A Detailed Look to Initiation Phase of Scope

A Detailed Look to Initiation Phase of Scope Management (Part 8) Dr. Çağatay ÜNDEĞER Instructor Bilkent University, Computer Engineering Middle East Technical University, Game Technologies & General Manager Sim. BT Inc. e-mail : undeger@simbt. com. tr CS-413 Bilgisayar Mühendisliği Bölümü – Bilkent Üniversitesi – Fall 2009 1

Scope Management • Project Management Components (knowledge areas) – Project Integration Management – Project Scope Management – Project Time Management – Project Cost Management – Project Human Resource Management – Project Communication Management – Project Quality Management – Project Risk Management – Project Procurement Management CS-413 2

Scope Management Phases • • • CS-413 Initiation Scope Planning Scope Definition Scope Verification Scope Change Control 3

A Detailed Look to: Initiation • The process of identifying and authorizing; – A new project, or – Continuation of an existing project. CS-413 4

A Detailed Look to: Initiation • Requires the following activities: – Identifying projects – Classifying and ranking projects – Selecting projects – Establishing project charter CS-413 5

Identifying projects • • No single method to use Some organizations use; – Very careful planning process; • Some use; – More ad hoc methods. CS-413 6

Identifying projects • CS-413 Who is responsible? – A key member of top management (e. g. a CEO, a senior executive) – A steering commitee composed of managers – User departments; • Head of a requesting unit • A commitee of requesting unit – A senior IS manager 7

Identifying projects • Although carefully identifying new projects has advantages, – Many organizations do not use a systematic planning process. • Projects are resulted from attempts to solve isolated organizational problems. • Procedures are likely to change, – In time, It will be necessary to modify existing systems. CS-413 8

Identifying projects • • CS-413 Use planning based-approachs. Planning based-approachs ask the following question to identify new potential projects: – What information requirements will satisfy; • Decision making needs or • Business process of enterprice today and well in the future? 9

Identifying projects • Advantage of planning-based approach is that; – An organization’s informational needs are less likely to change than its bussiness process. • To understand planning-based approach, need to understand; – Corporate Strategic Planning, and – Information Systems Planning. CS-413 10

Identifying projects (Corporate Strategic Planning) • To make effective decisions, you need to gain a clear idea of; – Where an organization is, – Where it wants to be in the future (vision of organization), and – How to make transitions to that desired future state. • Planners develop a strategic plan to guide the transition. CS-413 11

Identifying projects (Sample Vision Statement) • CS-413 Vision statement of Sim. BT Inc: – To provide national and international science and technology based original solutions in the area of modeling, simulation and simulators. – To realize company revolution on the concept of • “Behaving flexible and simple as a small company, • But meanwhile having the power of a big scale organization". 12

Identifying projects (Corporate Strategic Planning) • • CS-413 All successful organizations hava a mission. Mission statement of a company states what business the company is in. 13

Identifying projects (Sample Mission Statement) • Mission statement of Microsoft: – To enable people and businesses throughout the world to realize their full potential. • Mission statement of Sim. BT Inc: – To develop the best M&S prototypes and turnkey products for Turkish and abroad customers. CS-413 14

Identifying projects (Corporate Strategic Planning) • CS-413 Closely linked to their mission, – Organizations also define several objective statements that refer to broad and timeless goals for the organization • In order to reach a desired future state. 15

Identifying projects (Sample Objective Statement) • CS-413 Objective statements of Microsoft: – Broad customer connection: Connecting with customers, understanding their needs and how they use technology, and providing value through information and support to help them realize their potential. – A global, inclusive approach: Thinking and acting globally, enabling a diverse workforce that. . . –. . . 16

Identifying projects (Sample Objective Statement) • CS-413 Objective statements of Sim. BT Inc: – To bridge the gap among: • “Science, technology, turn-key systems“, • “University, research centers” and • “Industry, acquisition agencies" in the area of modelling, simulation and simulators. – To put ourselves in the position of our customers in order to understand their requirements. – To make our customers realize their requirements and utilize the state-of-the-art technology. 17

