1 management of it-enabled business projects dr. mary c. lacity
Post on 19-Dec-2015
221 views
TRANSCRIPT
1
Management of IT-EnabledBusiness Projects
Dr. Mary C. Lacity
2
Management of IT-Enabled Business Projects
The objectives of this module:
Gain an understanding of the track record and challenges of managing large scale, IT-enabled projects
Understand the relationship between: project management: managing the project phases
change management: managing the people affected by change, mostly through training & incentives
Explain robust, best practices for “doing the thing right”. These are management practices that have been associated with success since the beginning of IT—the practices do not change just because technologies change.
Gain an appreciation for the difference between “doing the thing right” and “Doing the right thing”.
3
Relationship Between Project Management & Change Management
Planning TestingDevelopmentDesignRequirements
AnalysisImplementation
Pre-awareness Awareness Self-concernMentalTryout
Hands-on Acceptance
Change Strategy Audience Analysis & Impact Assessment Sponsorship & Communication Plan Role Design & Mapping Training Design Training Deployment Readiness Assessment Startup Support
PROJECT MANAGEMENT PHASES
CHANGE PHASES
Source: Adapted from Roberts, Jarvenpaa & Baxley, MISQE, 2003
4
Best Project Management Practices are Robust:
Business solutions drive technology selection
Secure top management active support
Select high powered project manager with proven track record
Involve & incent knowledgeable users
Don't judge success solely based on time to budget
Buy-in outside expertise to transfer learning
Implement incrementally
Manage scope creep, perhaps using 80/20 satisficing rule
Beware of Mythical Man Month
Ensure change management (training, buy-in, roll out); May be a co-lead if large project
5
Project Management Studies
For the past 30 years, 80 % of all IT projects are late, over-budget,and/or fail to deliver promised functionality.
See: Keil, Mark and Montealegre, Ramiro, “Cutting Your Losses,Extricating Your Organization When a Big Project Goes Awry,”Sloan Management Review, Spring, 2000, pp. 55-68.
See: Sauer, Chris, Why Information Systems Fail, Alfred Waller,1993.
See: “The Standish Group CHAOS Report” reported on: http://www.standishgroup.com/chaos.html
See: Peter Morris, “Project Management: Lessons from IT and Non-IT Projects,”in Information Management: The Organizational Dimension, Earl (ed), OxfordUniversity Press, 1996, pp. 321-336.
6
ERP Success RatesERP Success Rates• Survey of 600 companies(1)
– 57% finished 10% - 30% or more over budget– 3% finished 10% to 30% under budget– 45% took 10% - 30% or more time than planned to implement
• W.W. Grainger Inc(2)
– Experienced “substantial systems and transaction processing disruptions” that caused losses of $.24/share
– Stock dropped 2%/$100M in market value on the earnings announcement
• Hewlett-Packard Inc(3)
– $400M 3Q 2004 loss blamed on “Poorly executed” migration• Hershey Foods Corp(2)
– Delayed customer order processing costing sales during Halloween• Whirlpool Corp(2)
– Poor implementation led to series of shipment delays to customers(1) The Controller’s Report. New York: May 2004., Iss. 5; pg. 7, 1 pgs(2) James P. Miller. Wall Street Journal. (Eastern Edition). New York, N.Y.: Jan 10,
2000. pg. C.12(3) Patrick Thibodeau, Don Tennant. Computerworld. Framingham: Sep 27, 2004.
Vol.38, Iss. 39; pg. 14, 1pgs
7
California Department of Social Services
State-wide Automated Child Support System
Expectations:
$76 million contract with Lockheed Martin to develop the system3 year schedule to complete
Outcome:
Cancelled in November 1997, after spending $435 million
8
Denver International Airport
Baggage Handling System
Expectations:
$175.6 million contract with BAE Automated Systems to developthe system
18 month schedule to complete, April 22 1992 to Oct 1993
Outcome:
Cancelled after horrible test in April 1994, after spending over $2 billion
9
London Stock Exchange
Integrated Claims and Settlement System
Expectations:£50 million cost estimate to develop the system (Cooper’s as project management)2 year project to complete, Dec 1989 to Oct 1991
Progress:In-house staff will take too long, buy Vista software &
hire Vista to modify (est. cost to modify, £1 million)
Outcome: Cancelled on March 1993, after spending £400 million
10
Standish Group CHAOS Report
In the US, companies spend $250 billion each year on developmentof 175,000 IT projects.
