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Week 11 Monday, April 10

Week 11 Monday, April 10 Portfolio Approach to Managing IT Projects Profolio Selecting and prioritizing projects Which projects have the greatest impact? Organization’s strategy Internal processes Which projects have the greatest risk? Which projects have the greatest payoff?

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Week 11 Monday, April 10

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  1. Week 11Monday, April 10 Portfolio Approach to Managing IT Projects

  2. Profolio • Selecting and prioritizing projects • Which projects have the greatest impact? • Organization’s strategy • Internal processes • Which projects have the greatest risk? • Which projects have the greatest payoff? • In terms of dollars, tangible and intangible benefits • Which projects are required? • What is the value of information?

  3. Portfolio Organization Strategic Plan • Corporate infrastructure • IT infrastructure IT Strategic Plan • Long-term projects • “Low-hanging fruit” Corporate Initiatives Portfolio Project Implementation

  4. Project Risk • Serious deficiencies in IT management • Failure to assess the implementation risk of a project at the time it is funded • Failure to consider the aggregate implementation risk of the portfolio of projects • Failure to recognize that different projects require different managerial approaches Payoff Risk Potential The greater the risk, the greater the payoff (benefit)

  5. Project Dimension and Risk • Project size – The larger the project (budget, staffing levels, duration, number of departments affected), the larger the risk • Experience with technology – Unfamiliarity with the technology (hardware, software, etc.) increases risk • Requirements volatility – Stable requirements reduce the risk; “evolving” projects pose greater risks

  6. Effect of Increasing Risk Components Project size Experience with technology Requirements volatility Risk Very High Risk Project Risk High Risk Moderate Risk 1 2 3 Number of Risk Factors

  7. Implementation Risk CategoriesLess Project Size High Requirements Volatility Low Requirements Volatility Low Technology Spreadsheet support for budgeting (low tech application, requirements unknown) Year 2000 compliance (low tech application, requirements known) Online graphic support for advertising copy (high tech application, requirements unknown) AI-driven bond trading (high tech application, requirements known) High Technology

  8. Implementation Risk Categories Low Spreadsheet support for budgeting (low tech application, requirements unknown) Year 2000 compliance (low tech application, requirements known) Technology Large Online graphic support for advertising copy (high tech application, requirements unknown) AI-driven bond trading (high tech application, requirements known) Size High Small High Requirements Volatility Low

  9. Dimensions Influencing Risk • Project size • Experience with technology • Requirements volatility (structured vs. unstructured) Small structured project with new technology Large, unstructured project with new technology “Low hanging fruit” Low Experience Large, structured project with known technology Large Project size High Small Structured Unstructured Requirements Volatility

  10. Dimensions Influencing Risk • Project size • Experience with technology • Requirement volatility (structured vs. unstructured) Medium risk (structured, low experience, large project) Low risk (unstructured, high experience, small project) High Experience Large Project size Low Small Structured Unstructured Requirements Volatility

  11. Dimensions Influencing Risk • Project size • Experience with technology • Requirement volatility (structured vs. unstructured) High risk (unstructured, low experience, small project) Very High risk (unstructured, low experience, large project) High Experience e-business projects Large Project size Low Small Structured Unstructured Requirements Volatility

  12. Risk Assessment Based on the Strategic Grid High Strategic Strategic IT plan, initiatives Factory Operational IT Impact of Existing IT applications Support Basic elements Turnaround Gradual adoption Low Low High Impact of Future IT applications

  13. Risk Portfolio New core value New benefits Improved benefits Variation Breakthrough systems Very high New platforms High Portfolio to mitigate risk Derivative systems Project Risk Medium Low-hanging fruit Low Portfolio composed of different projects

  14. Project Management: A Contingency Approach “There is no single correct approach to all projects” • Management tools • External integration – Link project team to system users • Internal integration – Ensure project team operates as an integrated unit • Formal planning – Structure sequence of tasks, estimate time, money and resources • Formal result controls – Evaluate progress and flag potential problems Use depends on the project

