IT Project Management: A Comprehensive Guide to Development and Implementation

Posted on May 1, 2024 in Economy

Introduction to IT Project Management

This guide explores the essential areas and activities involved in managing IT projects effectively. It emphasizes the crucial role of management, particularly at higher levels (CEO, President, functional managers), in ensuring project success. The level of management involvement should be proportional to their responsibility, with the highest level assuming the role of project sponsor.

Leadership and Control in IT Projects

Effective leadership establishes criteria, strategies, and tactics to manage and control key aspects of IT projects, including:

• Organizational Development: Allocating human resources and considering outsourcing options.
• Project Prioritization and Control: Establishing committees and criteria to regulate project priorities and profitability, and creating an annual plan.
• Industrialization of Development Processes: Implementing action plans to move from “craft” to “industrial” development processes, including resource management, cost control, benefit and cost prediction, and productivity and quality improvement.

These strategies and plans require clear allocation of responsibilities across different management levels, involving both senior management and user and information systems personnel.

Responsibilities of User Management

• Computerization Strategy: Defining a comprehensive strategy for computerizing their function, aligned with information systems and operational needs.
• Benefit Determination: Identifying the benefits of computerization projects, such as budget savings and increased productivity.
• Project Profitability: Assessing the profitability of computerization projects based on investment opportunity, cost, and technical feasibility.

Responsibilities of Information Systems Management

• IT Strategy: Establishing a global information technology strategy, addressing aspects like hardware centralization/decentralization, personal computing, networks, office systems, email, and business continuity.
• Development Area Responsibilities:
  • Defining technical environments for project development, testing, and production application maintenance.
  • Implementing plans for development activity improvement in areas like costs and procedures.
  • Proposing, implementing, and monitoring human resource organization plans.
  • Ensuring resource allocation for each development project.
  • Maintaining an updated annual plan of development projects.
  • Establishing and monitoring a technical training plan for professional development.

The success of these strategies and responsibilities hinges on direct involvement from the highest level of management.

Sub-Areas of IT Project Management

This guide delves into six key sub-areas of IT project management:

• Development as a Business
• Business Case
• IT Plan Generation
• Plan Implementation and Control
• Management Involvement
• Standards and Technical Tools

Development as a Business

Applications are the driving force of computing in an organization, connecting functional and departmental computing. Managing application development requires a business-oriented approach, considering it as an internal business within the company.

This internal business incurs costs that must be offset by the benefits and savings it generates. Management, particularly the computer and development departments, is responsible for ensuring this balance.

Key Parameters for Development as a Business

The key parameters to consider for development as a business are:

• Resources and Costs: Both human and financial resources involved.
• Benefits and Savings: The positive outcomes generated by the project.
• Cost-Benefit Balance: Ensuring that benefits outweigh costs.
• Deadlines: Meeting project timelines.
• Priorities and Customer Satisfaction: Aligning with organizational priorities and ensuring user satisfaction.

Premises for Profitable Development

To ensure development operates as a profitable business, certain premises must be met:

• Definition: Senior management defines the framework for action, including the IT strategy and tactics, and short-term investment plans.
• Decision: Functional departments propose computing plans, considering costs and profitability.
• Implementation: The computing/development function consolidates and controls project plan execution, proposes organizational structures, and manages resource allocation.
• Overall Control: Committees established by senior management ensure compliance with established limits, particularly regarding project profitability and resource investments.

Realization of Benefits

Realizing benefits requires effective control and communication. For individual projects or small improvement projects, this involves reviewing whether the application meets user requirements and comparing actual costs with those outlined in the “business case.”

The review information is shared with the user function, the profitability committee, and the departments responsible for resource allocation.

For groups of small improvement projects, monthly or bi-monthly reviews report on total costs and savings achieved.

In conclusion, treating development as a profitable business is essential for any organization. Adhering to the outlined premises and conducting thorough reviews ensures project profitability and benefits both the requesting function and the company as a whole.

“Business Case” for IT Projects

This chapter outlines the procedure for proposing and planning software development projects, with a focus on predicting the return on investment (ROI) once the application is operational.

The Role of the “Owner”

The “owner” is a director from the function requesting the project, acting as the project sponsor and liaison between the user function, end-users, and the development and maintenance organization.

Responsibilities of the Owner

The owner’s responsibilities during project proposal and development include:

• Quantifying savings and benefits for end users.
• Documenting requirements and characteristics of the application.
• Providing test data for validation.
• Defining confidentiality levels for application components.
• Providing end-user training.
• Overseeing the production transition.

The owner is supported by functional analysts throughout these responsibilities.

During the application’s lifecycle, the owner’s responsibilities include:

• Validating that the application meets requirements and delivers expected benefits.
• Managing user access and confidentiality.
• Ensuring correct and complete application execution.
• Acting as the focal point for end-user needs and initiating requests for modifications or improvements.

Profitability and Cost Control

Every development project, whether new or a modification, must be based on profitability or explicit approval from senior management. The key components of profitability are cost savings and benefits, which should be planned during the requirements phase and committed to during functional analysis and design.

Any changes during development that impact profitability require review and authorization from senior management. Continuous monitoring of actual costs against planned costs is crucial to ensure project profitability.

Implementation

Implementing and controlling a “Business Case” for each project in the annual plan involves:

• A project control plan (discussed in Chapter 7).
• Involvement of senior management, user management, the owner, and development leadership.

Establishing a body to ensure and coordinate these aspects is essential, depending on the company’s size, structure, and IT organization. This body, often called the information management or IT committee, ensures the company has a current plan for cost-effective IT projects.

Basics of Profitability Calculation

To calculate profitability and ROI, project costs and savings/benefits must be known.

Project Costs

Project costs include people, outsourcing, and equipment.

