ITPM_Initiation_Selection_wk2 - Compatibility Mode.pdf

IT Project Management Lecture 2 – Project Initiating (Unit 2) Objectives — Project Selection — Explain the importance of formal project selection. — Demonstrate competency in doing the calculations for project selection — Develop a Business Case using an appropriate template. — Project I...

IT Project Management Lecture 2 – Project Initiating (Unit 2) Objectives — Project Selection — Explain the importance of formal project selection. — Demonstrate competency in doing the calculations for project selection — Develop a Business Case using an appropriate template. — Project Initiation — Explain the fundamentals of the Project Initiation process groups. — Explain the importance of Stakeholder Management in projects. — Develop a project charter using an appropriate template. Project Selection How Projects Come to Be — Project selection can be a difficult process, especially when there are a large number of potential projects competing for scarce dollars. — Some selection methods are highly intuitive; others try to add rigor through more scientific selection processes.  First Selection Criterion Does the project support the stated goals of the organization? Which of the following meet this criterion? Why or why not? qAn environmental group proposes a project to raise money by selling aerosol cans of a powerful new pesticide. qA video store chain proposes to develop a web site for ordering and distributing videos. qA bank offers a free rifle to anyone opening a new savings account. qA restaurant equipment manufacturer decides to introduce a line of high-end refrigerators for the consumer market. Selection Tools Numeric Method Description Payback Period Determines how quickly a project recoups its costs Net Present Value Estimates the current worth of anticipated cash flows resulting from the project ROI Determine the Return On Investment Unweighted Selection Scores multiple projects against a set of selection criteria, with all criteria being equal Weighted Selection Scores multiple projects against a set of selection criteria, with each criterion assigned a numeric weight Unweighted Criteria (example, using scale of 1-5) Project A Project B Project C Good ROI 4 5 3 CEO Likes It 2 3 5 Provides Better 5 4 2 Service Matches new Initiative 4 4 5 of Competition Total Weighted Criteria (example, using scale of 1-5) Item Project A Project B Project C Criteria Weight 4 5 3 Good ROI 3 2 3 5 CEO Likes It 5 Provides 5 4 2 Better 4 Service Matches 4 4 5 new Initiative 3 of Competition Total: ROI Worked Example Calculate the ROI for the following two projects options. Based on your calculations, decide which project should be selected OUTSOURCED INHOUSE DEVELOPMENT DEVELOPMENT YEAR BENEFITS COSTS YEAR BENEFITS COSTS 0 $0 $1,400,000 0 $2,500,000 1 $1,200,000 1 $1,600,000 2 $1,500,000 2 $2,500,000 = 0.08 or 8% = 1.93 or 193% Choose Inhouse development as it has the higher ROI NPV Worked Example Calculate the Net Present Value (NPV) for the following two projects options. Based on your calculations, decide which project should be selected. Use a discount rate of 10%. OUTSOURCED INHOUSE DEVELOPMENT DEVELOPMENT YEAR BENEFITS COSTS YEAR BENEFITS COSTS 0 $0 $1,400,000 0 $2,500,000 1 $1,200,000 1 $1,600,000 2 $1,500,000 2 $2,500,000 NPV = discounted benefits – discounted costs PV of costs = 2,500,000 *1.0 PV of costs = 1,400,000 *1.0 PV of benefits = PV of benefits = 1,200,00*0.91+1,500,000*0.83 1,600,00*0.91+2,500,000*0.83 NPV = -$163,000 NPV = $2,131,000 Choose Inhouse Development as it has the higher NPV. Payback Worked Example Calculate the Payback Period for the following two projects options. Based on your calculations, decide which project should be selected OUTSOURCED INHOUSE DEVELOPMENT DEVELOPMENT YEAR BENEFITS COSTS YEAR BENEFITS COSTS 0 $0 $1,400,000 0 $2,500,000 1 $1,200,000 1 $1,600,000 2 $1,500,000 2 $2,500,000 Payback is year when costs are recovered Payback in year 2 Payback in year 1 Choose Inhouse Development as it has the earlier payback. Project Selection - Business Case Business Case — Purpose — To provide justification for investing in a project — Reasons for embarking on a project: — To solve a business problem — To create a business opportunity — To satisfy a directive  Business Case – Some Components — Background & Business Objective — Current situation and problem/opportunity statement — Critical assumptions and constraints — Preliminary project