A Detailed Look to Initiation Phase of Scope Management (Part 8)

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A Detailed Look to Initiation Phase of Scope Management

(Part 8)

Bilgisayar Mühendisliği Bölümü – Bilkent Üniversitesi – Fall 2009

Dr.Çağatay ÜNDEĞER

InstructorBilkent University, Computer Engineering

Middle East Technical University, Game Technologies

&

General ManagerSimBT Inc.

e-mail : [email protected]

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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

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Scope Management Phases

• Initiation• Scope Planning• Scope Definition• Scope Verification• Scope Change Control

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A Detailed Look to: Initiation

• The process of identifying and authorizing; – A new project, or – Continuation of an existing project.

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• Requires the following activities:– Identifying projects– Classifying and ranking projects– Selecting projects– Establishing project charter

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Identifying projects

• No single method to use• Some organizations use;

– Very careful planning process;• Some use;

– More ad hoc methods.

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• 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

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• 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.

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• 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?

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• 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.

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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.

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Identifying projects (Sample Vision Statement)

• Vision statement of SimBT 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".

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Identifying projects (Corporate Strategic Planning)• All successful organizations hava a mission.• Mission statement of a company states what

business the company is in.

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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 SimBT Inc:– To develop the best M&S prototypes and

turnkey products for Turkish and abroad customers.

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Identifying projects (Corporate Strategic Planning)• 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.

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Identifying projects (Sample Objective Statement)

• 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...

– ...

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Identifying projects (Sample Objective Statement)

• Objective statements of SimBT 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.

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Identifying projects(Corporate Strategic Planning)

• 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.

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Identifying projects (Corporate Strategic Planning)• A competitive strategy:

– Generic strategies:• Low-cost producer• Product differentiation• Product Focus

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Identifying projects (Corporate Strategic Planning)• Low-cost producer:

– Competing in an industry on the basis of product or service cost to the customer (e.g. very cheap products).

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Identifying projects (Corporate Strategic Planning)

• Product differentiation:– Capitalizing on a key criterion requested

by the market (e.g. high quality, high performance, original style).

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Identifying projects (Corporate Strategic Planning)• Product Focus:

– Similar to both low-cost and differentiation strategies.

– But employs a much narrow market focus (focus on some specific products).

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• Planning-based approaches:– Corporate strategic planning, and – Information Systems planning.

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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.

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• Model current and future organizational information needs.

• Develop strategies and project plans– To migrate current information systems

and technologies to their desired future state.

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• 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

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• 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.

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• 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.

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• 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.

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• Developing a transition strategy and plan:– When creation of current and target

situation is completed,• A detailed transition strategy and plan

are developed.

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• 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.

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• 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

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• 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.

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• 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.

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• 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.

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• 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).

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• 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.

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• 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.

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• 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.

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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.

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• Factors:– Economical– Technical– Operational– Schedule– Legal and contractual– Political

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• 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.

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• Economical Feasibility:– Determine project benefits:

• Tangible benefits• Intangible benefits

– Determine project costs:• Tangible costs• Intangible costs

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• Economical Feasibility:– Tangible benefits;

• Can be measured in money and with certainty.

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• 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.

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• Economical Feasibility:– Intangible benefits;

• Cannot be easily measured in money.– Some tangible benefits may be intangible

in early stages of a project.

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• 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.

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• Economical Feasibility:– Tangible costs;

• Can be measured in money and with certainty.

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• Economical Feasibility:– Categories of tangible costs:

• Hardware costs,• Software costs,• Labor costs,• Operational costs (employee training,

building renovations, etc.)• Others

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• Economical Feasibility:– Intangible costs;

• Cannot be easily measured in money.

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• 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.

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• Economical Feasibility:– Cost-benefit analysis:

• The use of a variety of analysis techniques for determining financial feasibility of a project.

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• Commonly used analysis techniques:– Net present value (NPV)– Return on Investment (ROI)– Break-even analysis (BEA)

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• 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.

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• The rate at which money can be borrowed or invested is called;

– The cost of capital, or– Discount rate.

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• Formula to compute present value of a money that will be available in the future:

PVn = Y x 1(1+i)nPresent value

Amount of money that will be available n years from now

Discount rate in a yearNumber of years required

for money become available

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• 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.