• People: Costs associated with end users, functional analysts, developers, and operations personnel.
• Outsourcing: Costs of subcontracting development tasks.
• Equipment: Costs of hardware, software, and other devices required for the project.

Project Savings

Savings or benefits are quantified by the user function and include:

• Timeframe: The period over which savings will accumulate.
• Resource Mix: The combination of human and monetary resources involved.
• Reductions vs. Avoidances: Savings from reduced resource usage versus avoided future costs.

Profitability and Return on Investment (ROI)

A project is considered profitable when savings or benefits equal or exceed costs. The point at which this occurs is called the “Payback” (RI).

Projects are categorized into two types:

• Individually Identified Projects: Development effort exceeding three months x person, with an RI set at two years or less.
• Improvement Projects: Smaller projects with an RI of one year or less, often grouped together for planning and control purposes.

Calculation of Factor

The “factor” is the ratio between savings and costs:

FACTOR = Savings (two years in production) / Costs (development)

Savings are calculated by weighting human and monetary resources based on whether they are “Reductions” or “Avoidances.”

Correlation between Factor and ROI

The required factor value depends on the project type:

• Individually Identified Projects: Factor ≥ 1 (RI ≤ 2 years)
• Improvement Projects: Factor ≥ 2 (RI ≤ 1 year)

Maintenance Projects

Corrective maintenance projects, which do not generate additional benefits, should be included in the annual plan and strictly controlled.

Alternatives for Profitability Calculation

Alternative methods for calculating profitability exist, such as accumulating costs and benefits annually. However, it’s crucial to base project planning on individual performance and formal approval, not intuition or hierarchy.

Computer Generation of Plan

Every company should have an annual IT plan for development projects, reviewed and updated regularly. This plan serves as a reference point for ongoing and upcoming projects, resource allocation, and project profitability.

Process Sequence for Plan Generation

The plan generation process follows a bottom-up approach, starting with end-user computing needs.

1. User Function Needs: End users and their management identify computing needs.
2. IT Departments of Functions: Functional analysts analyze needs and assess feasibility.
3. Consolidation and Prioritization: IT departments consolidate projects, identify owners, and prioritize based on profitability and importance.
4. Effort Estimation: Development organization estimates effort and costs for each project.
5. Plan Review and Approval: Functional departments review and approve plans with their management.
6. Profitability Committee Review: The IT plan is reviewed by the profitability committee, considering resource constraints and project profitability.
7. Plan Finalization and Distribution: The approved plan is finalized and distributed to all functions.

Alternatives and Reviews

While alternative plan generation processes exist, the chosen process should ensure:

• Agreement and endorsement from stakeholders and senior management.
• Clear lists of ongoing and outstanding projects.
• Effort, cost, and savings estimates for each project.
• Management involvement and commitment.
• Project profitability and alignment with business priorities.
• Continuity with previous plans.
• Transparency regarding canceled projects.

Plan Implementation and Control

Implementing the IT plan requires synchronization between user functions, the development organization, and the central processing/operations center. The development organization plays a crucial role in ensuring plan execution through efficient procedures, quality products, and numerical target control.

Components of Plan Implementation

What to Do

The development plan encompasses:

• New development projects
• Ongoing development projects
• Modifications and enhancements to existing applications
• Maintenance of existing applications
• Production implementation of changes

Who Directs, Coordinates, and Controls

The responsibility for project implementation depends on the IT organization and project type.

Project Leader/Coordinator

Leads project implementation, establishes plans, coordinates interactions, and reports to management. Suitable for well-established IT organizations and projects affecting a single user function.

Project Manager

A director-level individual with management responsibility for project team members. Suitable for multifunctional projects, specific technical projects, or groups of small improvement projects.

Managing Plan Implementation

Regular Meetings

Monthly meetings where the project manager reports on project status, deviations, and action plans. Attended by IT management, project directors, and sometimes functional directors.

Technical Reviews

Reviews conducted by internal or external professionals to analyze and solve technical problems, often initiated during monthly meetings or by Systems Assurance.

Numerical Indices

Measuring project performance using metrics like function points provides insights into productivity, quality, and on-target completion.

Benefit Realization

Once a project is complete and meets requirements, the user function is responsible for realizing the promised savings.

How to Support Plan Implementation

Development Support Center

Supports research, selection, and implementation of new technical tools, methodologies, and products. Improves developer productivity and quality. Manages service agreements with the processing center/operations department.

Systems Assurance

Acts as auditors or reviewers of the development process, ensuring quality and control. Responsibilities include:

• Reviewing project plans
• Assessing project risks
• Ensuring compliance with development methodology
• Validating final product quality
• Advising management on numerical targets and action plans
• Tracking goal evolution and identifying trends
• Guaranteeing a quality improvement program
• Acting as a liaison with external auditors

Maintenance

Different types of maintenance exist:

• Perfective: Improvements or extensions to existing applications, treated as improvement projects.
• Adaptive: Modifications to applications due to new projects, included in project costs.
• Corrective: Addressing defects in production applications, representing downtime and requiring strict control.

Alternative: Outsourcing

Outsourcing can be used to supplement internal resources when needed.

Turnkey

Contracting a project or group of projects to another company for a fixed price. Requires well-defined requirements and minimal involvement from the contracting company.

Hiring

Supplementing internal resources with external professionals. Simple and common, but may not guarantee cost control.

Hiring of Tasks

Contracting specific tasks to external professionals. Requires established procedures and controls. Offers benefits in terms of cost, expertise, and flexibility.

Conclusion

Effective IT project management requires a comprehensive approach, encompassing planning, implementation, control, and support. By following the guidelines and best practices outlined in this guide, organizations can increase their chances of project success and achieve their desired business outcomes.