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0100 01 It Prj Planning Webinar
 

0100 01 It Prj Planning Webinar

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Information Technology (IT) Project Planning: Developing the Business Case for Requesting Project Funds.

Information Technology (IT) Project Planning: Developing the Business Case for Requesting Project Funds.

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    0100 01 It Prj Planning Webinar 0100 01 It Prj Planning Webinar Presentation Transcript

    • CATEGORY: Strategic Planning > IT Project Planning Management Skills Training Guide Category: Strategic Planning IT Project Planning Developing the Business Case for Requesting Project Fund$.
    • About the Speaker Richard “Ric” Frederick Project Management Professional (PMP) Microsoft Certified Professional (MCP) www.linkedin.com/in/rfrederick www.pm-essentials.com Assured Solutions::PM-Essentials Rfrederick.pmp@gmail.com
    • Executive Summary IT Governance is the Structured Oversight (select, control, evaluate) executives perform to Situation: ensure the alignment of IT investment with Strategic Priorities. Because of poor methodology, a lot of time is wasted Problem: on good ideas that ultimately do not get funded. Utilizing the Project Management International (PMI®) - Project Management Body of Knowledge (PMBOK®) Solution: as the basis for planning IT projects can help IT Managers write a more credible business case. Nine (9) Knowledge Areas and the Project Planning How It Works: Process. Improve the Opportunity for funding Capital Budget Benefits: requests. Next Steps: One (1) Hour IT Planning Webinar
    • What are Projects? What are Projects? • Groups of Business Activities… • Required to Transform Knowledge into Wealth… • For Maximizing Return on Investment… • Of Owner’s Equity or Net Worth… • By a Specific Target Date.
    • Groups of Business Activities… Groups of Business Activities… Operations (Manage the Work) Sales Service Accounting (Get the (Do the Work) (Get Paid) Business)
    • Required to Transform Knowledge into Wealth… Required to Transform Knowledge Into Wealth… Process Operations (Manage the Work) Input Output Sales Service Accounting (Get the (Do the Work) (Get Paid) Business)
    • For Maximizing Return on Investment… For Maximizing Return on Investment… Return on Investment = (Productivity) x (Efficiency) Productivity = Efficiency = (Total Revenue) / (Total Assets) (Total Profit) / (Total Revenue)
    • Of Owner’s Equity or Net Worth… Of Owner’s Equity, Or Net Worth… What What What’s You You Left. Own Owe (Assets) - (Liabilities) = NetWorth
    • By a Specific Target Date. By a Specific Target Date… RATE YEARS RATE YEARS RATE YEARS RATE YEARS 72 12 6.55 4.5 1% years 6% years 11% years 16% years 36 10.3 6 4.24 2% years 7% years 12% years 17% years 24 9 5.54 4 3% years 8% years 13% years 18% years 18 8 5.14 3.79 4% years 9% years 14% years 19% years 14.4 7.2 4.8 3.60 5% years 10% years 15% years 20% years “Rule of 72”
    • OVERVIEW Situation Problem Solution How It Works Benefits Next Steps Situation Problem Solution How It works Benefits Next Steps
    • OVERVIEW Situation Problem Solution How It Works Benefits Next Steps Situation Problem Solution How It works Benefits Next Steps
    • SITUATION > Executive Scrutiny Situation Problem Solution How It Works Benefits Next Steps Executive Scrutiny • Because of increased IT Governance transparency (Sarbanes- Do More with Less Oxley) and accountability (Clinger-Cohen Act)... Manage for Value • Executives at public Time Value of Money institutions, U.S. Corporations Cost of Capital and Government Agencies, are under increasing scrutiny ROI to wisely manage the capital Capital Budgeting entrusted to them by stockholders and tax payers.
