the project management process - week 2
Post on 19-Sep-2014
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DESCRIPTION
A discussion about project portfolio management, and how to choose projects for your portfolio.TRANSCRIPT
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Project Management2. Portfolio Management
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Week 2
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Project selection and portfolio management
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Project selection and portfolio management
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Project selection and portfolio management
What are the inputs that cause
the project process to begin?
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Unit Objectives
Implement IT project planning and selection techniques
Appreciate the importance of project portfolio management
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Strategic PlanningIdentifying IT Projects
Project ProposalsProject Selection MethodsApplying a Selection Model
Project SelectionProject Success
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Strategic PlanningIdentifying IT Projects
Project ProposalsProject Selection MethodsApplying a Selection Model
Project SelectionProject Success
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But first
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Assignment 1
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Assignment 1
“Write a project plan”
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Assignment 1
“Write a project plan”
Topic: Week 3
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http://www.teachers.ash.org.au/researchskills/Dalton.htm
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Back to the programme…
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Strategic Planning
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Strategic Planning1. What is strategy?2. How do projects relate to strategy?
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Strategy 2Strategy 1 Strategy 3 Strategy 4
Organisation Mission
Money
Customers
Efficiency and Effectiveness
Adaptability
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5 Forces analysis
Supplier power
Customer power
Threat of New
Entrants
Substitutes
Intensity of Intensity of competitioncompetition
Michael Porter’s ‘5 Forces’ – 1980’s
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business model template
VALUEPROPOSITION
COSTSTRUCTURE
CUSTOMERRELATIONSHIP
TARGETCUSTOMER
DISTRIBUTIONCHANNEL
VALUECONFIGURATION
CORECAPABILITIES
PARTNERNETWORK
REVENUESTREAMS
INFRASTRUCTURE CUSTOMEROFFER
FINANCE
Osterwalder’s Business Model framework 2006http://business-model-design.blogspot.com
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Process efficiency Scorecard Customer
satisfaction
Financial
Learning and
innovation
Balanced Scorecard
Kaplan & Norton (1994?) HBR
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Kaplan & Norton (1998?) HBRhttp://www.visual-literacy.org/periodic_table/pix/strategy-bsc-map.png
Strategy Map
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Strategy 2Strategy 1 Strategy 3 Strategy 4
Organisation Mission
Money
Customers
Efficiency and Effectiveness
Adaptability
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• Strategic Management Overview– Involves determining long-term objectives,
predicting future trends, and projecting the need for new products and services
– Provides the theme and focus of the future direction for the firm
• respond to change• allocating scarce resources
– Requires strong links among mission, goals, objectives, strategy, and implementation
•
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Set (SMART) Goals
Review Mission
Develop Strategies
Implement Strategies through projects
Align Strategies to goals
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Set (SMART) Goals
Review Mission
Develop Strategies
Implement Strategies through projects
Align Strategies to goals
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SWOT Analysis
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SWOT = SITUATIONAL ANALYSIS
Where are we now?
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S
T
W
O
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S
T
W
O
Positive Negative
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S
T
W
O
Inte
rnal
Exte
rnal
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S
T
W
O
Inte
rnal
Exte
rnal
Positive Negative
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S
T
W
O
Inte
rnal
Exte
rnal
Positive Negative
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Set (SMART) Goals
Review Mission
Develop Strategies
Implement Strategies through projects
Align Strategies to goals
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http://en.wikipedia.org/wiki/SMART_(project_management)
SS SpecificMM MeasurableAA AchievableRR RelevantTT Time-bound
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Letter Major Term Minor Terms
SS Specific Significant[3], Stretching[3], SimpleMM Measurable Meaningful[3], Motivational[3], Manageable
AA Achievable Agreed, Attainable[6], Assignable[2], Appropriate, Actionable, Action-oriented[3]
RR Relevant Realistic[2], Results/Results-focused/Results-oriented[6], Resourced[7], Rewarding[3]
TT Time-boundTime framed[2], Timed, Time-based, Timeboxed, Timely[6][5], Timebound, Time-Specific, Timetabled, Trackable
E[1] Exciting, Evaluated, Ethical
R[1] Recorded, Rewarding, Reviewed[8]
http://en.wikipedia.org/wiki/SMART_(project_management)
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Examples of “not smart”
goals?
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Set (SMART) Goals
Review Mission
Develop Strategies
Implement Strategies through projects
Align Strategies to goals
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Set (SMART) Goals
Review Mission
Develop Strategies
Implement Strategies through projects
Align Strategies to goals
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Organisation Mission
Money
Customers
Efficiency and Effectiveness
Adaptability
Strategy 2Strategy 1 Strategy 3 Strategy 4
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Set (SMART) Goals
Review Mission
Develop Strategies
Implement Strategies through projects
Align Strategies to goals
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Organisation Mission
Money
Customers
Efficiency and Effectiveness
Adaptability
projects
projects
projects
projects
Strategy 2Strategy 1 Strategy 3 Strategy 4
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What are the goals of the projects?
