Chapter 1

23/02/2017
CH1 compiled by [email protected]
Bale, Robe Ethiopia

11/4/2024 CH-1 1
Learning Objectives
• Identify the growing need for better project management,
especially for information technology projects
• Explain what a project is and provide examples of
information technology projects
• Describe what project management is and discuss key
elements of the project management framework.
• Discuss how project management relates to other
disciplines
• Explain the history of project management
• Describe the project management profession, including
recent trends in project management research, certification,
and software products

11/4/2024 CH1 compiled by [email protected] 2

1.1. Importance of IT project management
• Until the 1980s, project management primarily focused on providing
schedule and resource data to top management in the military, computer,
and construction industries.
• The following statistics demonstrate the significance of project
management in today’s society, especially for projects involving
information technology (IT):
• Worldwide IT spending was $3.8 trillion in 2014, a 3.2 percent increase from 2013
spending. Telecom services accounted for 45 percent of the spending.
• The Project Management Institute estimates demand for 15.7 million project
management jobs from 2010 to 2020, with 6.2 million of those jobs in the United
States.
• The unemployment rate for IT professionals is generally half the rate of the overall
labor market in the United States. Between 2011 and 2014, and during the recession,
the average unemployment rate for workers not in science, technology, engineering,
and mathematics (STEM) was 7.4 percent, as opposed to just above 3 percent for
STEM workers.

11/4/2024 CH1 compiled by [email protected] 3

1.1. Importance of IT project management ...1
• The following statistics demonstrate the significance of project
management in today’s society, especially for projects involving
information technology (IT):…
• In 2013 (the most recent year of PMI’s salary survey), the average salary in U.S.
dollars for someone in the project management profession was $108,000 per year in
the United States; $134,658 in Australia, (the highest-paid country); and $24,201 in
Egypt (the lowest-paid country). Of the 11,150 people from the United States who
responded to PMI’s salary survey, 80 percent had the Project Management
Professional (PMP) credential, and their salary was over 20 percent higher than
professionals without it.
• The top skills employers look for in new college graduates are all related to project
management: team-work, decision-making, problem-solving, and verbal
communications. The three degrees most in demand are business, engineering, and
computer and information sciences.
• Organizations waste $109 million for every $1 billion spent on projects, according
to PMI’s Pulse of the Profession report. Excelling at project management definitely
affects the bottom line.

11/4/2024 CH1 compiled by [email protected] 4

1.1. Importance of IT project management ...2
• Many organizations assert that using project
management techniques provides advantages, such as:
• Better control of financial, physical, and human resources
• Improved customer relations
• Shorter development times
• Lower costs and improved productivity
• Higher quality and increased reliability
• Higher profit margins
• Better internal coordination
• Positive impact on meeting strategic goals
• Higher worker moral

11/4/2024 CH1 compiled by [email protected] 5

1.1. Importance of IT project management ...3
1.1.1 What is a project?
• You must have heard people talking about business process (or
operation) and project. Work generally involves either
operations or projects, although the two may overlap.
• Operations and projects share many characteristics; for
example, they are:
• Performed by people.
• Constrained by limited resources.
• Planned, executed, and controlled.
• Operations and projects differ primarily in that operations are
ongoing and repetitive while projects are temporary and
unique.
11/4/2024 CH1 compiled by [email protected] 6
1.1. Importance of IT project management ...4
1.1.1 What is a project?...
• A project is “a temporary endeavor undertaken to
accomplish a unique product or service” (PMBOK®
Guide 2000, p. 4)
• Attributes of projects
✓Purpose: unique purpose
✓Length: temporary
✓Resources: require resources, often from various areas
✓Sponsors: should have a primary sponsor and/or customer
✓Uncertainty: involve uncertainty

11/4/2024 CH1 compiled by [email protected] 7

1.1. Importance of IT project management ...5
1.1.1 What is a project?...
• Samples of IT Projects
• Northwest Airlines developed a new reservation system called ResNet
(see case study on companion Web site at
www.course.com/mis/schwalbe)
• Many organizations upgrade hardware, software, and networks via
projects
• Organizations develop new software or enhance existing systems to
perform many business functions
• A large network of healthcare providers updates its information systems
and procedures to reduce hospital acquired diseases.
• A team of students creates a smartphone application and sells it online.
• A company develops a driverless car.
• Note: “IT projects” refers to projects involving hardware, software,
and networks

