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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 l.jpg

Week 11Monday, April 10

Portfolio Approach to Managing IT Projects


Profolio l.jpg
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?


Portfolio l.jpg
Portfolio

Organization Strategic Plan

  • Corporate infrastructure

  • IT infrastructure

IT Strategic Plan

  • Long-term projects

  • “Low-hanging fruit”

Corporate Initiatives

Portfolio

Project Implementation


Project risk l.jpg
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)


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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


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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


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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


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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


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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


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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


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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


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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


Risk portfolio l.jpg
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


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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


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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


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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


Risk management l.jpg
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


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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


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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


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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


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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


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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


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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


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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


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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


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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


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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


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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