition Copyright 2014 8   An activity list is a tabulation of activities to be included on a project schedule that includes ◦ the activity name ◦ an activity identifier or number ◦ a brief description of the activity  Activity attributes provide more information such as predecessors, successors, logical relationships, leads and lags, resource requirements, constraints, imposed dates, and assumptions related to the activity Information Technology Project Management, Seventh Edition Copyright 2014 9   A milestone is a significant event that normally has no duration  It often takes several activities and a lot of work to complete a milestone  They’re useful tools for setting schedule goals and monitoring progress  Examples include obtaining customer sign-off on key documents or completion of specific products  The goal of defining activities is to ensure that the project team completely understands all the work it must do as part of the project scope so they can start scheduling the work. Information Technology Project Management, Seventh Edition Copyright 2014 10   Involves reviewing activities and determining dependencies  A dependency or relationship is the sequencing of project activities or tasks  You must determine dependencies in order to use critical path analysis Information Technology Project Management, Seventh Edition Copyright 2014 11   Mandatory dependencies: inherent in the nature of the work being performed on a project, (ex. You cannot test a code until a code is written)  Discretionary dependencies: defined by the project team., sometimes referred to as soft logic and should be used with care since they may limit later scheduling options (ex. Don’t start design until we get a user sign off all the analysis work)  External dependencies: involve relationships between project and non-project activities ( ex installation of new software depend on the delivery of new hardware) Information Technology Project Management, Seventh Edition Copyright 2014 12   Network diagrams are the preferred technique for showing activity sequencing  A network diagram is a schematic display of the logical relationships among, or sequencing of, project activities Information Technology Project Management, Seventh Edition Copyright 2014 13 Information Technology Project Management, Seventh Edition Copyright 2014 14   Also called activity-on-arrow (AOA) network diagrams  Activities are represented by arrows  Nodes or circles are the starting and ending points of activities  Can only show finish-to-start dependencies Information Technology Project Management, Seventh Edition Copyright 2014 15   Before estimating activity durations, you must have a good idea of the quantity and type of resources that will be assigned to each activity; resources are people, equipment, and materials  Consider important issues in estimating resources ◦ How difficult will it be to do specific activities on this project? ◦ What is the organization’s history in doing similar activities? ◦ Are the required resources available?  A resource breakdown structure is a hierarchical structure that identifies the project’s resources by category and type Information Technology Project Management, Seventh Edition Copyright 2014 16   Duration includes the actual amount of time worked on an activity plus elapsed time  Effort is the number of workdays or work hours required to complete a task  Effort does not normally equal duration  Duration relates to the time estimate on a calendar, not the effort estimate.  People doing the work should help create estimates, and an expert should review them Information Technology Project Management, Seventh Edition Copyright 2014 17   Instead of providing activity estimates as a discrete number, such as four weeks, it’s often helpful to create a three-point estimate ◦ an estimate that includes an optimistic, most likely, and pessimistic estimate, such as three weeks for the optimistic, four weeks for the most likely, and five weeks for the pessimistic estimate Information Technology Project Management, Seventh Edition Copyright 2014 18   Uses results of the other time management processes to determine the start and end date of the project  Ultimate goal is to create a realistic project schedule that provides a basis for monitoring project progress for the time dimension of the project  Important tools and techniques include Gantt charts, critical path analysis, and critical chain scheduling, and PERT analysis Information Technology Project Management, Seventh Edition Copyright 2014 19   Gantt charts provide a standard format for displaying project schedule information by listing project activities and their corresponding start and finish dates in a calendar format  Symbols include: ◦ A black diamond: a milestones ◦ Thick black bars: summary tasks ◦ Lighter horizontal bars: durations of tasks ◦ Arrows: dependencies between tasks Information Technology Project Management, Seventh Edition Copyright 2014 20 Information Technology Project Management, Seventh Edition Copyright 2014 21   Many people like to focus on meeting milestones, especially for large projects  Milestones emphasize important events or accomplishments on projects  Normally create milestone by entering tasks with a zero duration, or you can mark any task as a milestone Information Technology Project Management, Seventh Edition Copyright 2014 22   You can use a special form of a Gantt chart to evaluate progress on a project by showing actual schedule information. Figure 6-7 shows a Tracking Gantt chart—a Gantt chart that compares planned and actual project schedule information. Information Technology Project Management, Seventh Edition Copyright 2014 23 