11/4/2024 CH1 compiled by [email protected] 8

1.1. Importance of IT project management ...6
1.1.1 What is a project?...
• The Project Triple Constraint
• You know that every project is constrained in different ways by its scope, time, and cost
goals.
• To create a successful project, a project manager must consider scope, time, and cost and
balance these three often-competing goals. He or she must consider the following:
• Scope: What work will be done as part of the project? What unique product, service, or
result does the customer or sponsor expect from the project? How will the scope be
verified?
• Time: How long should it take to complete the project? What is the project‘s schedule?
How will the team track actual schedule performance? Who can approve changes to the
schedule?
• Cost: What should it cost to complete the project? What is the project‘s budget? We
know for every project that:
• Projects must be within cost.
• Projects must be delivered on time.
• Projects must be within scope.
• Projects must meet customer quality requirements.

11/4/2024 CH1 compiled by [email protected] 9

1.1. Importance of IT project management ...5
1.1.2 Problems with IS Project
• The triple constraint describes how the basic elements of a project
interrelate, other elements can also play significant roles. Quality is
often a key factor in projects, as is customer or sponsor satisfaction.
Some people, in fact, refer to the quadruple constraint of project
management, which includes quality as well as scope, time, and cost.
• A project team may meet scope, time, and cost goals but might fail to
meet quality standards and satisfy the sponsor. For example, Anne
Roberts may receive a 50-page report describing 30 potential IT
projects and hear a presentation that summarizes the report. The
project team may have completed the work on time and within the
cost constraint, but the quality may have been unacceptable.

11/4/2024 CH1 compiled by [email protected] 10

1.1. Importance of IT project management ...6
1.1.2 Problems with IS Project…
• Other factors might also be crucial to a particular project.
On some projects, resources are the main concern. For
example, the entertainment industry often needs particular
actors for movies or television shows.
• Project goals must be adjusted based on when particular
people are available. Risk can also affect major project
decisions. A company might wait to start a project until the
risks are at an acceptable level. The project manager should
be communicating with the sponsor throughout the project
to make sure it is meeting expectations.

11/4/2024 CH1 compiled by [email protected] 11

1.1. Importance of IT project management ...7
1.4. What is Project Management?
• Project management is “the application of knowledge,
skills, tools, and techniques to project activities to
meet project requirements.” Project managers must
strive not only to meet specific scope, time, cost, and
quality goals of projects, they must also facilitate the
entire process to meet the needs and expectations of
people involved in project activities or affected by
them.
11/4/2024 CH1 compiled by [email protected] 12
1.1. Importance of IT project management ...8
1.4. What is Project Management?

Figure 1- 2. Project Management Framework

11/4/2024 CH1 compiled by [email protected] 13

1.2. Stages of Project
• A standard project typically has the following four major phases (each
with its own agenda of tasks and issues): initiation, planning,
implementation, and closure.
1.2.1. The Feasibility Study
• A feasibility study is conducted to investigate whether each option
addresses the project objective and a final recommended solution is
determined.
• Issues of feasibility (“can we do the project?”) and justification
(“should we do the project?”) are addressed.
• Once the recommended solution is approved, a project is initiated to
deliver the approved solution and a project manager is appointed.
• The major deliverables and the participating work groups are identified,
and the project team begins to take shape. Approval is then sought by the
project manager to move onto the detailed planning phase.

11/4/2024 CH1 compiled by [email protected] 14

1.2. Stages of Project…1
1.2.2. The Cost-benefit Analysis
• Developing an IT application is an investment.
• Since after developing that application it provides the organization
with profits.
• Profits can be monetary or in the form of an improved working
environment.
• However, it carries risks, because in some cases an estimate can be
wrong.
• Cost benefit analysis helps to give management a picture of the
costs, benefits and risks. It usually involves comparing alternate
investments.
• Cost benefit determines the benefits and savings that are expected
from the system and compares them with the expected costs.
11/4/2024 CH1 compiled by [email protected] 15
1.2. Stages of Project…2
1.2.2. The Cost-benefit Analysis …1
• The cost of an information system involves the development cost and
maintenance cost.
• The development costs are one time investment whereas
maintenance costs are recurring.
• The development cost is basically the costs incurred during the
various stages of the system development.
• Each phase of the life cycle has a cost. Some examples are :
• Personnel
• Equipment
• Supplies
• Overheads
• Consultants' fees
11/4/2024 CH1 compiled by [email protected] 16
1.2. Stages of Project…2
1.2.2. The Cost-benefit Analysis…2
Cost and Benefit Categories
• In performing Cost benefit analysis (CBA) it is important to identify cost
and benefit factors.
• Cost and benefits can be categorized into the following categories.
• There are several cost factors/elements. These are hardware, personnel,
facility, operating, and supply costs.
In a broad sense the costs can be divided into two types
1. Development costs- costs that are incurred during the development of the
system are one time investment.
• Wages
• Equipment
2. Operating costs,
e.g., Wages, Supplies and Overheads

