© McGraw-Hill/Irwin 2004 Information Systems Project ManagementDavid Olson 1-2 Chapter 1: Introduction Information System Projects Systems Critical Success.
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© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson1-2
Chapter 1: Introduction
Information System Projects
Systems
Critical Success Factors
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson1-3
Denver International AirportBozman [1994]; Zetlin [1996]; Montealegre & Keil [2000]
• Designed as largest US airport
• Cost– Estimate $1.7 billion (to be done Oct 1993)– Pre-construction budget $2.08 billion– Aug 1994 spent $3.2 billion– Final 16 months late, $2 billion over budget
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson1-4
Denver International AP
• Functionality– Malfunctioning computerized baggage system
• Cost $193 million
• 55 networked computers, 56 barcode scanners
• Sometimes bags on wrong flights
• Major effort– Many problems
– Functioning airport
– Typical project
© McGraw-Hill/Irwin 2004
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What is a project?
– definable purpose– cut across organizational lines– unique– ad hoc
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson1-6
What is a project?
• everything done the first time is a project• can be constructing something
– road, dam, building• can be organizing something
– a meeting, an election campaign, a symphony, a movie
• GETTING A NEW, COMPLEX ACTIVITY DONE
© McGraw-Hill/Irwin 2004
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Project Characteristics
• Because projects are new (not at the repetitive operations stage), they typically involve– high levels of uncertainty and risk– difficult to estimate resources required– difficult to estimate time required
• Temporary activities by ad hoc organizations
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Dimensions of Complexity
• magnitude of effort• number of groups and
organizations to be coordinated• diversity in skills or expertise
neededusually the MORE COMPLEX, the
more time and resources required
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Group Size Dimension
individual term papergroup wedding
system implementationorganization auditing
plant constructionmultiorganization space shuttle
wars
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Challenges of Modern Environments
• high levels of risk and uncertainty from many interacting forces and variables
• rapidly changing technology• rising costs• increased competition• frequent resource shortages• many opposing interest groups
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Project Management Features
• differs from repetitive operations– market and technology much less predictable– greater uncertainty of outcomes– more parties or organizations involved– DYNAMIC environment
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson1-12
IS Project Features
• technological explosion– 286; 386; 486; Pentium; ?– CASE tools; C++; GUI;
• highly volatile & expanding market– CAD/CAM; EDI; laptops; Internet
• uncertainty– is what requester wants feasible?– how long will it take to program?– will there be any bugs?
• many people involved– user group; systems designers; programmers; end users;
© McGraw-Hill/Irwin 2004
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the Systems Approach
• recognize that organizations are made up of interrelated units
• need coordinated goals• integration benefits global objective attainment
– all pull towards same goal• PROJECTS are system of interrelated tasks and work
units• PROJECT MANAGEMENT unifies planning and work
efforts to accomplish multiple goals
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Project Goal Dimensions
INTERRELATED DIMENSIONS• Cost
– stay within budget• Time
– stay within time schedule specified• Performance
– end product performs to specifications
Maintain focus on all 3, control trade-offs
© McGraw-Hill/Irwin 2004
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Adages
• Brooks’s LawAdding manpower to a late software project makes it later.