Research Method:
Interviewed 365 IT executives about 8,380 IT projects.
Large company: > $500 million in revenueMedium company: $200 to $500 million in revenueSmall company: $100 to $200 million in revenue
11
Standish Group CHAOS Report:IT Projects classification
Type I: Success; on time, on budget, promised functionality
Type II: Challenged; over-budget, over-time and or missing functionality
Type III:Failed; Severely impaired projects; cancelled projects
12
Standish Group CHAOS Report:IT Projects classification
13
Standish Group CHAOS Report:IT Projects classification
SMALL MEDIUM LARGE
TYPE I 28% 16.2% 9%
TYPE II 50.4% 46.7% 61.5%
TYPE III 21.6% 37.1% 29.5%
14
Standish Group CHAOS Report:Failure Statistics
For every 100 project starts, there are 94 restarts
For Type II and Type III Projects: delivered at 189% of originalcost estimate:
Large companies 178%
Medium companies 183%
Small companies 214%
15
Standish Group CHAOS Report:Failure Statistics
For Type II and Type III Projects: delivered at 222% of originaltime estimate:
Large companies 230%
Medium companies 202%
Small companies 239%
16
Standish Group CHAOS Report:Failure Statistics
For Type II Projects: Only 61% of content delivered
Large companies 42%
Medium companies 65%
Small companies 74%
17
Standish Group CHAOS Report:Failure Rates over Time
48 % of participants believe there are more failures today than 5 years ago.
46 % of participants believe that there are more failures today than 10 years ago
18
How do IT Project Success RatesCompare with other large projects?
Peter Morris studied 1,444 projects world-wide in many industries.
Only 2% of projects were delivered on budget
Example: Trans Alaskan Pipeline estimated cost in 1969: $960 million actual cost: $8.7 billion
He found that cost escalation was largely due to factors outsideof project manager’s control, such as government action, inflation,strikes, technical uncertainty, scope changes, weather.
19
Morris StudyFactors Affecting Project SuccessENVIRONMENTAL
FACTORSPolitics, Community,
Environment, Weather
FINANCING &ECONOMICS
poor c/b analysisbudget cuts
IMPLEMENTATIONbest practices such as top management support, user involvement,
adequate resources, effective teams, quality assurance
PROJECT DEFINITION
Requirements knownTechnology Proven
EXPECTATIONS/ATTITUDES
PROJECTOUTCOME
20
Standish Group CHAOS Report:Success Statistics on Type I
• User Involvement• Executive Management Support• Clear Statement of Requirements• Proper Planning• Realistic Expectations• Smaller Project Milestones• Competent Staff• Ownership
DOING THE THING RIGHT:
21
Project Management:Three case studies
Manufacturing: Centralized order scheduling system to reduce cycle time
Centralized Decision-making
Baking: Hardware migration to cut costs No changes in decision-making
Insurance: Claims processing system to reduce fraud Decentralized decision making
22
Project Management:Three case studies
Manufacturing: Expected: Costs of $6 million, 2 years Actual: $12 million, more than 4 years
Baking: Expected: Costs of $7 million, 2 years Actual: $1.5 million for pilot, project cancelled
Insurance: Expected: Costs of £4.5 million Actual: £6 million, almost a year late
23
Project Management:Three case studies
Company Sales in Company/SBU
Annual I.T. Budget
# I.T. Employees
U.S. Manufacturing
$1 billion $8 million 75
U.S. Baking $2 billion $16 million 100
U.K. Insurance £650 million in insurance premiums (appx. $1.1 billion)
£15 million (about $24 million)
180
24
QUESTIONS TO THINK ABOUT:
Should success be based “on time” “on budget” “to functionality?”
• Baking is a Type III project that met all objectives• Insurance is a Type II, mediocre results• Manufacturing is a Type II, excellent results
Which projects “Did the thing right?”
Which projects “Did the right thing?”
25
HeadquartersMainframe
Honey, whatelse can we addto this claim???
Throw ineverything!
