0134m - ppt2 - r2

0134M - Manajemen ProyekBusiness Case Week 2

Learning ObjectivesDescribe the project life cycle (PLC) and the systems development life cycle (SDLC), and their relationship.Define what a methodology is and describe the role it serves in IT projects.Identify the phases and infrastructure that make up the IT project methodology introduced in this chapter.Develop and apply the concept of a projects measurable organizational value (MOV).Describe and be able to prepare a business case.Distinguish between financial models and scoring models.Describe the project selection process as well as the Balanced Scorecard approach.Copyright 2012 John Wiley & Sons, Inc.2-*

Copyright 2012 John Wiley & Sons, Inc.

Information Technology Project Methodology (ITPM)MethodologyA strategic-level plan for managing and controlling the projectGame plan for implementing project and product lifecyclesRecommends phases, processes, tools, and techniques for supporting an IT projectMust be flexible and include best practices learned from experiences over time.Can be Traditional (e.g., Waterfall)Agile (e.g., XPM, SCRUM)

Copyright 2012 John Wiley & Sons, Inc.2-*


The Project Life Cycle and IT DevelopmentProject Life CycleCollection of logical stages or phases that maps the life of a project from its beginning to define, build, and deliver the productEach phase should provide one or more deliverables

DeliverableTangible and verifiable product of workProject plan, design specifications, delivered system



Project PhasesPhase Exits, Stage Gates, Kill PointsThese are the phase-end review of key deliverablesAllows the organization to evaluate project performance and take immediate action to correct errors or problems

Fast TrackingStarting the next phase of a project before approval is obtained for the current phaseCan be used to reduce the project scheduleCan be risky and should only be done when the risk is acceptableCopyright 2012 John Wiley & Sons, Inc.2-*


Project Life CycleDefine Project GoalThe project goal should be focused on providing business value to the organizationProvides a clear focus and drives the other phases of the projectHow will we know if this project is successful given the time, money, and resources invested?

Plan ProjectDefines the agreed upon scope, schedule, and budget Used as a tool to gauge the projects performance throughout the life cycle. Copyright 2012 John Wiley & Sons, Inc.2-*


Project Life CycleExecute Project PlanManage the project scope, schedule, budget, and people to ensure the project achieves its goalProgress must be documented and compared to the baseline planProject performance must be communicated to all of the stakeholdersClose ProjectEnsures that all of the work is completed as plannedFinal project report and presentation to the clientCopyright 2012 John Wiley & Sons, Inc.2-*


Project Life CycleEvaluate ProjectLessons learned to determine those things to do the same and those things to changeEvaluate team member performanceMay be audited by an outside third partyCopyright 2012 John Wiley & Sons, Inc.2-*


Systems Development Life Cycle (SDLC)PlanningIdentifying and responding to a problem or opportunityIncorporates the project management and system development processes and activitiesEnsures that the goal, scope, budget, schedule, technology, and system development processes, methods, and tools are in placeAnalysisA closer look at the problem or opportunityDocuments the specific needs and requirements for the new systemCopyright 2012 John Wiley & Sons, Inc.2-*


Systems Development Life Cycle (SDLC)DesignThe project team uses the requirements and to be logical models to design the architecture to support the new information systemThis includes designing the network, hardware configuration, databases, user interface, and application programsImplementationThe development or construction of the system, testing, and installationTraining, support, and documentation must also be in place.Maintenance and SupportThe system is updated to respond to bugs, new features, or to adjust to a changing business environment.Copyright 2012 John Wiley & Sons, Inc.2-*


Phases Phase 1: Conceptualize and Initialize Phase 2: Develop the Project Charter and Detailed Project Plan defined in terms of projects:scopeschedulebudgetquality objectives



Phases continuedPhase 3: Execute and Control the Project using approach such as the SDLC.Phase 4: Close Project Phase 5: Evaluate Project Success Post mortem by project manager and team of entire project Evaluation of team members by project manager Outside evaluation of project, project leader, and team members Evaluate projects organizational value



IT Project Management Foundation Project Management Processes Initiating processes Planning processes Executing processes Controlling processes Closing processes

Project Objectives



Tools - e.g. Microsoft Project , Computer Aided Software Engineering (CASE)Infrastructure Organizational InfrastructureProject Infrastructure Project Environment Roles and Responsibilities of team members Processes and Controls Technical Infrastructure Project Management Knowledge AreasIT Project Management Foundation Copyright 2012 John Wiley & Sons, Inc.2-*


The Business Case Definition of Business Case: an analysis of the organizational value, feasibility, costs, benefits, and risks of the project plan. Attributes of a Good Business Case Details all possible impacts, costs, and benefits Clearly compares alternatives Objectively includes all pertinent informationSystematic in terms of summarizing findings



Developing the Business Case

Step 1: Select the Core Team Advantages: Credibility Alignment with organizational goals Access to the real costs Ownership Agreement Bridge building Copyright 2012 John Wiley & Sons, Inc.2-*


Measurable Organizational Value (MOV)The projects goalMeasure of successMust be measurableProvides value to the organizationMust be agreed uponMust be verifiable at the end of the projectGuides the project throughout its life cycleShould align with the organizations strategy and goalsCopyright 2012 John Wiley & Sons, Inc.2-*