Identifying projects (Corporate Strategic Planning) • CS-413 A competitive strategy: – The method by which an organization attempts, to achieve its mission and objective. – An organization’s game plan for playing in the competitive business world. 18

Identifying projects (Corporate Strategic Planning) • CS-413 A competitive strategy: – Generic strategies: • Low-cost producer • Product differentiation • Product Focus 19

Identifying projects (Corporate Strategic Planning) • CS-413 Low-cost producer: – Competing in an industry on the basis of product or service cost to the customer (e. g. very cheap products). 20

Identifying projects (Corporate Strategic Planning) • CS-413 Product differentiation: – Capitalizing on a key criterion requested by the market (e. g. high quality, high performance, original style). 21

Identifying projects (Corporate Strategic Planning) • CS-413 Product Focus: – Similar to both low-cost and differentiation strategies. – But employs a much narrow market focus (focus on some specific products). 22

Identifying projects • CS-413 Planning-based approaches: – Corporate strategic planning, and – Information Systems planning. 23

Identifying projects (Information Systems Planning) • A second planning approach that can help identifying projects is information systems planning (ISP). • An orderly means of; – Assessing information needs of an organization, and – Defining systems, databases, and technologies that will best satisfy those needs. CS-413 24

Identifying projects (Information Systems Planning) • Model current and future organizational information needs. • Develop strategies and project plans – To migrate current information systems and technologies to their desired future state. CS-413 25

Identifying projects (Information Systems Planning) • A top-down process that takes into account; – Outside forces (industry), – Economy, – Relative size, – Geographic region, etc. • Key activities are: – Describing current situation – Describing target situation, trends, and constraints – Developing a transition strategy and plan CS-413 26

Identifying projects (Information Systems Planning) • CS-413 Describing current situation: – Define the current organizational situation using top-down planning. – Top-down planning attempts; • To gain a broad understanding of informational needs of entire organization. 27

Identifying projects (Information Systems Planning) • CS-413 Describing current situation: – Top-down planning; • Begins with analysis of organization’s mission, objectives, and strategy; • Continues with determination of information requirements needed to meet each objective. • Requires involvement of top-level management. 28

Identifying projects (Information Systems Planning) • CS-413 Describing target situation, trends, and constraints: – Define target situation that reflects desired future state of organization. – Vision consists of desired state of; • Locations, • Units, • Functions, • Processes, • Data, • Information systems. 29

Identifying projects (Information Systems Planning) • CS-413 Developing a transition strategy and plan: – When creation of current and target situation is completed, • A detailed transition strategy and plan are developed. 30

Identifying projects (Information Systems Planning) • CS-413 Developing a transition strategy and plan: – Plan should be: • Very comprehensive, • Reflecting broad and long-range issues, and • Providing sufficient detail to guide all levels of management concerning; – What needs to be done, – How and when it needs to be done, – Who in organization will be doing. 31

Identifying projects (Information Systems Planning) • Developing a transition strategy and plan: – Outline of an information systems plan: • Organizational mission, objectives & strategy • Information inventory • Mission and objectives of IS • Constraints on IS development • Overall systems needs and long-range IS strategies • The short-term plan • Conclusions CS-413 32

Identifying projects (Information Systems Planning) • CS-413 Developing a transition strategy and plan: – Organizational mission, objectives & strategy: • Briefly describes mission, objectives and strategy of the organization. • Presents current and future views of the organization briefly. 33

Identifying projects (Information Systems Planning) • CS-413 Developing a transition strategy and plan: – Information inventory: • Provides a summary of various bussiness process, functions, data entities, and information needs of enterprise. • Will contain both current and future views. 34

Identifying projects (Information Systems Planning) • CS-413 Developing a transition strategy and plan: – Mission and objectives of IS: • Describes primary role of IS in transformation from current to future state. • For example, role may be; – A necessary cost, – an investment, or – a strategic advantage. 35