11/4/2024 CH1 compiled by [email protected] 17

1.2. Stages of Project…3
1.2.2. The Cost-benefit Analysis…3
Cost and Benefit Categories…
Another classification of the costs can be:
• Hardware/software costs:
• It includes the cost of purchasing or leasing of computers and it's peripherals. Software costs
involves required software costs.
• Personnel costs:
• It is the money, spent on the people involved in the development of the system. These
expenditures include salaries, other benefits such as health insurance, conveyance allowance, etc.
• Facility costs:
• Expenses incurred during the preparation of the physical site where the system will be operational.
These can be wiring, flooring, acoustics, lighting, and air conditioning.
• Operating costs:
• Operating costs are the expenses required for the day to day running of the system. This includes
the maintenance of the system. That can be in the form of maintaining the hardware or application
programs or money paid to professionals responsible for running or maintaining the system.
• Supply costs:
• These are variable costs that vary proportionately with the amount of use of paper, ribbons, disks,
and the like. These should be estimated and included in the overall cost of the system.

11/4/2024 CH1 compiled by [email protected] 18

1.2. Stages of Project…4
1.2.2. The Cost-benefit Analysis…4
Benefits
We can define benefit as
Profit or Benefit = Income - Costs
Benefits can be accrued by :
- Increasing income, or
- Decreasing costs, or
- Both
- Benefits can be tangible or intangible, direct or indirect.
- In cost benefit analysis, the first task is to identify each benefit and
assign a monetary value to it.
- The two main benefits are improved performance and minimized
processing costs.
11/4/2024 CH1 compiled by [email protected] 19
1.2. Stages of Project…5
1.2.2. The Cost-benefit Analysis…5
Tangible or Intangible Costs and Benefits
• Tangible cost and benefits can be measured. Hardware costs, salaries for
professionals, software cost are all tangible costs. They are identified and
measured.. The purchase of hardware or software, personnel training, and
employee salaries are example of tangible costs.
• Costs whose value cannot be measured are referred as intangible costs.
• For example, more customer satisfaction, improved company status, etc
are all intangible benefits. Whereas improved response time, producing
error free output such as producing reports are all tangible benefits.
• Both tangible and intangible costs and benefits should be considered in the
evaluation process.

11/4/2024 CH1 compiled by [email protected] 20

1.2. Stages of Project…6
1.2.2. The Cost-benefit Analysis…6
• Direct or Indirect Costs and Benefits
• From the cost accounting point of view, the costs are treated
as either direct or indirect.
• Direct costs are having ETB value associated with it.
• Direct benefits are also attributable to a given project. For
example, if the proposed system that can handle more
transactions say 25% more than the present system then it is
direct benefit.
• Indirect costs result from the operations that are not directly
associated with the system. Insurance, maintenance, heat,
light, air conditioning are all indirect costs.

11/4/2024 CH1 compiled by [email protected] 21

1.2. Stages of Project…7
1.2.2. The Cost-benefit Analysis…7
Fixed or Variable Costs and Benefits
• Some costs and benefits are fixed.
• Fixed costs don't change.
• Depreciation of hardware, Insurance, etc are all fixed costs.
• Variable costs are incurred on regular basis.
• Recurring period may be weekly or monthly depending upon the
system.
• They are proportional to the work volume and continue as long as
system is in operation.
• Fixed benefits don't change. Variable benefits are realized on a
regular basis.

