IS 556 Enterprise Project Management

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IS 556 Enterprise Project Management

• Summer 2008
• Instructor Dr. Olayele Adelakun
• Lecture 5

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Agenda

• Review of last session material
• Assignment 2 due
• This week
• Bonham Chapter 7
• Bonham Chapters 1 3, skim Chapter 2

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Leach Chapter 10

• Project-Risk Management

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Risk-Management Process
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Incorporating Risk Assessment into Pjt Process

• Preventing (or reduce the likelihood of) the risk
  event (e.g., breaking the project into phases or
  researching uncertain project elements to improve
  certainty)
• Transferring the risk (e.g., subcontracting)
• Monitoring to determine if the chances of the
  risk are increasing (e.g., monitoring for
  precursors)
• Reducing the consequences of the risk event,
  should the risk materialize
• Insuring against the risk event
• Mitigating the consequences if the event the risk
  materializes.

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Bonham Chapter 1

• Introduction to IT Program Portfolio Management

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project portfolio management office

• Executive staffs continue to be faced with
  tornadoes of uncontrolled, high-risk projects.
• How can executives get a better aggregate view of
  what is going on in their IT project portfolio?
• How can IT project teams get word of the various
  methods for success?
• How can IT departments obtain control of
  ambitious department heads starting technically
  redundant projects?
• Many IT departments have recently adopted
  techniques that defense and the National
  Aeronautics and Space Administration (NASA)
  contractors have used for decades techniques
  that are implemented by a project portfolio
  management office (PMO).

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project portfolio management office

• An established IT PMO that is actively supported
  at the executive level can help solve problems
  with project auditing and initiative approval.
• how can project audits be fair between projects
  if no common initiative or project methodology is
  followed by every business unit and PM?
• How can the business units efficiently
  communicate ideas to upper management if no
  business case template has been developed?
• By creating structure for projects and
  initiatives through business case templates and
  software development methodologies, projects can
  be tracked consistently.
• The PMO can provide an auditing function that can
  prove health, risk, and valuation of all
  projects.
• The PMO can also provide training curricula
• The PMO can have a clear window view into all
  corporate projects
• Can better manage human resources and assets
  across projects.
• IT architecture group dictate new technical
  direction for the company
• By establishing an architecture branch, the PMO
  can ensure that new projects leverage existing
  assets and avoid duplicate, siloed
  implementations.
• Finally, by being aware of any inter-project
  dependencies the PMO can have seemingly uncoupled
  projects react appropriately to shifts in
  corporate strategies.

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Ch 1 Introduction to PPM Project
Portfolio Management

• Modern Portfolio Theory (MPT)
• Financial Investments
• Project Investments
• IT Project Management
• Variable Schedule
• Variable Cost/Budget
• Variable Functionality/Scope/Quality
• Risk
• Portfolio Selection
• Maximization
• Strategic Alignment
• Balance
• Resource Allocation
• The IT PMO
• PMO Rollout
• Government Regulations

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Modern Portfolio Theory (MPT)

• Financial Investments
• 4 goals guide most financial portfolios
• Maximize Return for Given Risk
• Minimize Risk for Given Return
• Avoid high correlation
• Are tailored to investors particular strategy

Risk and rate of return are the most common
metrics used in prioritizing a financial portfolio
This chart shows how the required return
correlates with the risk premium (theextra
amount required to cover the riskier investment
).
Fig. 1.1
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Modern Portfolio Theory (MPT)

• Financial Investments
• Risk Types making up Risk Premium
• Maturity time kept raises risk
• Default- likely that bond dumps
• Seniority- rights to cash
• Marketability- ease in selling

1.2
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Modern Portfolio Theory (MPT)
Types of Project RiskMarket change in
business conditionsOrganizational user
resistance how well the stakeholders embrace
some new IT solution to a business problem.
Technical bleeding edge innovations Designs,
implementations, interfaces, verification and
Q/A, maintenance, specification ambiguity,
technical uncertainty, technical obsolescence,
and bleeding-edge technology are all examples of
technical risks Project time cost
overruns