Identifying projects (Information Systems Planning) • CS-413 Developing a transition strategy and plan: – Constraints on IS development: • Briefly describes limitations imposed by; – State of the art technology, – Current level of resources within the organization (financial, technological, personnel). 36

Identifying projects (Information Systems Planning) • CS-413 Developing a transition strategy and plan: – Overall systems needs and long-range IS strategies: • Presents a summary of; – Overall systems needs within the organization, – A set of long-range (2 -5 years) strategies chosen by IS department to meet the needs. 37

Identifying projects (Information Systems Planning) • CS-413 Developing a transition strategy and plan: – The short-term plan: • Shows; – A detailed inventory of present projects and systems, – A detailed plan of projects to be developed or advanced during current year. 38

Identifying projects (Information Systems Planning) • CS-413 Developing a transition strategy and plan: – Conclusions: • Contains; – Likely, but not certain events that may effect the plan, – An inventory of business change elements as presently known, – A description of their estimated impact on plan. 39

A Detailed Look to: Initiation • Requires the following activities: – Identifying projects – Classifying and ranking projects – Selecting projects – Establishing project charter CS-413 40

Classifying and Ranking Projects • Focuses on assessing relative merit of potential projects. • All projects are feasible given unlimited resources and time, – But most projects must be developed within tight budgendary and time constraints. – Therefore, assessing feasibility and value of projects is essential. CS-413 41

Classifying and Ranking Projects • CS-413 Factors: – Economical – Technical – Operational – Schedule – Legal and contractual – Political 42

Classifying and Ranking Projects • CS-413 Economical Feasibility: – A comparison of financial benefits and costs associated with a development project. – Often reffered as Cost-Benefit Analysis. – Impossible to preciesly define costs and benefits, – But an estimation is required in order to compare rival projects. 43

Classifying and Ranking Projects • CS-413 Economical Feasibility: – Determine project benefits: • Tangible benefits • Intangible benefits – Determine project costs: • Tangible costs • Intangible costs 44

Classifying and Ranking Projects • CS-413 Economical Feasibility: – Tangible benefits; • Can be measured in money and with certainty. 45

Classifying and Ranking Projects • CS-413 Economical Feasibility: – Categories of tangible benefits: • Cost reduction and avoidance, • Error reduction, • Increased flexibility, • Increased speed of activity, • Improvement of management, planning and control, • Opening new markets and increasing sales opportunities, • Others. 46

Classifying and Ranking Projects • CS-413 Economical Feasibility: – Intangible benefits; • Cannot be easily measured in money. – Some tangible benefits may be intangible in early stages of a project. 47

Classifying and Ranking Projects • CS-413 Economical Feasibility: – Categories of intangible benefits: • Increased competiveness with other companies, • Increased organizational flexibility, • Increased employee morale, • Increased organizational learning and understanding, • More timely information collection, • Others. 48

Classifying and Ranking Projects • CS-413 Economical Feasibility: – Tangible costs; • Can be measured in money and with certainty. 49

Classifying and Ranking Projects • CS-413 Economical Feasibility: – Categories of tangible costs: • Hardware costs, • Software costs, • Labor costs, • Operational costs (employee training, building renovations, etc. ) • Others 50

Classifying and Ranking Projects • CS-413 Economical Feasibility: – Intangible costs; • Cannot be easily measured in money. 51

Classifying and Ranking Projects • CS-413 Economical Feasibility: – One-time cost: • A cost associated with; – Project start-up and development or – System start-up. – Recurring costs: • A cost resulting from ongoing evolution and use of a system. 52

Classifying and Ranking Projects • CS-413 Economical Feasibility: – Cost-benefit analysis: • The use of a variety of analysis techniques for determining financial feasibility of a project. 53

Classifying and Ranking Projects • CS-413 Economical Feasibility: – Cost-benefit analysis: • Commonly used analysis techniques: – Net present value (NPV) – Return on Investment (ROI) – Break-even analysis (BEA) 54