11/4/2024 CH1 compiled by [email protected] 22

1.2. Stages of Project…8
1.2.2. The Cost-benefit Analysis…8
Performing Cost Benefit Analysis (CBA)
• Example: Cost for the proposed system ( figures in USD Thousands)

• Table 1-2 Costs for the Proposed system

• Benefit for the propose system

Table 1-3 Benefits for the

proposed system

11/4/2024 CH1 compiled by [email protected] 23

1.2. Stages of Project…9
1.2.2. The Cost-benefit Analysis…9
Performing Cost Benefit Analysis (CBA) …
• Profit = Benefits – Costs = 300, 000 -154, 000 = USD 146, 000
Since we are gaining, this system is feasible.
• Steps of CBA can briefly be described as:
Estimate the development costs, operating costs and
•

benefits
Determine the life of the system
•

When will the benefits start to accrue?

•

When will the system become obsolete?

•

Determine the interest rate

•

11/4/2024 CH1 compiled by [email protected] 24

1.2. Stages of Project…10
1.5.2. The Cost-benefit Analysis…10
1.2.2. Planning
• A project plan is created outlining the activities, tasks, dependencies,
and time-frames.
• The project manager coordinates the preparation of a project budget
by providing cost estimates for the labor, equipment, and materials
costs.
• The budget is used to monitor and control cost expenditures during
project implementation.
• Once the project team has identified the work, prepared the schedule,
and estimated the costs, the three fundamental components of the
planning process are complete.
11/4/2024 CH1 compiled by [email protected] 25
1.2. Stages of Project…11
1.5.2. The Cost-benefit Analysis…11
1.2.3. Project Execution
• The third phase is the implementation phase, the project
plan is put into motion and the work of the project is
performed.
• It is important to maintain control and communicate as
needed during implementation.
• Progress is continuously monitored and appropriate
adjustments are made and recorded as variances from the
original plan.
• In any project, a project manager spends most of the
time in this step.
• During project implementation, people are carrying out the
tasks, and progress information is being reported through
regular team meetings.
11/4/2024 CH1 compiled by [email protected] 26
1.2. Stages of Project…12
1.5.2. The Cost-benefit Analysis…12
1.2.4 Project and Product Life Cycles
• A project life cycle is a collection of phases.
• Phases break projects down into smaller, more manageable pieces, which will
reduce uncertainty.
• Some organizations specify a set of life cycles for use in all of their projects,
while others follow common industry practices based on the types of projects
involved.
• Project life cycles define what work will be performed in each phase, what
deliverables will be produced and when, who is involved in each phase, and
how management will control and approve work produced in each phase.
• A deliverable is a product or service, such as a technical report, a training
session, a piece of hardware, or a segment of software code, produced or
provided as part of a project.
• One tool for creating an overview of the required work is a work breakdown structure
(WBS). A WBS outlines project work by decomposing the work activities into different levels
of tasks. The WBS is a deliverable-oriented document that defines the total scope of the
project.

11/4/2024 CH1 compiled by [email protected] 27

1.3. The Stakeholder of a Project
• Stakeholders are the people involved in or affected by
project activities, and include the project sponsor,
project team, support staff, customers, users, suppliers,
and even opponents of the project.

Figure 1- 7. Project stakeholders.

11/4/2024 CH1 compiled by [email protected] 28

1.4. Project Management Framework
• The four frames of Organizations As shown in Figure
1-8, you can try to understand organizations better by
focusing on different perspectives. Organizations can
be viewed as having four different frames: structural,
human resources, political, and symbolic.
Structural frame: Roles and Human resources frame: Providing
responsibilities, coordination and harmony between needs of the
control. Organizational charts help organization and needs of people.
describe this frame.

Political frame: Coalitions composed Symbolic frame: Symbols and

of varied individuals and interest meanings related to events. Culture,
Figure 1- 8. Perspectives on
groups. Conflict and power are key language, traditions and image are all
issues. parts of this frame. organizations [Source: Bolman and
Deal.]

11/4/2024 CH1 compiled by [email protected] 29

1.5. Software Tools for Project Management
• With the introduction of computer technology, there have been a
number of software tools specifically developed for project
management purpose. MS Project is one such tool that has won the
hearts of project managers all over the world.

• MS Project can be used as a standalone tool for tracking project

progress or it can be used for tracking complex projects distributed in
many geographical areas and managed by a number of project
managers.

11/4/2024 CH1 compiled by [email protected] 30