    • SITUATION > IT Governance Situation Problem Solution How It Works Benefits Next Steps • IT Governance is the structured Executive Scrutiny oversight (Select, Control, Evaluate) IT Governance that executives perform to ensure the alignment of IT investments with Do More with Less strategic priorities. Manage for Value • According to the Federal CIO Council committee on Capital Planning and Time Value of Money IT Investment, there are sixteen (16) success factors associated with Cost of Capital the selection of Information ROI Technology. Capital Budgeting
    • SITUATION > Federal CIO Council > 16 Success Factors Situation Problem Solution How It Works Benefits Next Steps 2. Defined business, technical, Executive Scrutiny 1. Establish corporate decision and management goals and making infrastructure. objectives. IT Governance 3. Involve functional level IT 4. Integrated IT planning cycle executives. with agency budget cycle. Do More with Less 6. Developed portfolio 5. Use of Scorecards. management approaches. 7. Active, energized investment 8. Analyzed multiple investment Manage for Value review board. risk categories. 10. Predicted benefits of Time Value of Money 9. Use of Raines Rules and investment that accrue in the near guiding principles. term rather than 3-5 years. Cost of Capital 11. Standardized reporting 12. Exercised a practical "make formats. sense" approach. ROI 13. Exercised flexibility where 14. Develop criteria for applying appropriate. decision making. Capital Budgeting 15. Incorporated lessons learned 16. Use mission based into process. performance measure.
    • SITUATION > “Do More With Less” Situation Problem Solution How It Works Benefits Next Steps Executive Scrutiny • With Executives under IT Governance scrutiny, Functional IT Do More with Less Managers are increasingly told to “do more with less.” Manage for Value • Already challenged with the Time Value of Money requirements of managing Cost of Capital technology, these managers need a better way to “manage ROI for value.” Capital Budgeting
    • SITUATION > Manage for Value Situation Problem Solution How It Works Benefits Next Steps Executive Scrutiny • Manage for Value IT Governance – Time Value of Money Do More with Less Manage for Value – Cost of Capital Time Value of Money – (ROI)Return on Invested Capital Cost of Capital ROI – Capital Budgeting Capital Budgeting
    • SITUATION > Time Value of Money Situation Problem Solution How It Works Benefits Next Steps Executive Scrutiny IT Governance “A dollar ($) today Do More with Less is worth more Manage for Value than Time Value of Money Cost of Capital a dollar ($) ROI tomorrow.” Capital Budgeting
    • SITUATION > Time Value of Money Situation Problem Solution How It Works Benefits Next Steps Executive Scrutiny • How do You improve IT Governance Your Standard of Do More with Less Living? Manage for Value 1. Save Your Money. Time Value of Money Cost of Capital 2. Invest Your Money. ROI 3. Start a Business. Capital Budgeting
    • SITUATION > Time Value of Money Situation Problem Solution How It Works Benefits Next Steps Risk/Return Business Investing Savings Time 0 Inflation Risk/Return
    • SITUATION > Cost of Capital Situation Problem Solution How It Works Benefits Next Steps Executive Scrutiny • If I invest (lend) a ($) IT Governance dollar with you today… Do More with Less 1. When will you give it Manage for Value back to me? Time Value of Money 2. How much will you pay Cost of Capital me (INTEREST) for the ROI use of my ($) dollar. Capital Budgeting
    • SITUATION > Cost of Capital Situation Problem Solution How It Works Benefits Next Steps Executive Scrutiny • Interest Paid to a Lender or IT Governance Dividends Paid to an Do More with Less Investor is the “Cost of Manage for Value Capital” to a Company. Time Value of Money • The Cost of Capital is what Cost of Capital a Business REPAYS its ROI Lenders or RETURNS to its Capital Budgeting Owners.
    • SITUATION > (ROI) Return On Invested Capital Situation Problem Solution How It Works Benefits Next Steps Executive Scrutiny • The SOLE Reason Companies Exist is to: IT Governance Do More with Less – MAXIMIZE the (ROI) Return On Invested Capital Manage for Value – Which is placed “At-Risk” Time Value of Money by the Owner(s) and Cost of Capital Investor(s) ROI – In Excess of the Company’s Capital Budgeting Cost of Capital.