Classifying and Ranking Projects • CS-413 Economical Feasibility: – Cost-benefit analysis: • Development and useful life of a system may span several years. • Therefore, costs and benefits must be normalized into present day in order to compare. • Time value of money (TVM) is used, – In order to compare present cash outlays to future expected returns. 55

Classifying and Ranking Projects • CS-413 Economical Feasibility: – Cost-benefit analysis: • The rate at which money can be borrowed or invested is called; – The cost of capital, or – Discount rate. 56

Classifying and Ranking Projects • Economical Feasibility: – Cost-benefit analysis: • Formula to compute present value of a money that will be available in the future: Amount of money that will be available n years from now Present value PVn = Y x 1 (1+i)n Discount rate in a year CS-413 Number of years required for money become available 57

Classifying and Ranking Projects • CS-413 Economical Feasibility: – Cost-benefit analysis (Example): • A seller sells a car for 4500 TL; – By 3 instalments. » 1500 TL in cash, » 1500 TL after 1 year, » 1500 TL after 2 years. • If seller were able to put money in a bank, – Would receive 10 percent return in a year for his/her investment. 58

Classifying and Ranking Projects • Economical Feasibility: – Cost-benefit analysis (Example): • 1500 TL in cash: – • 1 PV 2 = 1500 x (1+0. 10)1 = 1363 TL 1500 TL after 2 years. – CS-413 = 1500 TL after 1 year, – • PV 1 1 PV 3 = 1500 x (1+0. 10)2 = 1239 TL 59

Classifying and Ranking Projects • CS-413 Economical Feasibility: – Cost-benefit analysis (Example): • Seller will actually benefit; » 4102 TL (Net PV = 1500+1363+1239) – From 4500 TL sale. 60

Classifying and Ranking Projects • CS-413 Economical Feasibility: – Cost-benefit analysis (Example): • Seller will actually benefit; » 4102 TL (Net PV = 1500+1363+1239) – From 4500 TL sale. • Therefore, if buyyer gives equal to or more than 4102 TL in cash, – Seller will accept (if he/she knows enough matematics ). 61

Classifying and Ranking Projects • CS-413 Economical Feasibility: – Cost-benefit analysis: • To perform analysis, – Useful life of project and – Cost of capital must be determined. 62

Classifying and Ranking Projects • Economical Feasibility: – Cost-benefit analysis: • Overall return on investment (ROI): – A useful value for trade-off analysis among projects. ROI = 35. 003 = 0. 24 145. 236 CS-413 63

Classifying and Ranking Projects • Economical Feasibility: – Cost-benefit analysis: • Break-Even Analysis: – Used to discover at what point benefits will equal to costs. Break-even occurs between year 2 and 3 CS-413 64

Classifying and Ranking Projects • Economical Feasibility: – Cost-benefit analysis: Break-Even ratio = Yearly NPV Cash Flow – Overall NPV Cash Flow Yearly NPV Cash Flow 15. 303 – 9. 139 = 0. 403 15. 303 Project break-even occurs at 2. 403 years. CS-413 9. 139 – (-6. 164) 65

Classifying and Ranking Projects • CS-413 Factors: – Economical – Technical – Operational – Schedule – Legal and contractual – Political 66

Classifying and Ranking Projects • CS-413 Technical Feasibility: – An assesment of the developer organization’s ability to construct a proposed system. – Should include understanding of; • Target hardwares, • Target softwares, • Target operating systems, • Size and complexity of project, • Experience of groups involved. 67

Classifying and Ranking Projects • CS-413 Technical Feasibility: – All projects have risks. – Risk is not necessarily something to avoid. – Organizations typically expect a greater return on their investments for riskier projects. – Important thing is; • To understand risks and • To manage them in order to minimize. 68

Classifying and Ranking Projects • CS-413 Technical Feasibility: – Primary factors for risk: • Project size, • Project structure, • Developer group’s experience with application and technology area, • User group’s experience with systems development projects and application areas. 69

