Project Management

Project Concept Formation Feasibility Studies & Reports

Skills of a Project Manager

Management skills Communication Leadership Political Negotiating Organisational Teamwork Coping

Technical Motivational Patient Flexible Creative Persistent

Understanding Organizations

Structural frame: Focuses on roles and responsibilities, coordination and control. Organization charts help define this frame.

Human resources frame: Focuses on providing harmony between needs of the organization and needs of people.

Political frame: Assumes organizations are coalitions composed of varied individuals and interest groups. Conflict and power are key issues.

Symbolic frame: Focuses on symbols and meanings related to events. Culture is important.

Project Phases and the Project Life Cycle

A project life cycle is a collection of project phases

Project phases vary by project or industry, but some general phases include concept development implementation support

4 Phases of Project Life Cycle

Concept high level summary plan/ feasibility reports. If OK then

Development more accurate WBS and estimates. If OK

Implementation definitive estimates, acquisition, development & delivery

Close-out Work complete, Customer sign off, evaluation report

Phases of the project life cycle

Feasibility

The purpose of a Feasibility Study is to assess the viability of a potential project.

A Feasibility Report, is developed from the Feasibility Study.

It is presented to senior management to determine whether the project has sufficient merit to continue into more detailed phases.

The results of this phase are used to support the development of the Business Case.

Feasibility Types

Economic Feasibility Will the cost of implementing this system be

within management’s expectations in terms of expenditure and cash flow?

Operational Feasibility Will the system operate as desired in this

organisation?Technical Feasibility Is the technology available to build this

system and is it appropriate for this organisation?

Feasibility types con’t

Schedule Feasibility Will the time frame fit with the project

deadline?Legal Feasibility Does the project contradict any legal

requirements?Political feasibility Will we upset anyone, will we incur

ramifications later?

Economic feasibility

Concerns returns from investments in a project.

determines whether it is worthwhile to invest the money in the project

Some organizations place great emphasis on economic analysis.

Economic feasibility study

place actual money values against any purchases or activities needed for project.

place money values against any benefits that will accrue from a new system created by the project. Such calculations are often described as

cost-benefit analysis.

Cost-Benefit Analysis

usually includes two steps: producing the estimates of costs and

benefits, and determining whether the project is

worthwhile once these costs are ascertained.

Producing costs and benefits

produce a list of what is required to implement the system and a list of the new system's benefits.

Cost-benefit analysis is clouded by both tangible and intangible items.

Tangible items are those to which direct values can be attached

Some tangible costs often associated with computer system development are: Equipment costs for the new system. Personnel costs. Material costs. Conversion costs.

Tangible costs

Tangible items are those to which direct values can be attached

Some tangible costs often associated with computer system development are: Equipment costs for the new system. Personnel costs. Material costs. Conversion costs Training costs Other costs.

Intangible costs

Values that cannot be precisely determined and are the result of subjective judgment.

For example, how much is saved by completing a project earlier or providing new information to decision makers?

Determining whether a project is worthwhile

The costs and benefits are used to determine whether a project is economically feasible. -There are two ways to do this: the payback method and the present value method.

The payback method

Defines the time required to recover the money spent on a project.

Determine the costs Determine the benefits The difference between the cost and the

benefit for each year will be the saving or net benefit for the year.

Table 4.1 A present value evaluation

Year Cost BenefitPresent Value of

benefitDiscount Factor

(10%)Discount Factor

(15%)

0 $110,000

1 $20,000 $18,180 .909 .866

2 $40,000 $33,040 .826 .756

3 $60,000 $45,060 .751 .658

4 $30,000 $20,490 .683 .571

5 $10,000 $6,210 .621 .497

Total amount $122,980

The present value method

Determines how much money it is worthwhile investing now in order to receive a given return in some years' time.

The answer depends on the interest rate used in the evaluation.

The table above shows samples using both 10% and 15% To some extent the present value method works

backwards. First, the project benefits are estimated for each year and

then the present-value of these savings. If the project cost exceeds the present value, then it is

not worthwhile. The formula is:

Present value x (1 + r/ 100)n = Benefit at Year n We call 1/1(1 + r/ 100)n the discount factor in Table 4. 1.

Present Value

The formula is:Present value x (1 + r/ 100)n = Benefit at Year

n We call 1/(1 + r/ 100)n the discount factor in

Table 4. 1. Example, the present value of the $40

000 benefit at Year 2 is computed as:Present value = 40,000/(1 + 10/100)2= 33,057

Note that the sum of the present values in Table 4.1 is $122, 980. As this exceeds $110 000, the project is worthwhile.

Return on Investment (ROI)

The result of subtracting the project costs from the benefits and then dividing by the costs.

Example: If you invest $100 today and next year it is work $110.00 your ROI is

($110 – 100)/100 = 0.10 (10%)

TEXT CASE D: Construction Company‑Defining the Problems

Read the handout: ’Concept and feasibility’ This text looks at the feasibility of an IT

project for a construction company 5 broad concepts or solutions are

considered for project feasibility This case is similar to many IT project

problems After much work solution five is considered

the appropriate alternative

Summary

Project Life Cycle Feasibility Feasibility types Cost Benefit Analysis Payback method Present Value method

Thanks for listening