Old Claims Process at Insurance:Pay out £222,000,000 year
26
HeadquartersMainframe
Claims typedin
Old Claims Process at Insurance
27
HeadquartersMainframe
Supervisor readsmainframe reportsand assigns to a claims handler
Old Claims Process at Insurance
28
HeadquartersMainframe
Claims handlerinvestigates theclaim and decideson award
Old Claims Process at Insurance
29
HeadquartersMainframe
Looks good,cut them a check
Old Claims Process at Insurance
30
HeadquartersMainframe
Customer has timeto exaggerate or makeup claims
Supervisor doesn’tassign cases basedon expertise
Old Claims Process at Insurance
31
HeadquartersMainframe
Customermust phonein claim
Claim handlerprints and sendsto customer forsignature and also saves electronic copy of claim
New Claims Process at Insurance
32
HeadquartersMainframe
Signed customerdocument scanned andstored on image server
Mainframe programassigns complexityand expertise ratingfrom 0 to 20
New Claims Process at Insurance
33
HeadquartersMainframe
Each claims handlerhas an expert ratingto determine whatclaims they can workon
New Claims Process at Insurance
34
• Poor customer service, poor manufacturing coordination due to a lack of shared information about each of the plant’s capabilities, capacities, and schedules.
• BPR: Centralize decision-making, software selection drove client/server
• Implemented a global client/server application for customer-ordering, manufacturing planning, plant scheduling, and product specification.
• Improved customer service from 3 weeks to 4 hours, decrease manufacturing cycle from 27 to 19 days.
• Huge success, although senior management credit manufacturing with the improvements
Manufacturing
35
Manufacturing
36
Manufacturing
Can I order 60,000wafers with these 200parameters?
37
Manufacturing
Let me check,I’ll get back toyou…
38
Manufacturing
Can you do 60,000wafers?
39
Manufacturing
Well, let me see ifI can get some crystal...
40
Manufacturing
Hey Joe--can I have bunch of crystal by next week?
41
Manufacturing
I can give you half whatyou need…try Ben
42
Manufacturing
Ben--do you have xamount of crystal toship by next week?
43
Manufacturing
No, but I can make somewithin 3 weeks. Want it?
44
Manufacturing
Let me get backto you
45
Manufacturing
Susan, can I have xamount of crystal?
46
Manufacturing
Sure I can ship today!
47
Manufacturing
I can make 30,000 wafersin 3 months, but the rest willtake 5 months.
48
Manufacturing
Let me try some otherplants first...
49
Manufacturing
THREE WEEKS LATER….
Great news we can do it!
50
Manufacturing
Thanks but I went with your competitor--he gave me a quote the next day.
51
Manufacturing
This is what you aregoing to make and when!
52
Manufacturing
Sir I am happy to confirm yourorder within 4 hours!
Yipee!!!
53
Baking
• $8 million per year on mainframe outsourcing contract perceived as too expensive.
• Migration of mainframe transaction processing systems to client/server for 35 bakeries to client/server to reduce costs.
• No changes in organizational structure or processes.
• Pilot project a technical success
• Project canceled when company was sold
• New management believes in “letting each bakery select its own
technology”
54
HeadquarterMainframe
Daily sales, returns, orders
Baking
55
HeadquarterMainframe
Daily baking schedules, driver instructions,prices, discounts, etc.
Baking
56
HeadquarterMainframe
Daily baking schedules, driver instructions,prices, discounts, etc.
Baking
57
Original Plan at Baking
58
Big success!
Denver Pilot at Baking
59
Revised Plan at Baking
60
Company Expected Cost Actual Cost Number of Months Late
Manufacturing $ 6 million $ 12 million 24 Baking $ 7 million Project Canceled Project Canceled Insurance £4.5 million £6 million + 10
All three projects were late and over-budget:
PROJECT OUTCOMES
But are they successes or failures?
61
PROJECT JUSTIFICATIONPRACTICES
Not just cost/benefit analysis
Contribution to business develop new distribution channelsstrategy: mass customization Process improvement: quicker manufacturing time faster product development
improved customer service reduced inventory levels
Opportunity costs: what happens if we don’t do this project?