Classifying and Ranking Projects • CS-413 Technical Feasibility: – Project size: • Larger projects are harder to manage, so are more riskier most of the time. • Size of project is relative to the size which development group is familiar with. 70

Classifying and Ranking Projects • CS-413 Technical Feasibility: – Project structure: • A system in which requirements are; – easily obtained and – highly structured will be less risky. • One in which requirements are; » messy, » ill-structured, ill-defined, or » subject to individual judgement will be more risky. 71

Classifying and Ranking Projects • CS-413 Technical Feasibility: – Developer group’s experience with application and technology area: • Development of a system employing commonly used or standard technology will be less risky. • Development of one employing novel and non-standard technology will be more risky. 72

Classifying and Ranking Projects • CS-413 Technical Feasibility: – User group’s experience with systems development projects and application areas: • A project is less risky when user group is familiar with systems development. • Successful projects require; – Active involvement and cooperation between user and developer groups. 73

Classifying and Ranking Projects • CS-413 Technical Feasibility: – Many organizations look at risk as a portfolio issue. – It is acceptable to have reasonable percentage of; • High-risk projects, • Medium-risk projects, • Low-risk projects. 74

Classifying and Ranking Projects • CS-413 Other Feasibility Concerns: – Operational feasibility – Schedule feasibility – Legal and contractual feasibility – Political feasibility 75

Classifying and Ranking Projects • CS-413 Other Feasibility Concerns: – Operational feasibility: • Examining the degree to which a proposed system will; – Solve business problems or – Take advantage of business opportunities. 76

Classifying and Ranking Projects • CS-413 Other Feasibility Concerns: – Schedule feasibility: • Examining the degree to which; – Completion dates for all major activities can be met, and – Meeting these dates will be sufficient for dealing with organization’s needs with respect to timing. 77

Classifying and Ranking Projects • CS-413 Other Feasibility Concerns: – Legal and contractual feasibility: • Determining any potential legal and contractual ramifications (results) due to construction of a system. • For instance, licence, ownership, source code, . . . 78

Classifying and Ranking Projects • CS-413 Other Feasibility Concerns: – Political feasibility: • Evaluating how key stakeholders within the organization view the proposed system. • An information system will effect distribution of information (and power) within the organization, – Therefore have political results. 79

A Detailed Look to: Initiation • Requires the following activities: – Identifying projects – Classifying and ranking projects – Selecting projects – Establishing project charter CS-413 80

Selecting Projects • • CS-413 A process of considering both short and long term projects, and Selecting those most likely to achieve business objectives. 81

Selecting Projects • CS-413 Factors for selecting projects: – List of potential and ongoing projects, – Existing and available resources, – Current organizational environment, – Evaluation criteria, – Perceived and real needs. 82

Selecting Projects • CS-413 Some project evaluation methods: – Value chain analysis – Multi-criteria analysis 83

Selecting Projects • CS-413 Value chain analysis: – The process of analyzing an organization’s activities; • To determine where value is added to product and services and their costs, • So to understand value chain of organization. – IS projects providing greatest benefits to value chain will be given higher priority over those with fewer benefits. 84

Selecting Projects • CS-413 Multi-criteria analysis: – A project selection method that uses; • Weighted scoring for a variety of criteria – To compare alternative projects or system features. 85

Selecting Projects • Multi-criteria analysis: – Assummed that there are 3 alternative designs for a system. 18 x 5 = 90 CS-413 86

A Detailed Look to: Initiation • Requires the following activities: – Identifying projects – Classifying and ranking projects – Selecting projects – Establishing project charter CS-413 87

Establishing Project Charter • • • CS-413 A short document prepared for customer during project initiation; Describes what project will deliver; Outlines generally at high level all work required to complete the project. 88

Establishing Project Charter • CS-413 Often includes: – Project title, – Date of authorization, – Project manager name & contact information – Customer name & contact information – Project start and completion dates – Key stakeholders, their roles and responsibilities – Project objectives and description – Key assumptions and approach – Signature section for key stakeholders. 89