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Figure 2.1 Strategic Management Process (Gray & Larson, 2006, p25)
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projects
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projects
projectsprojects
projects
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projects
projects
projects
projects projects
projects
projects
projects
projects
projects
projects
projects
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PPPMProjectProgrammePortfolioManagement
The ‘O’ is for Organisational
OPM3
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Programme
OPM3
Portfolio
Projects
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ProjectsProgramme
Portfolio
ProjectProgramme
ProjectProjectProjectsProjectProjectProjects
ProjectProjectProjects
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One Portfolio or Several?
Categories
Approaches to project
portfolio management
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One Portfolio or Several?
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Categories
Venture: Projects that transform the business
Growth: Projects that grow revenue or market
share
Core: Projects that help run the business
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What are the benefits of Project Portfolio Management?
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Benefits of Project Portfolio
Management
Builds discipline into project selection processLinks project selection to strategic metricsPrioritizes project proposals across a common set of criteria, rather than on politics or emotionAllocates resources to projects that align with strategic directionBalances risk across all projects
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Problems with Project Portfolio
Management
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Different views from senior management on what (and how) should
be done
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Competition (& effective utilisation) for resources
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How toSenior Management Input
– provide guidance in selecting criteria that are aligned with the organization’s goals
– decide how to balance available resources among current projects
• The Priority Team Responsibilities– publish the priority of every project– ensure selection process is transparent – re-assess the organization’s goals /
priorities– evaluate the progress of current projects
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Figure 2.8 Sample project portfolio approach(Schwalbe, 2005, p51)
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Figure 1.5 Project management compared to project portfolio management(Schwalbe, 2005, p15)
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Money
Customers
Efficiency and Effectiveness
Adaptability
projects
projects
projects
projects projects
programme
projects
projects
projectsprojects
programme projects
Strategy 2Strategy 1 Strategy 3 Strategy 4
Organisation Mission
Programme
projects
projects
programme
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Shor
t te
rmM
id
term
Long
te
rm
projects
projects
projects
projects projects
projects
projects
projects
projectsprojects
projects projects
Strategy 2Strategy 1 Strategy 3 Strategy 4
Organisation Mission
projects
projects
projects
projects
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http://www.betterprojects.net/search?q=strategy
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projects
projects
projects
projects projects
projects
projects
projects
projectsprojects
projects projects
Strategy 2Strategy 1 Strategy 3 Strategy 4
Organisation Mission
projects
projects
projects
projects
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Identifying IT Projects
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Identifying IT Projects• Many organizations follow a planning
process for selecting IT projects which is aligned with business strategy
• Research shows:– Supporting business objectives is the
number one reason for investing in IT projects
– Use of IT standards lowers development costs by 41 percent per user (Cosgrove Ware, 2002)(Cosgrove Ware, 2002)
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Figure 2.1 Pyramid for the Project Selection Process(Schwalbe, 2005, p35)
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Project Proposals
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Most business units have a
strategic plan
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Which SHOULD align with the organisation’s strategic plan
Which SHOULD align with the organisation’s strategic plan
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Solicitation of Project Proposals
Within the organization
Request for proposal (RFP) from external
sources (contractors and vendors)
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When ranking proposals, consider;
DisciplineAccountabilityResponsibilityConstraints
Reduced flexibilityLoss of power
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Project Initiation forms
Figure 2.4B Risk Analysis(Gray & Larson, 2006, p39)
Figure 2.4A Major Project Proposal (Gray & Larson, 2006, p38)
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Project Initiation forms
Figure 2.4B Risk Analysis(Gray & Larson, 2006, p39)
Figure 2.4A Major Project Proposal (Gray & Larson, 2006, p38)
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Project Selection Methods
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Not all project proposals make it to initiation
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Every project idea isn’t progressed.
Why?