62
Companies had to develop (or help the vendor develop) the client/server technology. TECHNICAL UNCERTAINTY: Unexpected incompatibilities among vendor products Debug vendor’s new client/server applications Technical cracks in back-ups, roll-outs, and check-points REQUIREMENT UNCERTAINTY: UNREALISTIC EXPECTATIONS OF PROJECT DELIVERY UNREALISTIC COST/BENEFIT ANALYSIS IN ACQUISTION REQUEST
REASONS FOR COST/TIME OVERRUNS
63
PROJECT JUSTIFICATION
Company Quantifiable Benefits Financial GuessesManufacturing $500,000 a year savings to
terminate mainframeoutsourcing
Increase sales by $15 millionper year
Baking $3 million a year savings toterminate mainframeoutsourcing (however, theoutsourcing vendor reducedbill by this amount during c/sdevelopment)
Insurance 2% reduction in costs ofclaims (which translates toabout £5 million annually).
Only 1 of the companies quantified the benefits
?
64
Lesson: Companies needed to secure top management support in the project, primarily by
having a senior-level project sponsor.
TYPE OF SUPPORT SILICON BAKING INSURANCEProject Champion X X
Project Sponsor X X X
65
Lesson: Companies needed to secure top management support in the project, primarily by
having a senior-level project sponsor.
• Project Champion: “Champions are managers who actively and vigorously promote their personal vision for using IT, pushing the project over or around approval and implementation hurdles. They often risk their reputations in order to ensure the innovation’s success” (Beath, 1991, p. 355)
• Project Sponsor: “Sponsors have the funds and authority to accomplish their goals” (Beath, 1991, p. 355) (A less active and less enthusiastic role compared to a champion)
66
Lesson: Business strategy drove technology selection in 2 companies
Company Business Process Re-engineeringManufacturing “It’s a business problem that we solved using this technology as opposed to the other
way around. [The MIS Director] thinks, from what he has seen, if you are installingC/S just to install C/S, you are crazy, because there is a high learning curve to get over.”--Strategic Manager of Marketing
Baking none:
“You can buy a $100,000 processor that if you want to use MIPS or throughput, soyou can get a pretty sophisticated piece of equipment for $100,000. To get theequivalent in IBM, older generation, you are talking $700,000 to $1,000,000. Sowhat I presented to management was, ‘Here we are on this path with this investmentbase and its dropping at this rate. Here’s a new technology base, a lower entry fee,but its cost is dropping. How do we get from this curve to that curve without killingourselves and without making a zillion dollar investment?’”-- Head of ITDepartment
Insurance “We are re-engineering the business process. It takes a large number of businessfunctions, so for example, process work flow handling. It has business rules in it forprocessing claims. You take it immediately into a PC arena. Also because we areprocessing rules, it takes us into the client/server arena. We are actually holdingsome data locally to assign work flow.”-- Manager of the Business TechnologyDepartment
67
Lesson: All companies hired some outside experts, to varying success
Company Supplier RelationshipManufacturing Received free vendor resources in exchange for helping to
debug new client/server system. Knowledge about the newtechnology was transferred so that internal IT staff were in aposition to support it.
Baking Baking hired a consulting firm to help with implementation:
“I got the feeling they were only one chapter ahead of us inthe book.”
Insurance At first, Insurance relied on vendor salespeople. Aftertechnical incompatibilities arose, they hired an outsourcingconsulting company to review/verify technical design.
68
Lesson: All companies hired some outside experts, to varying success
Lesson: From prior research on 116 sourcing case studies, the development of immature technologies were the worst to outsource because specifications were
uncertain and no transfer of knowledge occurred.
The best sourcing model for immature technologies: buy-in vendor resources
69
Lesson: Each company implemented incrementally
Company Implementation Strategy
Manufacturing Implemented 3 phases, each with added-value to business Phase I: central specifications, scheduling Phase II: 700 management reports Phase III: Front-end customer orders
Baking Pilot at one bakery
Insurance Mock-up “model” office
Benefits of incremental implementation:
Verify user requirements Reduce risk Recover from mistakes early Demonstrate value to secure management approval
for full-scale implementation Gain user acceptance of the system
70
QUESTIONS TO THINK ABOUT:
Should success be based “on time” “on budget” “to functionality?”
• Baking is a Type III project that met all objectives• Insurance is a Type II, mediocre results• Manufacturing is a Type II, excellent results
Which projects “Did the thing right?”
Which projects “Did the right thing?”