  15. Implementation Risk Categories High Requirements Volatility Low Requirements Volatility Low Technology • Low-risk profiles • External integration critical • Internal integration necessary • Formal planning tools, traditional • Results controls necessary • Projects easy to manage • External integration necessary • Internal integration less necessary • Formal planning tools, traditional • Results controls necessary • Extremely difficult and should not be taken lightly • External integration critical • Internal integration necessary • Formal planning tools, less predictive value (due to uncertainties) • Results controls necessary • Projects not easy to manage • External integration not crucial • Internal integration crucial • Formal planning tools, less predictive value • Results controls limited, personnel monitoring important High Technology

  16. Risk ManagementFrom Sprague and McNurlin • Types of risk • Technical – failure due to technology • Business – failure do due organizational issues • Assessment of risks • Project’s leadership – commitment, experience, abilities, formal and informal management skills • Employee’s perspective – acceptance to change • Scope and urgency – extent of change (breadth and depth), need to implement change

  17. Risk Management Likelihood of Business Change Employees’ Perspective Project Scope and Urgency Recommended Project Method Leadership High Big Bang + Less Risky Improvisation - + Guided Evolution + + Top-down Coordination - - Championed Dealmaker + + More Risky - Championed Improvision - Champion Guided Evolution - + Migrate or Kill the Project - Low

  18. Other Aspects of IT Project ManagementBased on a Survey of 10 Executives in Sacramento • Develop and compare feasibility, complexity, scalability and cost of possible solutions • Project portfolio – investing in the right projects • Aligning projects and initiatives to strategic objectives • Risk management – risk considerations, factors and plans • Contingency plans • Managing multiple vendors and workflow • Regulatory and compliance issues • Leveling resources over projects – human, financial, technical

  19. Other Aspects of IT Project ManagementBased on a Survey of 10 Executives in Sacramento • Project planning, execution and scheduling – Prioritizing, defining performance measures, tracking processes to ensure performance, schedule resources, project monitoring, change and service controls, quality assurance and testing, identify key drivers • Project leadership – Assessing change and change management, communication and organizational skills • Adoption issues • Identify and understanding stakeholders

  20. Good IT Project Management • Deliver on time • Come in or under budget • Meet the original objectives • Establish ground rules • Foster discipline, planning, documentation and management • Obtain and document the “final” user requirements • Obtain tenders from all appropriate potential vendors • Include suppliers in decision making • Convert existing data • Follow through after implementation Successful project characteristics

  21. Value of a System or Application • Benefits the business will receive from the IT • IT by itself provides no benefits or advantages • Measuring benefits • Distinguish between the different roles of the systems – support role, integral to strategy, or product/service offering • Measure what is important to management • Assess investments across organizational levels

  22. Measuring Benefits: Role of System • Measuring organizational performance – ability to support the organization and its users with their tasks • Measuring business value – help meeting organizational and business goals • Measuring a product or service – profitability of product or service

  23. Measuring Benefits: Importance to Management • IT is usually not viewed as a revenue generator • Investment to improve the business • Corporate effectiveness • Less tangible benefits includes • Customer relations (satisfaction) • Employee morale • Time to complete an assignment

  24. Measuring Benefits: Across the Organization Sources of Value • Potential benefits differ at various organizational levels • Dimensions • Economic performance payoffs (market measures of performance) • Organizational processes impact (measures of process change) • Technology impacts (impacts on key functionality) Individual Corporate Division Assess IT’s impact in each cell

  25. Value of IT Investments to Investors • Brynjolfsson, Hitt and Yang study • Every $1 of installed computer capital yielded up to $17 in stock market value, and no less than $5 • Led to organizational changes that created $16 worth of “intangible assets” • Past IT investments correlated with higher current market value

  26. Value of IT Investments to Investors • Brynjolfsson and Hitt study • Organizational factors correlated to and complemented IT investments • Use of teams and related incentives • Individual decision-making authority • Investments in skills and education • Team-based initiatives • Businesses making the highest IT investments not only invest in IS but also invest in making organizational changes to complement the new IS

  27. Value of IT Investments to Investors • Brynjolfsson and Hitt study (cont.) • Led to adoption of decentralized work practices • Frequent use of teams • Employees empowered (i.e., given broader decision-making authority) • Offer more employee training

  28. Value of IT Investments to Investors • Brynjolfsson, Hitt and Yang study • Companies with the highest market valuation had the largest IT investments and decentralized work practices • Market value of investing in IT is substantially higher in businesses that use these decentralized practices because each dollar of IT investment is associated with more intangible assets because the IT investments complement the work practices Other resource IT Leveraging

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