• Project Investments

1.3 Risks for project investments. Greater
complexity than financial investmentsCore
Project Goal - Stkehdrs realize expectations
for money, assets, HR invested..
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Differences between Financial/Project Investments

• Financial
• Higher financial riskcorrelates with potential
  higher return
• Aim is to increase risk premium

• Project
• Higher project risk doesNOT correlate with
  potential higher return
• Aim is decrease surprises by meeting time/cost
  schedules with functionality
• Risk mitigated more effectively through PMO

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IT Project Management

• Variable Schedulecan impact ROI if slippage
  occurstime buffers used
• Variable Cost/Budgetunanticipated costscost
  buffers used
• Variable Functionality/Scope/Qualityoften to
  meet market forces
• Risk Central to PM technical riskcommercial
  riskproject/process riskorganizational risk

CLASSIC
PMBOK
1.4
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Additive Nature of Risks thru Project Life
Note By layering the risksyou can see how risks
dodecrease overall but some recycle
throughout. Using PM tools such as COCOMO can
help in calculating what the risk is. PMOs
require a standardized, objective method for
calc of risks.ALSO RISK is involved in the
Project Selection process.COnstructive COst
MOdel
1.5
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Portfolio Selection Prioritization Criteria

• Project portfolio selection is the periodic
  activity involved in selecting a portfolio, from
  available project proposals and projects
  currently underway,
• that meets the organizations stated objectives
  in a desirable manner
• without exceeding available resources or
• violating other constraints.

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Portfolio Selection Prioritization Criteria

• Maximization relies on PMOs expectations
  management
• Scope mgt accepting scope changes wont reduce
  success probability
• Rollout mktg reject of scope changes wont
  reduce stkhldr enthusiasm
• Balance of capability need defines achievable
  best by PMO
• Resource Allocation between projects duty of
  the PMO
• Strategic Alignment gtgt

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Strategic Alignment
Building Maintaining the projectportfolio for
strategic alignment
1. Resources c/be allocated among business units
(BUs) also known as strategic business units
(SBUs) through centralized corporate
planning. 2. Corporate strategy c/evolve by
developing BU level strategies similar
to the Balanced Scorecard approach. 3 BU c/
implement its strategies for growth or
productivity gains by developing detailed
plans. C/be in the form of a portfolio of
initiatives (or business cases) for projects. 4.
Periodic review process for all funded
initiatives (projects) c/be established 5.
Then, once the portfolio is determined, can
then be maintained through decision-making,
prioritization, review, realignment, and
reprioritization
1.7
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Categorizing Resources for IT projects
This lets PMO know what resources are available
for projectsby getting them into subsets
1.8
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Selection Prioritization (SP) Goals Tasks
Mapping SP criteria fromMPT to PPM via tasks
1.9
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SP using PPM via tasks Project Support
Resource Balancingnow is AARK Mgt
AArchitecture AAsset R(human) Resources
KKnowledge This leads to the PMOfor handling
the PPM
Mapping SP criteria fromMPT to PPM via tasks
withproject support
1.10
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IT PMO for handling initiatives(proposals)
IT PMO has its strategylean to productivity
orientedprojects IT used more to improve
efficiency ofproducing products rarelydoes IT
create products (growth)
1.11 Corporate vs.IT PMO handling ofbusiness
initiatives
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PMOs Project Types

• The sacred cow. The project is sacred in the
  sense that it will be maintained until
  successfully concluded or until the boss,
  personally, recognizes the idea as a failure and
  terminates it. Sony refers to these types of
  projects as skunk works projects that
  circumvent the formal project approval process.
• The operating necessity. It is needed to keep the
  business running.
• The competitive necessity. It is needed to keep
  the business

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IT PMO Project Prioritization
1.12 IT PMO Building Blocks based on 4 IT PMO
goals
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IT PMO Rollout

• Takes same expectation management as a
  projectrollout
• Thus, segmented rollout to gain organizational
  support of the IT PMO atthe various levels
• Top Management
• Middle Management