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• 1500 TL in cash:

– PV1 = 1500 TL

• 1500 TL after 1 year,

– PV2 = 1500 x = 1363 TL

• 1500 TL after 2 years.

– PV3 = 1500 x = 1239 TL

1(1+0.10)1

1(1+0.10)2

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• Seller will actually benefit;» 4102 TL (Net PV = 1500+1363+1239)

– From 4500 TL sale.

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• 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 ).

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• To perform analysis,– Useful life of project and– Cost of capital must be determined.

Discount rate = 12% Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Totals

Benefits V of Benefits 0 TL 50.000 TL 50.000 TL 50.000 TL 50.000 TL 50.000 TL 250.000 TLPV of Benefits 0 TL 44.643 TL 39.860 TL 35.589 TL 31.776 TL 28.371 TL 180.239 TLNPV of all Benefits 0 TL 44.643 TL 84.503 TL 120.092 TL 151.867 TL 180.239 TL 180.239 TL

Costs One-time Costs 42.500 TLRecurring Costs 0 TL 28.500 TL 28.500 TL 28.500 TL 28.500 TL 28.500 TL 142.500 TLPV of Rc.Costs 0 TL 25.446 TL 22.720 TL 20.286 TL 18.112 TL 16.172 TL 102.736 TLNPV of Rc.Costs 0 TL 25.446 TL 48.166 TL 68.452 TL 86.564 TL 102.736 TL 102.736 TLNPV of all Costs 42.500 TL 67.946 TL 90.666 TL 110.952 TL 129.064 TL 145.236 TL 145.236 TL

Overall NPV -42.500 TL -23.304 TL -6.164 TL 9.139 TL 22.803 TL 35.003 TL 35.003 TL

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• Overall return on investment (ROI):– A useful value for trade-off analysis

among projects.





ROI = 35.003 = 0.24 145.236

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• Break-Even Analysis:– Used to discover at what point

benefits will equal to costs.Discount rate = 12% Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Totals




Break-even occurs between year 2 and 3

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Break-Even ratio =Yearly NPV Cash Flow – Overall NPV Cash Flow

Yearly NPV Cash Flow

Break-Even ratio = = 0.403 15.303 – 9.139

15.303

9.139 – (-6.164)Project break-even occurs at 2.403 years.

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• Factors:– Economical– Technical– Operational– Schedule– Legal and contractual– Political

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• 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.

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• 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.

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• 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.

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• 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.

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• 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.

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• 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.

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• 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.

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• 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.

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• Other Feasibility Concerns:– Operational feasibility– Schedule feasibility– Legal and contractual feasibility– Political feasibility

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• Other Feasibility Concerns:– Operational feasibility:

• Examining the degree to which a proposed system will;

– Solve business problems or – Take advantage of business

opportunities.

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• 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.

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• 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, ...

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• 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.

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Selecting Projects

• A process of considering both short and long term projects, and

• Selecting those most likely to achieve business objectives.

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Selecting Projects

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

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Selecting Projects

• Some project evaluation methods:– Value chain analysis– Multi-criteria analysis

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Selecting Projects

• 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.

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Selecting Projects

• Multi-criteria analysis:– A project selection method that uses;

• Weighted scoring for a variety of criteria

– To compare alternative projects or system features.

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Selecting Projects

• Multi-criteria analysis:– Assummed that there are 3 alternative

designs for a system.

WeightRating Score Rating Score Rating Score

Requirements Real-time data entry 18 5 90 5 90 5 90Automatic reordering 18 1 18 5 90 5 90Real-time data query 14 1 14 5 70 5 70Total 50 122 250 250

Constraints Developer costs 15 4 60 5 75 3 45Hardware costs 15 4 60 4 60 3 45Operating costs 15 5 75 1 15 5 75Ease of training 5 5 25 3 15 3 15Total 50 220 165 180

Total 100 342 415 430

Criteria Alternative A Alternative B Alternative C

18x5 = 90

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Establishing Project Charter

• 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.

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Establishing Project Charter

• 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.

Documents

A Detailed Look to Initiation Phase of Scope Management (Part 8)