requirements — Budget Estimate & Preliminary Financial Analysis — Schedule estimate Constraints Applicable restriction or limitation, either internal or external to the project that will affect the performance of the project or a process PMBOK Guide,Third Edition, Glossaary Constraints (cont) Common business constraints include: budget limitations time restrictions resource limitations work resource skill limitations Constraints (cont.) § Common Technical Constraints include: o Restriction on development languages o hardware/operating system/infrastructure restrictions Constraints - Examples — The project is dependent on the shared resources of the agency. — Application software must be compatible with Linux operating system Assumptions — Factors considered true without proof — Assumptions add risk to a project since it is possible that they will turn out to be false. — It is important to document and analyze them. Assumptions - Examples — Dedicated staff will remain in their current roles. — Dedicated staff will cross train one another. — Database testing will receive business team assistance.  Initiating Process Group Project Charter Project Stakeholders  Project Management Process Groups and Knowledge Areas Map Project Management Process Groups Knowledge Areas Initiating Planning Executing Monitoring & Controlling Closing 4. Project 4.1 Develop Project 4.2 Develop Project Management 4.3 Direct and Manage 4.5 Monitor and Control 4.7 Close Project or Integration Charter Plan Project Work Project Work Phase Management 4.4 Manage product 4.6 Perform Integrated Change knowledge Control 5. Project Scope 5.1 Plan Scope Management 5.5 Verify Scope Management 5.2 Collect Requirements 5.6 Control Scope 5,3 Define Scope 5.4 Create Work Breakdown Structure (WBS) 6. Project Time 6.1 Plan Schedule Management 6.6 Control Schedule Management 6.2 Define Activities Project Time 6.3 Sequence Activities Management 6.4 Estimate Activity Durations 6.5 Develop Schedule 7. Project Cost 7.1 Plan Cost Management 7.4 Control Costs Management 7.2 Estimate Costs 7.3 Determine Budget 8. Project Quality 8.1 Plan Quality Management 8.2 Manage Quality 8.3 Control Quality Management 9. Project 9.1 Plan Resource Management 9.2 Acquire Resources Resource 9.3 Develop Team Management 9.4 Manage Team 10. Project 10.1 Plan Communications 10.2 Manage 10.3 Monitor Communication Communications Management Communications Management 11. Project Risk 11.1 Plan Risk Management 11.6 Manage Risk Response 11.7 Monitor & Control Risk Management 11.2 Identify Risk 11.3 Perform Qualitative Risk Analysis 11.4 Perform Quantitative Risk Analysis 11.5 Plan Risk Response 12. Project 12.1 Plan Procurement 12.2 Manage 12.3 Conduct Procurements Procurement Management Procurements Management 13. Project 13.1 Identify 13.2 Plan Stakeholder 13.3 Manage Stakeholder 13.4 Monitor Stakeholder Stakeholder Stakeholders Engagement Engagement Engagement Management Initiating Process Group — Consists of processes to define a new project or phase — Obtain authorization to begin project or phase — Processes in the Initiating Process Group are: — Develop Project Charter (Knowledge area – Integration Management) — Identify Stakeholders (Knowledge area – Stakeholder Management) Project Charter Project Charter - Definition A document issued by the project initiator or sponsor that formally authorizes the existence of a project, and provides the project manager with the authority to apply organizational resources to project activities. PMBOK Guide, Sixth Edition, Glossary  Project Charter - Components — can include Business Case Summary (justifying project) — can include Preliminary Scope Statement — Project Purpose — Success Criteria — Assigned Project Manager — Milestones & Schedule Summary — Budget Estimate (high level) Summary — Signature of Sponsor Identify Stakeholders Project Stakeholders “Individuals and organizations that are actively involved in the project, or whose interest may be positively or negatively affected as a result of project execution or project completion.” PMBOK Guide Project Stakeholders — Project Sponsor — Project requestor — Project manager and team — Internal Consultants -Legal -Audit -Human Resources Department Project Stakeholders (cont.) — External entities affected by the project — Customers — Vendors — Governmental agencies — Other regulatory bodies  Stakeholder Register Internal/ Contactt Name Position External Project Role Information -END-