Transcript Document 7261392

IS 556 Enterprise Project Management
Summer 2008
Instructor – Dr. Olayele Adelakun
Lecture 5
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Agenda
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Review of last session material
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Assignment 2 due
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This week
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Bonham
Chapter 7
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Bonham
Chapters 1 & 3,
skim Chapter 2
2
Leach Chapter 10
Project-Risk Management
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Risk-Management Process
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Incorporating Risk Assessment into Pjt Process
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Preventing (or reduce the likelihood of) the risk event (e.g., breaking the
project into phases or researching uncertain project elements to improve
certainty);
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Transferring the risk (e.g., subcontracting);
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Monitoring to determine if the chances of the risk are increasing (e.g.,
monitoring for precursors);
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Reducing the consequences of the risk event, should the risk materialize;
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Insuring against the risk event;
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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
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Executive staffs continue to be faced with
tornadoes of uncontrolled, high-risk projects.
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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
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An established IT PMO that is actively supported at the executive
level can help solve problems with project auditing and initiative
approval.
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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
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Modern Portfolio Theory (MPT)
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IT Project Management
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Variable Schedule
Variable Cost/Budget
Variable Functionality/Scope/Quality
Risk
Portfolio Selection
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Financial Investments
Project Investments
Maximization
Strategic Alignment
Balance
Resource Allocation
The IT PMO
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PMO Rollout
Government Regulations
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Modern Portfolio Theory (MPT)
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Financial Investments
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4 goals guide most financial portfolios
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Risk and rate of return
are the most common
metrics used in
prioritizing a financial
portfolio
Maximize Return for Given Risk
Minimize Risk for Given Return
Avoid high correlation
Are tailored to investor’s particular strategy
This chart shows how the
required return correlates
with the risk premium (the
extra amount required to
cover the riskier investment ).
Fig. 1.1
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Modern Portfolio Theory (MPT)
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Financial Investments
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Risk Types making up Risk Premium
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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)
Project Investments
Types of Project Risk
Market – change in business conditions
Organizational – 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
1.3: Risks for project investments. Greater complexity than financial investments
Core Project Goal – Stkehdrs realize expectations for money, assets, & HR invested..
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Differences between Financial/Project Investments
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Financial
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Project
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Higher financial risk
correlates with potential
higher return
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Higher project risk does
NOT correlate with
potential higher return
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Aim is to increase risk
premium
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Aim is decrease surprises
by meeting time/cost
schedules with
functionality
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Risk mitigated more
effectively through PMO
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IT Project Management
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Variable Schedule
CLASSIC
can impact ROI if slippage occurs
time buffers used
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Variable Cost/Budget
unanticipated costs
cost buffers used
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Variable
Functionality/Scope/Quality
PMBOK
often to meet market forces
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Risk Central to PM
technical risk
commercial risk
project/process risk
organizational risk
1.4
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Additive Nature of Risks thru Project Life
Note: By layering the risks
you can see how risks do
decrease 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.
1.5
ALSO RISK is involved in the
Project Selection process.
*COnstructive COst MOdel
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Portfolio Selection & Prioritization Criteria
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Project portfolio selection is the periodic activity involved in
selecting a portfolio, from available project proposals and projects
currently underway,
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that meets the organization’s stated objectives in a desirable manner
without exceeding available resources or
violating other constraints.
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Portfolio Selection & Prioritization Criteria
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Maximization relies on PMO’s expectations management
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Scope mgt – accepting scope changes won’t reduce success
probability
Rollout mktg – reject of scope changes won’t reduce stkhldr
enthusiasm
Balance of capability & need defines achievable best by PMO
Resource Allocation between projects – duty of the PMO
Strategic Alignment >>
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Strategic Alignment
Building & Maintaining the project
portfolio 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 projects
by getting them into subsets
1.8
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Selection & Prioritization (S&P) Goals – Tasks
1.9
Mapping S&P criteria from
MPT to PPM via tasks
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S&P using PPM via tasks & Project Support
‘Resource Balancing’
now is ‘AARK Mgt’
A=Architecture
A=Asset
R=(human) Resources
K=Knowledge
This leads to the PMO
for handling the PPM
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Mapping S&P criteria from
MPT to PPM via tasks with
project support
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IT PMO for handling initiatives
(proposals)
IT PMO has its strategy
lean to productivity oriented
projects – IT used more
to improve efficiency of
producing products – rarely
does IT create products
(growth)
1.11 Corporate vs.
IT PMO handling of
business initiatives
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PMO’s Project Types
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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.
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The operating necessity. It is needed to keep
the business running.
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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 project
rollout
• Thus, segmented rollout
to gain organizational
support of the IT PMO at
the various levels:
• Top Management
• Middle Management
1.13
Acquiring organizational
support for the IT PMO Building
Blocks
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Bonham Chapter 3
Portfolio Flexibility
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Bonham Ch 3 – Portfolio Flexibility
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Flexibility
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Initiative Methodologies
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Phase 1
Context
Phase 2
Phase 3
Phase 4
– Understanding the Problem & Its
– Risk/Option/Cost Analysis
– Presentation and Project Preparation
– Metric Mapping
Project Methodologies
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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
Phase 1
Here we see how the PMO
can help business initiatives
(proposals) go through the
various phases.
Understand the Problem and Its
Context
Specify Objective
Identify Stakeholders
Analyze Problem
Phase 2
--each PMO s/tailor their
Risk/Option/Costs Analysis
Risk Analysis
bus initiative (proposal) process
to the organization.
Options Analysis
Cost/Benefits Analysis
Phase 3
Presentation and Project Prep
Document the Case
Make the Case
Project Prep
Phase 4
Project Auditing
Ongoing Reviews
Metric Mapping
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The Proposal Phases “Blown Up”
3.2
2-Risk/Option/Cost
analysis
1-Understand
Problem & Context
3-Presentation
Project Preparation
4-Metric
Mapping
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Phase 1 -- Initiative (Proposal) Review Flow with PMO
PMO gap teams
offer 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 Value
PI = Profit Index= PV/Costs
IRR= Internal Rate of Return
K = 1000s
M = 1000000s
Real Options Analysis of Multiphased Project
3.4
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Usefulness of the Decision Tree
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Gives a more realistic and sophisticated
assessments of the possibilities that the project
will or will not deliver benefits.
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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 can
be for ALL IT-based
business initiatives
3.5
Linking Elements Of Business Initiative To Business Case
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Sponsor Activities While Waiting for Financing
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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
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By adopting a suite of standard project
methodologies, PMO makes sure all
projects use consistent metrics to trace
back to business case on:
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Project cost
Health
Risk
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Virtual IT PMO
The PMO is careful
to present templates
not rigid methods
Methodology Management Teams
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Characteristics of PMO methodologies
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Flexible to:
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Should have:
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Strategic long-term projects (e.g. ERP)
Tactical quick-implementation projects
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:
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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
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To make sure project deliverables end up supporting org
mission
– add Audit Points to chosen methodology at key points:
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Initiation
Execution start
Testing start
Completion
4 Methodologies that PMO often use:
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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-Specific
audit 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
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Bonham
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Chapters 4,7,9
PMO as Cost Center
 Program Management Core Competencies
 Cases
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