    • SITUATION > (ROI) Return On Invested Capital Situation Problem Solution How It Works Benefits Next Steps Dupont ROI Return on Invested Capital Return on Investment = (Productivity) x (Efficiency) Productivity = Efficiency = (Total Revenue) / (Total Assets) (Total Profit) / (Total Revenue)
    • SITUATION > (ROI) Return On Invested Capital Situation Problem Solution How It Works Benefits Next Steps • Productivity is a Ratio of Executive Scrutiny Output to Input. IT Governance • In Financial terms, this is the Do More with Less ratio of sales to investment and represents the ability to Manage for Value generate revenue for a given Time Value of Money level of assets. Cost of Capital • How many sales ($) dollars can I GENERATE from one (1$) ROI dollar of assets? Capital Budgeting
    • SITUATION > (ROI) Return On Invested Capital Situation Problem Solution How It Works Benefits Next Steps Executive Scrutiny • Efficiency is a measure of a company’s ability to CONTROL IT Governance EXPENSES at a given level of Do More with Less activity. Manage for Value • In Financial terms, this is the ratio of earnings (net income) Time Value of Money to sales. Cost of Capital • How much money can I RETAIN from one (1$) dollar of sales? ROI Capital Budgeting
    • SITUATION > (ROI) Return On Invested Capital > Chart of Accounts Situation Problem Solution How It Works Benefits Next Steps Chart of Accounts Account Number Account Financial Statement Normal Sign Description 1-0000 Assets Balance Debit Total Capital Sheet 2-0000 Liabilities Balance Credit Source Sheet of Capital 3-0000 Equity Balance Credit Source “Net Worth” Sheet of Capital 4-0000 Income Income Credit Sales Income Revenue Statement 5-0000 Cost of Income Debit Production Goods Sold Statement Costs 6-0000 Expenses Income Debit Overhead Statement Costs
    • SITUATION > (ROI) Return On Invested Capital > RMA Diagram Situation Problem Solution How It Works Benefits Next Steps RMA Diagram Account Account Financial Period Start 1st Period 2nd Period 3rd Period 4th Period Period End Number Statement 4-0000 Revenue Income Income Statement $2.78 $3.25 $3.78 $4.42 5-0000 Cost of Income 39% or $1.27 $1.47 $1.72 Goods Sold Statement $1.08 6-0000 Expenses Income 55% or Statement $1.53 $1.79 $2.08 $2.43 ∆ Cash Flow Cash Flow 6% or $0.19 $0.23 $0.27 $0.17 1-0000 Assets Balance Sheet $1.00 $1.17 $1.36 $1.59 $1.86 $1.86 2-0000 Liabilities Balance Sheet .50 .50 .50 .50 .50 .50 3-0000 Net Balance Worth Sheet .50 .67 .86 1.09 1.36 $1.36
    • SITUATION > (ROI) Return On Invested Capital Situation Problem Solution How It Works Benefits Next Steps • The SOLE Reason Companies Exist is to Executive Scrutiny MAXIMIZE the (ROI) Return On Invested IT Governance Capital which is placed “At-Risk” by the Owner(s) and Investor(s) in Excess of Do More with Less the Company’s Cost of Capital. Manage for Value • Those of you who work in a business are Time Value of Money Responsible to the Owner’s for insuring Cost of Capital that their CAPITAL BUDGETED for the purchase of Assets and Projects ROI generates a return which is greater than Capital Budgeting the cost of that capital.
