Class 9: Project Guidance

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Class 9 Project Guidance

• Project Planning
• A. Tie-in to overall organization strategy
• B. The business problem efficiency,
  effectiveness, competitiveness
• C. Money issues Costs, TCO, NPV, ROI
• D. Justification- tangible and intangible
  benefits
• Future Trends in Computing

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The IT Planning Process
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Three Major Issues of IT Strategic Planning

• Efficiency
• Effectiveness
• Competitiveness

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Evaluating and justifying IT investment

• Justifying IT investment includes three aspects
• assessment of costs,
• assessment of benefits (values), and
• comparison of the two-
• cost-benefit analysis.

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Costing IT Investment

• Fixed costs are those costs that remain the same
  regardless of change in the activity level. For
  IT, fixed costs include infrastructure cost of IT
  services, and IT management cost
• Total cost of ownership (TCO) Formula for
  calculating the cost of acquiring, operating and
  controlling an IT system.

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Total Cost of Ownership

• Assuming the average lifespan of a dog is ten
  years, the estimated cost of owning a dog for its
  lifetime is over 8,300.
• A recently released Gartner study on the five
  year (TCO - Total Cost of Ownership) of a 2,000
  PC, shows that when administration and management
  costs are added into the equation the actual cost
  is more like 21,000!!!
• Includes Direct Costs Indirect Costs
• Need to compare TCO for various alternatives

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Costs
Quazi-fixed Costs
Fixed Costs
Economies of scale
Dis-economies of scale
Constant return to scale
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Present Value, Future Value

• Using NPV in cost-benefit Analysis. Using the NPV
  method, analysts convert future values of
  benefits to their present-value equivalent by
  discounting them at the organizations cost of
  funds.
• Example1 Present value of 100,000 five years
  from now at r 10
• PV 100,000/(1 0.10)5 60,082
• Example2 Future value of 100,000 today 5 years
  from now at r 10
• FV 100,000 (1 0.10)5 161,051

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Net Present Value
Using NPV in cost-benefit Analysis. Using the NPV
method, analysts convert future values of
benefits to their present-value equivalent by
discounting them at the organizations cost of
funds. Example A project will have startup
costs and benefits over six years. It will
have an immediate (t0) cash outflow of 100,000.
Other cash outflows for years 1-6 are expected
to be 5,000 per year. Cash inflows are expected
to be 30,000 per year for years 1 to 6. r 10.
T0 -100,000 / 1.100 -100,000
PV. T1 (30,000 - 5,000)/ (1.10)1 22,727
PV. T2 (30,000 - 5,000)/ (1.10)2 20,661
PV. T3 (30,000 - 5,000)/ (1.10)3 18,783
PV. T4 (30,000 - 5,000)/ (1.10)4 17,075
PV. T5 (30,000 - 5,000)/ (1.10)5 15,523
PV. T6 (30,000 - 5,000)/ (1.10)6 14,112 PV.
If NPV gt 0 it is a good investment NPV 8,882
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Return on Investment (ROI)

• Return on investment. It measures the
  effectiveness of management in generating profits
  with its available assets.
• ROI has more credibility when it is stated in raw
  benefits, which are sometimes non-quantifiable,
  rather than translated into dollars. That
  translation is often fuzzy and tends to lose some
  audiences.

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A Model for Investment Justification
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Making the Case Theres a Problem

• Theres trouble in River City, with a capital T
• Tell-tale signs" of degradation, warning them
  all the problems will come because of P-O-O-L.
• Only the paranoid survive Andrew Grove, Intel

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Theres a Solution

• Problem Addressed
• Parents should purchase musical instruments and
  uniforms to start a boy's band.
• The only way to save the young people from
  damnation (represented by pool parlors and
  smoking).
• Technology solutions are
• often the brass bands of today (for better or
  worse).

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Critical Elements of Projects

• Diagnoses of the business problem- why it is a
  big problem.
• Define requirements for the solution.
• Definition of solution that meets the
  requirements.
• Description of the technology behind the
  solution.
• 1. Some of the science theory behind it. A
  mathematical formula would be great!
• 2. How the technology works.
• 3. What the technology does.
• 4. How it is likely to develop in the future.
• Estimate budget for the solution- people, hours,
  equipment, etc. Also, not just .
• Estimate timeline of project
• Definition of a set of unambiguous measurable
  goals designed around the solution.
• Upgrade Paths

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What is the Future of Outsourcing or
Off-shoring

• Significant Cost savings
• Nearly 1 million lost US jobs
• Salaries increasing in India from 1 of US to
  75- global competition for IT outsourcing.
• Less stable US IT employment
• Still average US IT salary, 2007 in US gt 75K
  rising faster than inflation (5.3 vs 2.8)
• Tips
• 1. Be flexible and learn new things dont
  over-specialize
• 2. Work in smaller organization
• 3. Start your own business

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Cloud Services

• Amazon Elastic Cloud (EC2)
• Also Dell, IBM, Google
• Only pay for what is used
• Controlled by user
• Example- 10 cents per hour for 1.7 GB memory, 1
  compute unit, 160 GB storage
• Why have your own
• data center?

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Operating Systems

• User interfaces
• Less keyboard mouse
• Gesture based interfaces (Wii, iPhone)
• Speech recognition interfaces
• 3D images Avatars as salespeople, holographic
  projection, manual manipulation

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E-bomb

• electromagnetic bomb
• HPM (high power microwave weapons)
• Targets transistors, circuit boards processors
• Instantaneous but powerful electromagnetic burst
  (gigawatts)

High power microwave division in NM
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Famous Predictions

• When the ENIAC was equipped with 18,000 vacuum
  tubes and weighed 30 tons, computers in the
  future may have only 1,000 vacuum tubes and weigh
  only 1.5 tons. Popular Mechanics, March 1949.
• There is no reason anyone would want a computer
  in their home. Chairman of DEC, 1977.
• Fooling around with alternating current is just
  a waste of time. Nobody will use it, ever.
  Thomas Edison, 1889.
• Everything that can be invented has been
  invented. US patent office official , 1899

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What Next?

• 2020 Computing, Nature, 3/23/06
• Quantum Leap, Fortune, 6/27/06
• No electricity needed, embedded computers
  everywhere- walls, chairs, clothes, etc.
• All information at fingertips I wont have to
  remember anything.
• Ultrasonic information sent directly to the brain
  for gaming