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TimeMoneyFocus
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Methods for selecting projects include:
- Focusing on broad organizational needs
- Categorizing IT projects- Financial analysis- Using a weighted scoring model- balanced scorecard- Strategy mapping
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Focusing on Broad Organizational Needs
– E.g. Non-financial, but important benefits
– Three important criteria:• need for the project• funds available for the project• will to make the project succeed
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Categorizing IT Projects – Does the project provides a response to:
•a problem•an opportunity•a directive
– The time and date of expected completion
– The overall priority of the project
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Financial Analysis
$$$
Net Present Value
Payback model
Return on Investment
(there are more)
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Financial Analysis
$$$
Net Present Value
Payback model
Return on Investment
(there are more)
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Net Present Value
Net Present Value (NPV) ModelUses management’s minimum desired rate-of-return (discount rate) to compute the present value of all net cash inflows
positive NPV: the project meets the minimum desired rate of return and is eligible for further considerationnegative NPV: project is rejected
Net Present Value (NPV) Model cont’d…NPV Calculations
determine estimated costs / benefits for the life of the project and products it producesdetermine discount rate (ask organization)calculate the NPV some organizations consider the investment year as year 0, others consider it year 1some organizations enter costs as negative numbers, others do not (ask organization)
Example: CP829_Lecture_Week2_NPV.xls
Time to
StoStopp
and turn to a new
presentation pack
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Payback model
Figure 4.1 Charting the Payback Period (Schwalbe, 2006, p129)
Measures the time it will take to recover the project investment
Shorter paybacks are more desirable
Payback occurs when cumulative discounted benefits and costs are greater than zero
Limitations of payback:• ignores the time value of money• assumes cash inflows for
investment period only• does not consider profitability
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Return on Investment
Return on Investment (ROI)Calculated by subtracting project costs from the benefits and then dividing by the costsFormula:
ROI = (total discounted benefits – total discounted costs) / discounted costs
Higher the ROI, the better. Many organizations have a set or minimum rate of return on investment projects
Example: CP829_Lecture_Week2_ROI.xls
(total discounted benefits – total discounted costs)
discounted costs
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Non-financial Analysis
$$$
Weighted scoring model
Balanced Scorecard
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$$$
Weighted scoring model
A weighted scoring model is a tool that provides a systematic process for selecting projects based on many criteria
– Steps in identifying a weighted scoring model:
• identify criteria for project selection• assign weights (%) to criteria add up to
(100%)• assign scores to each criteria for each project• multiply scores by weights to get total scores
– The higher the weighted score, the better– Example: CP829_Lecture_Week2_WeightedScore.xls
$$$
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$$$
Balanced Scorecard
•Balanced Scorecard – Robert Kaplan and David Norton developed
this approach to help select and manage projects that align with business strategy
– Methodology that converts an organization’s value drivers, such as customer service, innovation, efficiency, and financial performance, to a series of defined metrics
– See http://www.balancedscorecard.org for more information
$$$
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Applying a selection
model
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Applying a Selection Model• Project Classification
– Deciding how well a strategic or operations project fits the organization’s strategy
• Selecting a Model– Focus on competitive strategy and broad organizational
needs– Perform net present value analysis or other financial
projections– Use a weighted scoring model– Implement a balanced scorecard– Address problems, opportunities, and directives– Consider project time frame– Consider project priority
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Project Selection
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The Business Case
Impacts Costs & Benefits
Clearly compares alternatives Objective
Systematic
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The Business Case
Elevator pitches?
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Table 3.4 Sample business case(Schwalbe, 2005, pp74-76)
Example business case
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Contents of a Business Case1. Introduction/Background2. Business Objective3. Current Situation and Problem/Opportunity
Statement4. Critical Assumptions and Constraints5. Analysis of Options and Recommendation6. Preliminary Project Requirements7. Budget Estimate and Financial Analysis8. Schedule Estimate9. Potential Risks10.Exhibits
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Figure 2.3 The Process for Developing a Business Case(Marchewka, 2003, p34)
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Project Success
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By the way,
Things are getting better
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Source: CHAOS Report 1995 by the Standish GroupAccess it here: http://net.educause.edu/ir/library/pdf/NCP08083B.pdf
Not even complete
d
Typically 189% over
budgetOTOBOS
53%Challenged
16%Success
31% Critical Failures
1994
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Not even complete
d
Still way over
budgetOTOBOS
51%Challenged
34%Success
15% Critical Failures
2002
Source: CHAOS Report 2002 by the Standish GroupAccess it here: http://www.standishgroup.com/quarterly_reports/index.php
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53%Challenged
16%Success
31% Critical Failures
1994
51%Challenged
34%Success
15% Critical Failures
2002
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$0
$50
$100
$150
$200
$250
1994 2005
Wasted money as a
share of total project
spend
Billions of dollars
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What happened?
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“The reasons for the increase in successful projects vary. First, the average cost of a project has been
more than cut in half. Better tools have been created to monitor and control progress and better skilled project managers with better management processes are being used. The fact
that there are processes is significant in itself.”
(Standish Group cited in Schwalbe, 2004, p13)
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“The reasons for the increase in successful projects vary. First, the average cost of a project has been
more than cut in half. Better tools have been created to monitor and control progress and better skilled project managers with better management
processes are being used. The fact that there are processes is significant in
itself.” (Standish Group cited in Schwalbe, 2004, p13)
Smaller
projects
Better tools
Better trainin
g
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Better Selection
Portfolio Mgt
Strategic Alignme
nt
More recently
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Things you
should have
(if you want to succeed)
1. Executive support2. User involvement3. Experienced project
manager4. Clear business objectives5. Minimized scope6. Standard software
infrastructure7. Firm basic requirements8. Formal methodology9. Reliable estimates10. Other criteria, such as
small milestones, proper planning, competent staff, and ownership
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incrementalBut, change has been…
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There is still plenty of room for
improvement.
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? What do you think is still
going wrong?
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BetterProjects.net
Title page pic care of jpellqen & CC @ Flickrhttp://flickr.com/photos/jpellgen/444946201/