Information Technology Project Management, Seventh Edition Copyright 2014 24   CPM is a network diagramming technique used to predict total project duration  A critical path for a project is the series of activities that determines the earliest time by which the project can be completed  The critical path is the longest path through the network diagram and has the least amount of slack or float  Slack or float is the amount of time an activity may be delayed without delaying a succeeding activity or the project finish date Information Technology Project Management, Seventh Edition Copyright 2014 25   First develop a good network diagram  Add the duration estimates for all activities on each path through the network diagram  The longest path is the critical path  If one or more of the activities on the critical path takes longer than planned, the whole project schedule will slip unless the project manager takes corrective action Information Technology Project Management, Seventh Edition Copyright 2014 26 Information Technology Project Management, Seventh Edition Copyright 2014 27   A project team at Apple computer put a stuffed gorilla on the top of the cubicle of the person currently managing critical task  The critical path is not the one with all the critical activities; it only accounts for time  There can be more than one critical path if the lengths of two or more paths are the same  The critical path can change as the project progresses Information Technology Project Management, Seventh Edition Copyright 2014 28   Three main techniques for shortening schedules ◦ Shortening durations of critical activities/tasks by adding more resources or changing their scope ◦ Crashing activities by obtaining the greatest amount of schedule compression for the least incremental cost ◦ Fast tracking activities by doing them in parallel or overlapping them Information Technology Project Management, Seventh Edition Copyright 2014 29   It is important to update project schedule information to meet time goals for a project  The critical path may change as you enter actual start and finish dates  If you know the project completion date will slip, negotiate with the project sponsor Information Technology Project Management, Seventh Edition Copyright 2014 30   Goals are to know the status of the schedule, influence factors that cause schedule changes, determine that the schedule has changed, and manage changes when they occur  Tools and techniques include ◦ Progress reports ◦ A schedule change control system ◦ Project management software, including schedule comparison charts like the tracking Gantt chart ◦ Variance analysis, such as analyzing float or slack Information Technology Project Management, Seventh Edition Copyright 2014 31   First review the draft schedule or estimated completion date in the project charter  Prepare a more detailed schedule with the project team  Get stakeholders approval  To establish the schedule, it is critical to get involvement and commitment from all project team members, top management, the customer, and other key stakeholders.  Make sure the schedule is realistic and followed  Alert top management well in advance if there are schedule problems Information Technology Project Management, Seventh Edition Copyright 2014 32   Software for facilitating communications helps people exchange schedule-related information  Decision support models help analyze trade-offs that can be made  Project management software can help in various time management areas Information Technology Project Management, Seventh Edition Copyright 2014 33   Project time management is often cited as the main source of conflict on projects, and most IT projects exceed time estimates  Main processes include ◦ Plan schedule management ◦ Define activities ◦ Sequence activities ◦ Estimate activity resources ◦ Estimate activity durations ◦ Develop schedule ◦ Control schedule Information Technology Project Management, Seventh Edition Copyright 2014 34 Information Technology Project Management   IT projects have a poor track record for meeting budget goals  The CHAOS studies found the average cost overrun (the additional percentage or dollar amount by which actual costs exceed estimates) ranged from 180 percent in 1994 to 43 percent in 2010 Information Technology Project Management, Seventh Edition Copyright 2014 2   Cost is a resource sacrificed or foregone to achieve a specific objective or something given up in exchange  Costs are usually measured in monetary units like dollars  Project cost management includes the processes required to ensure that the project is completed within an approved budget  many IT professionals think that preparing cost estimates is a job for accountants. On the contrary, preparing good cost estimates is a demanding, important skill that many professionals need to acquire, including project managers. Information Technology Project Management, Seventh Edition Copyright 2014 3   Planning cost management :determining the policies, procedures, and documentation that will be used for planning, executing, and controlling project cost.  