    • SITUATION > Capital Budgeting Situation Problem Solution How It Works Benefits Next Steps • The Process and Tools used Executive Scrutiny for Evaluating the Desirability IT Governance of Long-term Assets and Do More with Less Projects. • Insures that EVERY Project Manage for Value purchased or performed by Time Value of Money the company generates cash Cost of Capital flows which exceed the cost of the project by more than ROI the company’s cost of capital. Capital Budgeting
    • SITUATION > Capital Budgeting Situation Problem Solution How It Works Benefits Next Steps Period Start 1st Period 2nd Period 3rd Period 4th Period Cash Flows -$1.00 $2.78 $3.25 $3.78 $4.42 Cost of Capital 10% .27 Years Break Even 3.5 Months NPV $9.16 Efficiency Profitability 916% ROI
    • OVERVIEW Situation Problem Solution How It Works Benefits Next Steps Situation Problem Solution How It works Benefits Next Steps
    • PROBLEM > Capital is Scarce Situation Problem Solution How It Works Benefits Next Steps • In today’s business climate, Capital is Scarce capital is scarce and the stakes Poor Methodology could not be any higher. Waste Good Ideas. Wasted Time. money, lose your job. • In order to do their jobs, functional IT managers must “run the gauntlet” of IT governance to receive funding for capital projects.
    • PROBLEM > Scope, Methodology, & Business Case Situation Problem Solution How It Works Benefits Next Steps • Functional IT Managers are Capital is Scarce focused on Functional IT Poor Methodology Requirements. • Requests for Capital FAIL Good Ideas. Wasted Time. because: – Project SCOPE Not Directly Tied to Strategic Plan. – Poor METHODOLOGY Drives Invalid Assumptions (Outcomes, Risks, Benefits, etc.). – Project Plan does not include a Strong BUSINESS CASE.
    • PROBLEM > Good Ideas. Wasted Time Situation Problem Solution How It Works Benefits Next Steps • IT Managers and their staffs Capital is Scarce have good ideas. Poor Methodology • However, they waste a lot of Good Ideas. Wasted Time. time building strong technical documentation that never gets Executive Sponsorship. • What’s needed is A PROCESS to tie their technical knowledge into a Scope, Methodology, Business Case Model.
    • OVERVIEW Situation Problem Solution How It Works Benefits Next Steps Situation Problem Solution How It works Benefits Next Steps
    • SOLUTION Situation Problem Solution How It Works Benefits Next Steps SCOPE + Methodology + Business Case
    • OVERVIEW Situation Problem Solution How It Works Benefits Next Steps Situation Problem Solution How It works Benefits Next Steps
    • HOW IT WORKS > Scope > Financial Analysis Situation Problem Solution How It Works Benefits Next Steps Capital Markets (Lenders) SCOPE Liquidity: Current Ratio, Acid Test Ratio Methodology Debt to Assets, Debt to Capitalization, Leverage: Debt to Equity Interest Coverage, Principal and Debt Service: Interest Coverage Business Case Management Return on Assets, Earnings Before Profitability: Interest and Taxes (EBIT) Gross Margin, Profit Margin (Efficiency), Operating Expenses, Profit Contribution of Products, Asset Management, Asset Operational Ratios: Turnover (Productivity), Working Capital, Inventory Turnover, Accounts Receivable, Accounts Payable Shareholders (Owners) Return on Owners Equity (NetWorth), Profitability: Return on Common Equity, Earnings per Share Price to Earnings (P/E) Ratio, Market to Market Indicators: Book Value Ratio Cash flow per share, Dividends per share, Dividend Yield, Payout to Disposition of Earnings: Retained Earnings Ratio, Dividend Coverage
    • HOW IT WORKS > Scope > Strategic Planning (SWOT Analysis) Situation Problem Solution How It Works Benefits Next Steps Government Political Economic Cultural International Regulations Parties Indicators Shifts Affairs earnings Capital capital budgets Program strategy Finance Management Markets Management shareholder Shareholders value Labor human Human staff Design support Information Markets resources Resources Engineering Services Operations material Stock Room supplies new products Distribution products Suppliers equipment Manufacturing Purchasing services Order Entry Testing services Customers customer Sales & Emerging changing Research & designs Business feedback orders Marketing Technologies technology Development Analysts requirements Customer feedback Competitors products features services costs