71
Mastering the Next Wave of Enterprise Systems:Leveraging Lessons From ERP
Top Management is engaged in the project, not just involved
Project leaders are veterans with proven track records and team makers are best in the business empowered to make decisions
Buy-in vendor resources to fill gaps in expertise and transfer their knowledge
Change management goes hand in hand with project management
A satisficing mindset prevails.
By Carol Brown and Iris Vessey, MISQE, 2003.
72
Three “Successful” ERP Implementations
“Material” “Valvo” “Asea”
Revenues $3.5 Billion $430 Million Transform a small branch to profit center with own selling & distribution
Reason for ERP
Replace 200 legacy systems to provide global business processes
Replace lousy legacy systems running on old mainframe packages
Cost of ERP $100 million $17 million $150,000
Time Line April 1995
Late 1997
Sept 1996
Year end 1997
Sept 2000
Year end 2000
Time ~2.75 years;
Late & over budget
~1.5 yearsOn time & under budget
(but increased 30% after planning phase)
~4 months
Sooner & on budget
Outcomes 50% increase in inventory turns
20% reduction in admin costs
$millions in logistical costs
Y2k compliance
35% reduction in inventory costs
Better order fulfillment rates
Allowed new profit center to get up and running with selling & inventory
73
ERP In Practice…
SourceSource: www.freequality.org/beta%20freequal/fq%20web%20site/ training/EnterpriseResourcePlanning2%5B1%5D.: www.freequality.org/beta%20freequal/fq%20web%20site/ training/EnterpriseResourcePlanning2%5B1%5D. pptppt
74
History Of ERP
1. Manual Intensive
2. Not real-time
3. Non-Collaborative
4. Multiple Application
Source: http://webprofesores.iese.edu/valor/Docs/EMBA/intro%20ERPS.pdf
75
After ERP
1. Automated
2. Real-time
3. Collaborate
4. Single Application
Source: http://webprofesores.iese.edu/valor/Docs/EMBA/intro%20ERPS.pdf
76
Employees
Managers andStakeholders
ERP Modules
CentralDatabase
ReportingApplications
HumanResource
ManagementApplications
FinancialApplications
ManufacturingApplications
InventoryAnd SupplyApplications
HumanResource
ManagementApplications
ServiceApplications
Sales andDelivery
Applications
Sales ForceAnd CustomerService Reps
Customers Back-officeAdministratorsAnd Workers
Suppliers
Source: Davenport, Thomas, “Putting the Enterprise into the Enterprise System”, Harvard Business Review, July-Aug. 1998.
77
mySAP Business Suite
Source: http://www.sap.com
78
Noted Practices“Material” “Valvo” “Asea”
Adoption Diffusion
Lesson
Early adopter achieves
Success by learning by
Doing with “freedom”
To fail culture
Early majority achieves success by benchmarking successful early adopters
Late majority achieve success by applying templates.
Buy-in of vendor
resources
Big 5 firm with 50 consultants on project
Convinced consulting firm to help them go big bang
Used shared services experts located in Malaysia with R/3 expertise
Change Management
Lead by organizational development & training specialists
900 power users
Cash bonus
Stock options
Project co-lead along with IT and business;
Documented new work, newly automated work, eliminated work; work transferred to another group
Bonus pay to everyone
Business co-led with IT was also responsible for change management
79
Management of Global Large-Scale Projects Through a Federation of Multiple
Web Based Workflow Management SystemsBadir, Founou, Stricker, Bourquin, Project Management Journal, Sept 2003
ManagementTeam
E-Platform Providers
ProjectManagement
SystemObject-Oriented Database
Graphical User Interface
WorkflowManagement
System
Sending Information
WorkflowManagement
System
WorkflowManagement
System
Information D
istribution
Browse
Browse
MobileAgent
Updating
80
WorkflowManagement
System
ProjectManagement
System
Identification of tasksResource requirements & costsSchedulesPercentage of work completeBudgets verses actual
Task steps & assignments
81
Best Practices on Project Managementare Robust
Don’t forget the past...
Business solutions drive technology selection
Secure top management active support
Select high powered project manager with proven track record
Involve & incent knowledgeable users
Don't judge success solely based on time to budget
Buy-in outside expertise to transfer learning
Implement incrementally
Manage scope creep, perhaps using 80/20 satisficing rule
Beware of Mythical Man Month
Ensure change management (training, buy-in, roll out); May be a co-lead if large project