Estimating costs: developing an approximation or estimate of the costs of the resources needed to complete a project  Determining the budget: allocating the overall cost estimate to individual work items to establish a baseline for measuring performance  Controlling costs: controlling changes to the project budget Information Technology Project Management, Seventh Edition Copyright 2014 4 Information Technology Project Management, Seventh Edition Copyright 2014 5   Most members of an executive board better understand and are more interested in financial terms than IT terms , so IT project managers must speak their language ◦ Profits are revenues minus expenditures ◦ Profit margin :is the ratio of revenues to profits (If revenues of $100 generate $2 in profits, there is a 2 percent profit margin. If the company loses $2 for every $100 in revenue, there is a −2 percent profit margin.) ◦ Life cycle costing considers the total cost of ownership, or development plus support costs, for a project (For example, a company might complete a project to develop and implement a new customer service system in 1 or 2 years, but the new system could be in place for 10 years. Project managers, with assistance from financial experts in their organizations, should create estimates of the costs and benefits of the project for its entire life cycle (10 years in the preceding example) Information Technology Project Management, Seventh Edition Copyright 2014 6  ◦ Cash flow analysis determines the estimated annual costs and benefits for a project and the resulting annual cash flow  Organizations have a history of not spending enough money in the early phases of projects, which affects total cost of ownership. For example, it is much more cost-effective to spend money on defining user requirements and doing early testing on IT projects than to wait for problems to appear after implementation. correcting a software defect late in a project costs much more than fixing the defect early. When Facebook was down for 20 minutes on September 3, 2014, they lost a little more than $22,453 for every minute or more than $500,000. On August 19, 2013, Amazon.com went down for about 30 minutes, costing them $66,240 per minute or nearly $2 million. Information Technology Project Management, Seventh Edition Copyright 2014 7   Tangible costs or benefits are those costs or benefits that an organization can easily measure in dollars  Intangible costs or benefits are costs or benefits that are difficult to measure in monetary terms (ex. Team members spent own personal time using government-owned computers, books, and other resources to research areas related to the project. Although their hours and the government-owned materials would not be billed to the project, they could be considered intangible costs. Information Technology Project Management, Seventh Edition Copyright 2014 8   Direct costs are costs that can be directly related to producing the products and services of the project (salaries)  Indirect costs are costs that are not directly related to the products or services of the project, but are indirectly related to performing the project(cost of electricity, paper) Information Technology Project Management, Seventh Edition Copyright 2014 9   Sunk cost is money that has been spent in the past; when deciding what projects to invest in or continue, you should not include sunk costs  Reserves are dollars included in a cost estimate to mitigate cost risk by allowing for future situations that are difficult to predict Information Technology Project Management, Seventh Edition Copyright 2014 10   The project team uses expert judgment, analytical techniques, and meetings to develop the cost management plan  A cost management plan includes: ◦ Level of accuracy ◦ and units of measure ◦ Organizational procedure links ◦ Control thresholds ◦ Rules of performance measurement ◦ Reporting formats ◦ Process descriptions Information Technology Project Management, Seventh Edition Copyright 2014 11   Project managers must take cost estimates seriously if they want to complete projects within budget constraints  It’s important to know the types of cost estimates, how to prepare cost estimates, and typical problems associated with IT cost estimates Information Technology Project Management, Seventh Edition Copyright 2014 12 Information Technology Project Management, Seventh Edition Copyright 2014 13   Estimates are usually done at various stages of a project and should become more accurate as time progresses  A large percentage of total project costs are often labor costs Information Technology Project Management, Seventh Edition Copyright 2014 14   Basic tools and techniques for cost estimates: ◦ Analogous or top-down estimates: use the actual cost of a previous, similar project as the basis for estimating the cost of the current project. this technique requires a good deal of expert judgment and is generally less costly than other techniques, but it is also less accurate. ◦ Bottom-up estimates: involve estimating individual work items or activities and summing them to get a project total ◦ Three-point estimates involve estimating the most likely, optimistic, and pessimistic costs for items. You can use a formula like the PERT weighted average to calculate cost estimates ◦ Parametric modeling uses project characteristics (parameters) in a mathematical model to estimate project costs Information Technology Project Management, Seventh Edition Copyright 2014 15   Estimates are done too quickly  People lack estimating experience  Human beings are biased toward underestimation  Management desires accuracy Information Technology Project Management, Seventh Edition Copyright 2014 16   Cost budgeting involves allocating the project cost estimate to individual work items over time  The WBS is a required input to the cost budgeting process since it defines the work items  Important goal is to produce a cost baseline ◦ a time-phased budget that project managers use to measure and monitor cost performance Information Technology Project Management, Seventh Edition Copyright 2014 17 Information Technology Project Management, Seventh Edition Copyright 2014 18   Project cost control includes ◦ Monitoring cost performance ◦ Ensuring that only appropriate