    • HOW IT WORKS > Scope > Strategic Planning (SWOT Analysis) Situation Problem Solution How It Works Benefits Next Steps SCOPE Methodology Business Case Risk Risk Probability Risk Risk Risk Risk Risk Impact
    • HOW IT WORKS > Scope > Scorecards Situation Problem Solution How It Works Benefits Next Steps SCOPE Targets Methodology Strategic Objectives Measurements Yr 1 Yr 2 Yr 3 Financial Maximum Returns Return on Equity (%) 12 13 14 Business Case Utilization of Assets Utilization Rates (%) 7 8 9 Revenue Growth Change in Revenue (%) 11 11 11 External Customer Retention Retention (%) 75 75 75 Customer Service Survey Rating (%) 85 88 90 Customer Relations Self Initiated Call (%) 35 40 45 Internal Fast Delivery Turnaround Time (min) 15m 14m 13m Effective Service 1st Time Resolution (%) 68 69 70 Optimal Cost Cost of Sales (%) 50 48 46 Resource Utilization Productivity Indicator (%) 60 62 64 Learning High Skill Level Skill Set Ratio (%) 65 67 69 Employee Satisfaction Survey Rating (%) 85 88 90 Outstanding Leaders 5 Point Ranking 4.5 4.7 4.9
    • HOW IT WORKS > Methodology > PMI® Knowledge Areas Situation Problem Solution How It Works Benefits Next Steps SCOPE Methodology Integration Scope Time Management Management Management Business Case Cost Quality Resource Management Management Management Communication Risk Procurement Management Management Management
    • HOW IT WORKS > Business Case Development Situation Problem Solution How It Works Benefits Next Steps SCOPE Methodology Subject and Title and Subtitle To and From Date Purpose Business Case Overview Executive Disclaimer Introduction Summary Scope and Cost/Benefit Data Sources and Methods Financial Metrics Assumptions Business Benefits Model Methods Case Development Impacts Financial Model Cash Flow Analysis of Non Financial Statement Results Benefits Risk Risk Analysis Sensitivity Contingencies and Analysis Dependencies Summary Conclusions Recommendations
    • OVERVIEW Situation Problem Solution How It Works Benefits Next Steps Situation Problem Solution How It works Benefits Next Steps
    • BENEFIT > Results & Consequences Situation Problem Solution How It Works Benefits Next Steps Result: Consequence: Contribution to Strategic Business Objective Tangible but non financial benefit Cash Inflow Net Benefit Avoided Cost Cost Outcomes Cost Decrease Cost Outcomes Continuing Cost Cost Outcomes No Change Cost Increase Cost Outcomes Net Cost
    • BENEFITS > Benefit Measurement Situation Problem Solution How It Works Benefits Next Steps Benefit Measurement Step 1: Define a measurement for each benefit: Benefit => Measurement to be used => Description of Measurement => Units of Measurement ($,%,etc) Update Frequency:M for Monthly, Q for Quarterly, A for Annual, etc. Degree of Reliability:V for Very Reliable, M for Medium Reliability, L for Low Reliability Degree of usefulness in establishing objective - High, Medium or Sets Objective: Low Ability to Benchmark:H for High, M for Medium, L for Low Responsibility Location:Team, Project, Department, Manager, etc. Degree of Fit:(within the organization) High, Medium or Low Degree of Support:Available support (IT, Finance, etc.) in place - Yes or No Step 2: Define the sources for the measurement: Internal documents / reports External documents / reports Special studies Programs Databases Other Step 3: Define how the measurement is derived and “accounted “ for: Calculation Required: Assumptions in Calculation: Availability of Data:Currently Available, Requires Research, Not Available
    • OVERVIEW Situation Problem Solution How It Works Benefits Next Steps Situation Problem Solution How It works Benefits Next Steps
    • Next Steps Situation Problem Solution How It Works Benefits Next Steps Free Consultation. Agree to Agree. Initial Analysis.