© McGraw-Hill/Irwin 2004 Information Systems Project ManagementDavid Olson 1-2 Chapter 1: Introduction Information System Projects Systems Critical Success.

© McGraw-Hill/Irwin 2004

Information Systems Project Management—David Olson1-2

Chapter 1: Introduction

Information System Projects

Systems

Critical Success Factors

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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

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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

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What is a project?

– definable purpose– cut across organizational lines– unique– ad hoc

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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

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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

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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;

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Information Systems Project Management—David Olson1-13

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

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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

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Information Systems Project Management—David Olson1-19

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)

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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

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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

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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)

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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

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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