• Throwing money at a project doesn’t solve the problem
• Taking resources away from a project doesn’t always make it easier either
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Project Entities
• Project Manager – coordinates efforts across functional areas;
– integrates planning & controls costs;
– schedules, assigns tasks
• Project Team– group of people doing what needs to be done
– often from different functions, organizations
• Project Management System– organizational structure, information processing, procedures
permitting integration of tasks and those who accomplish them
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IS Project Environment
• Risky– Standish Group reports:
• >30% cancelled
• About 40% lack designed functionality
• Only 13% rated successful by sponsors
– Examples• Bank of America project
• American Airlines subsidiary travel reservation
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FoxMeyer Drug
Large drug distributor, wanted to implement ERP
© McGraw-Hill/Irwin 2004
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ERP
• Integrate financial, logistics, marketing
• can handle multiple sites worldwide, with global sourcing
• integrate decision making
• coordinates all functions (makes them use same computer software)
© McGraw-Hill/Irwin 2004
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ERP Market
• Compound annual growth of 37% 1997-2002 (AMR Research)
• Top tier vendors: SAP AG PeopleSoft
Baan J.D. Edwards Oracle• top tier growth 61%/year, have 64% of
market• SAP $5 billion, rest near $1 billion
© McGraw-Hill/Irwin 2004
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SAP
• Systems, Applications & Products in Data Processing
• founded 1972, Walldorf, Germany• #1 vendor of standard business-application
software in the world - 32% market share• PRODUCTS: R/2 (mainframe; 11 modules)
R/3 (client/server - 1992; now > 1 million users• over 9000 customers in 90 countries
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FoxMeyer Corp
• Holding company in health care services• wholesale distribution of drugs & beauty aids
• served drug stores, chains, hospitals, care facilities
• US: 23 distribution centers
• Sought market niches, such as home health care
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FoxMeyer
• Due to aging population & growth in health care, expected high growth
• Market had extreme price competition, threatening margins
• Long-term strategies: – efficiently manage inventory– lower operating expenses– strengthen sales & marketing– expand services
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Prior FoxMeyer IS
• 3 data processing centers, linked
• included electronic order entry, invoice preparation, inventory tracking
• 1992 began migration of core systems
• Benefits not realized until system fully integrated
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FoxMeyer Process
• Customer fills out electronic order• Order sent to 1 of the 3 data processing centers• Orders sent to the appropriate distribution center
(within 24 hours)• Orders filled manually and packaged• Had just completed national distribution center
with multiple carousels & automated picking• Could track inventory to secondary locations
© McGraw-Hill/Irwin 2004
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New System
• Needed new distribution processes & IS to capitalize on growth
• Wanted to be able to undercut competitors• Replacing aging IS key
• PROJECT: 1994 - hoped to save $40 million annually (estimated cost $65 million)– complete ERP installation & warehouse
automation system (another $18 million)
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson1-27
FoxMeyer Project
• Select ERP– hundreds of thousands of transactions– meet DEA & FDA regulations– benchmarked & tested for months– picked SAP R/3– hired Andersen Consulting to integrate– hired Pinnacle Automation for warehouse
automation system
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Operations
• FoxMeyer expected the new systems to improve operational efficiency
• Signed several giant contracts– counted on savings, underbid competitors
• Counted on being up and running in 18 months
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Problems
• SAP & warehouse automation system integration– two sources, two installers - coordination
problems• New contracts forced change in system
requirements after testing & development underway
• Late, Over budget– SAP successfully implemented
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Outcomes
• Lost key customer - 15% of sales• To recoup, signed new customer, expected $40
million benefit from ERP immediately - pushed ERP project deadline ahead 90 days, no time to reengineer
• Warehouse system consistently failed– late orders, incorrect shipment, lost shipments– losses of over $15 million
• August 1996 filed for Chapter 11– McKesson bought
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McKesson
• Bought FoxMeyer operation
• Made ERP work– On time– Within budget– Full functionality
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Project Critical Success FactorsBelassi & Tukel [1996]
• Goal Definition– Define goals, scope, requirements
• Top Management Support– Continued involvement
• User Involvement• Project Manager
– Competent; on-site
• Others– Project team, manpower, accurate estimates, test & train
© McGraw-Hill/Irwin 2004
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Project Champion
• Top level executive– Powerful, with access to top
• Don’t need to have authority
– Enthusiastic support leading to adoption– Continued support key to project continuance
• Even if project should be cancelled
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Summary
• All projects are complex– IS projects even more so– Get diverse people to work together
• Time• Cost• Functionality
• Systems view helps understand projects• Critical Success Factors
• Top management support• Clearly stated objectives• End user involvement
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