project changes are included in a revised cost baseline ◦ Informing project stakeholders of authorized changes to the project that will affect costs  Many organizations around the globe have problems with cost control Information Technology Project Management, Seventh Edition Copyright 2014 19   EVM is a project performance measurement technique that integrates scope, time, and cost data  Given a baseline (original plan plus approved changes), you can determine how well the project is meeting its goals  You must enter actual information periodically to use EVM  More and more organizations around the world are using EVM to help control project costs Information Technology Project Management, Seventh Edition Copyright 2014 20   The planned value (PV),, also called the budget, is that portion of the approved total cost estimate planned to be spent on an activity during a given period  Actual cost (AC),, is the total of direct and indirect costs incurred in accomplishing work on an activity during a given period  The earned value (EV), is an estimate of the value of the physical work actually completed  EV is based on the original planned costs for the project or activity and the rate at which the team is completing work on the project or activity to date Information Technology Project Management, Seventh Edition Copyright 2014 21   Rate of performance (RP) is the ratio of actual work completed to the percentage of work planned to have been completed at any given time during the life of the project or activity  For example, suppose the server installation was halfway completed by the end of week 1. The rate of performance would be 50% because by the end of week 1, the planned schedule reflects that the task should be 100 percent complete and only 50 percent of that work has been completed Information Technology Project Management, Seventh Edition Copyright 2014 22   Cost variance (CV) is the earned value minus the actual cost. If cost variance is a negative number, it means that performing the work cost more than planned. If cost variance is a positive number, performing the work cost less than planned.  Schedule variance (SV) is the earned value minus the planned value. A negative schedule variance means that it took longer than planned to perform the work, and a positive schedule variance means that the work took less time than planned. Information Technology Project Management, Seventh Edition Copyright 2014 23   The cost performance index (CPI) is the ratio of earned value to actual cost; it can be used to estimate the projected cost of completing the project. If the CPI is equal to one, or 100 percent, then the planned and actual costs are equal—the costs are exactly as budgeted. If the CPI is less than one or less than 100 percent, the project is over budget. If the CPI is greater than one or more than 100 percent, the project is under budget. Information Technology Project Management, Seventh Edition Copyright 2014 24   The schedule performance index (SPI) is the ratio of earned value to planned value; it can be used to estimate the projected time to complete the project. Similar to the cost performance index, an SPI of one, or 100 percent, means the project is on schedule. If the SPI is greater than one or 100 percent, then the project is ahead of schedule. If the SPI is less than one or 100 percent, the project is behind schedule. Information Technology Project Management, Seventh Edition Copyright 2014 25   Negative numbers for cost and schedule variance indicate problems in those areas  CPI and SPI less than 100% indicate problems  Problems mean the project is costing more than planned (over budget) or taking longer than planned (behind schedule)  The CPI can be used to calculate the estimate at completion (EAC)—an estimate of what it will cost to complete the project based on performance to date.  The budget at completion (BAC) is the original total budget for the project Information Technology Project Management, Seventh Edition Copyright 2014 26   Suppose that a project included a summary activity of purchasing and installing a new web server. Suppose further that, according to the plan, it would take one week and cost a total of $10,000 for the labor hours, hardware, and software. Therefore, the planned value (PV) for the activity that week is $10,000  uppose that it actually took two weeks and cost $20,000 to purchase and install the new web server. Assume that $15,000 of these actual costs were incurred during Week 1 and $5,000 was incurred during Week 2. These amounts are the actual cost (AC) for the activity each week.  Total budget for the project is 100,000 Information Technology Project Management, Seventh Edition Copyright 2014 27 Information Technology Project Management, Seventh Edition Copyright 2014 28 Information Technology Project Management, Seventh Edition Copyright 2014 29 Information Technology Project Management, Seventh Edition Copyright 2014 30   Spreadsheets are a common tool for resource planning, cost estimating, cost budgeting, and cost control  Many companies use more sophisticated and centralized financial applications software for cost information  Project management software has many cost- related features, especially enterprise PM software Information Technology Project Management, Seventh Edition Copyright 2014 34   Project cost management is a traditionally weak area of IT projects, and project managers must work to improve their ability to deliver projects within approved budgets  Main processes include ◦ Plan cost management ◦ Estimate costs ◦ Determine the budget ◦ Control costs Information Technology Project Management, Seventh Edition Copyright 2014 35