Process for Developing the MOVSet a time frame for achieving the MOVWhen will the MOV be achieved?Verify and get agreement from the project stakeholdersProject manager and team can only guide the processCopyright 2012 John Wiley & Sons, Inc.2-*


Process for Developing the MOVSummarize the MOV in a clear, concise statement or tableMOV: The Web Site will provide a 20% return on investment and 500 new customers within the first year of its operationThis project will be successful if _________________.Copyright 2012 John Wiley & Sons, Inc.2-*


Bina NusantaraExample MOV Using Table FormatCopyright 2012 John Wiley & Sons, Inc.2-*

YearMOV120% return on investment 500 new customers225% return on investment1,000 new customers330% return on investment1,500 new customers


Project Goal ?Install new hardware and software to improve our customer service to world class levels

Respond to 95% of our customers inquiries within 90 seconds with less than 5% callbacks about the same problem.



A Really Good GoalI believe that this nation should commit itself to achieving the goal before this decade is out, of landing a man on the moon and returning him safely to Earth.John F. KennedyMay 25, 1961Copyright 2012 John Wiley & Sons, Inc.2-*


Developing the Business CaseStep 3: Identify AlternativesBase Case AlternativePossible Alternative StrategiesChange existing process without investing in IT Adopt/Adapt systems from other organizational areasReengineer Existing SystemPurchase off-the-shelf Applications packageCustom Build New Solution



Developing the Business CaseStep 4: Define Feasibility and Assess RiskEconomic feasibilityTechnical feasibilityOrganizational feasibilityOther feasibilitiesRisk focus onIdentificationAssessmentResponseCopyright 2012 John Wiley & Sons, Inc.2-*


Developing the Business CaseStep 5: Define Total Cost of OwnershipDirect or Up-front costsOngoing CostsIndirect CostsStep 6: Define Total Benefits of OwnershipIncreasing high-value workImproving accuracy and efficiencyImproving decision-makingImproving customer service



Developing the Business CaseStep 7: Analyze alternatives using financial models and scoring modelsPayback

Payback Period = Initial Investment Net Cash Flow

= $100,000 $20,000 = 5 years Copyright 2012 John Wiley & Sons, Inc.2-*


Developing the Business CaseBreak Even

If you sell a golf putter for $30.00 and it costs $25.00 to make, you have a profit margin of $5.00:

Breakeven Point = Initial Investment / Net Profit Margin= $100,000 / $5.00= 20,000 unitsCopyright 2012 John Wiley & Sons, Inc.2-*

Materials (putter head, shaft, grip, etc.)$12.00Labor (0.5 hours at $9.00/hr)$ 4.50Overhead (rent, insurance, utilities, taxes, etc.)$ 8.50Total$25.00


Developing the Business CaseReturn on Investment

Project ROI =(total expected benefits total expected costs) total expected costs = ($115,000 - $100,000) $100,000 = 15%Copyright 2012 John Wiley & Sons, Inc.2-*


Developing the Business CaseNet Present Value

NPV = -I0 + (Net Cash Flow / (1 + r)t)

Where:I = Total Cost or Investment of the Projectr = discount ratet = time periodCopyright 2012 John Wiley & Sons, Inc.2-*

Year 0Year 1Year 2Year 3Year 4Total Cash Inflows$0$150,000$200,000$250,000$300,000Total Cash Outflows$200,000$85,000$125,000$150,000$200,000Net Cash Flow($200,000)$65,000$75,000$100,000$100,000


Developing the Business CaseNet Present Value


Time PeriodCalculationDiscounted Cash FlowYear 0($200,000)($200,000)Year 1$65,000/(1 + .08)1$60,185Year 2$75,000/(1 + .08)2$64,300Year 3$100,000/(1 + .08)3$79,383Year 4$100,000/(1 + .08)4$73,503Net Present Value (NPV)$77,371



CriterionWeightAlternative AAlternative BAlternative CFinancialROI15%2410Payback10%3510NPV15%2410OrganizationalAlignment with strategic objectives10%358Likelihood of achieving projects MOV10%269ProjectAvailability of skilled team members5%554Maintainability5%467Time to develop5%576Risk 5%355ExternalCustomer satisfaction10%249Increased market share10%258Total Score100%2.654.858.50Notes: Risk scores have a reverse scale i.e., higher scores for risk imply lower levels of risk


Project Selection and ApprovalThe IT Project Selection ProcessThe Project Selection DecisionProject must map to organization goalsProject must provide verifiable MOVSelection should be based on diverse measures such astangible and intangible costs and benefitsvarious levels throughout the organizationCopyright 2012 John Wiley & Sons, Inc.2-*


Reasons Balanced Scorecard Approach Might FailNonfinancial variables incorrectly identified as primary driversMetrics not properly definedGoals for improvements negotiated not based on requirementsNo systematic way to map high-level goalsReliance on trial and error as a methodologyNo quantitative linkage between nonfinanacial and expected financial resultsCopyright 2012 John Wiley & Sons, Inc.2-*


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