1.13 Acquiring organizationalsupport for the IT
PMO Building Blocks
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Bonham Chapter 3

• Portfolio Flexibility

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Bonham Ch 3 Portfolio Flexibility

• Flexibility
• Initiative Methodologies
• Phase 1 Understanding the Problem Its Context
• Phase 2 Risk/Option/Cost Analysis
• Phase 3 Presentation and Project Preparation
• Phase 4 Metric Mapping
• Project Methodologies
• Pitfalls
• Audit Points

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Flexibility
3.1
Single release
Iterative releases higher quality higher
risk mitigation quicker environment
response
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Goals / Phases of Business Initiative Methodology
Here we see how the PMOcan help business
initiatives (proposals) go through thevarious
phases. --each PMO s/tailor theirbus initiative
(proposal) processto the organization.
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The Proposal Phases Blown Up
3.2
2-Risk/Option/Costanalysis
1-UnderstandProblem Context
4-MetricMapping
3-Presentation Project Preparation
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Phase 1 -- Initiative (Proposal) Review Flow
with PMO
PMO gap teamsoffer risks, does not reject ideas

• Preliminary Initiative Plan
• WHAT will be done
• WHO is sponsor
• Link to org direction
• Link to business goals
• Top-level description
• Costs
• Benefits
• Risks

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Phase 2 -- Using Cost/Benefit Analysis Decision
Tree Built
NPV Net Present ValuePI Profit Index
PV/CostsIRR Internal Rate of Return
K 1000s M 1000000s
3.4
Real Options Analysis of Multiphased Project
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Usefulness of the Decision Tree

• Gives a more realistic and sophisticated
  assessments of the possibilities that the project
  will or will not deliver benefits.
• It can show that after a shaky start in phase 1,
  it can go on to generate a 1.3 PI (Profit Index)

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Phase 3 Presentation Project Prep
This template canbe for ALL IT-basedbusiness
initiatives
3.5
Linking Elements Of Business Initiative To
Business Case
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Sponsor Activities While Waiting for Financing

• Project Planning complete high-level Gantt
  charts and work breakdown structures
• Staffing recruit key personnel and prepare
  transfer paperwork
• Stakeholder Committee Formation sponsor starts
  this committee to ensure organization support
• Equipment Tool Acquisition submit requests
  for items with long lead times
• Facilities find and negotiate for items needs
• Operational concepts develop communication
  plans

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Phase 4 Metric Mapping

• By adopting a suite of standard project
  methodologies, PMO makes sure all projects use
  consistent metrics to trace back to business case
  on
• Project cost
• Health
• Risk

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Virtual IT PMO
The PMO is carefulto present templatesnot rigid
methods
Methodology Management Teams
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Characteristics of PMO methodologies

• Flexible to
• Strategic long-term projects (e.g. ERP)
• Tactical quick-implementation projects
• Should have
• Breadth. Must be transferable across project
  types.
• Depth. Must show sufficient detail for each
  stage/phase
• Clarity. Must be easily understood.
• Impact. Must allow for measurable results
• Pitfalls to avoid
• Over-enforcement of project methodologies
• Strained attempts to fit the mold of a dictated
  methodology
• Setting up methods that constrain experienced
  PMs and too loose for new PMs

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Methodologies and Audit Points

• To make sure project deliverables end up
  supporting org mission add Audit Points to
  chosen methodology at key points
• 1. Initiation
• 2. Execution start
• 3. Testing start
• 4. Completion
• 4 Methodologies that PMO often use
• RUP (Rational Unified Process from IBM)
• Spiral (a classic iteration process)
• Extreme Programming
• PMBOK from PMI

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RUP (Rational Unified Process) with Audit Points
From IBM
3.7
Project workloads over time with PMO-specific
audit points
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Spiral with Audit Points
Spiral methodology with PMO-Specificaudit points
3.8
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Extreme Programming with audit points
3.9
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PMBOK with audit points
3.10
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Next Session

• Bonham
• Chapters 4,7,9
• PMO as Cost Center
• Program Management Core Competencies
• Cases