IT Project Management Tutorials

Tutorial 1: Introduction to Project Management Page | 1

Tutorial 1: Introduction to Project Management

What is Project Management?

Project management Institute (PMI), which is an International professional society for project managers,

defines a project as a “Temporary endeavour undertaken to create a unique product, service or result.”

In the required text, Kathy Schwalbe, gives six attributes that a project should have

� Purpose/Objective

� Be Temporary

� Developed in Increments

� Requires resources

� Has a primary customer/sponsor

� Involves uncertainty

Activity:

Identify project attribute in the following case

� What is the project? - Improve operations of the company

Case

Anne Roberts, the new Director of the Project management Office for a large retail chain, stood in front of

the five hundred people in the large corporate auditorium to explain the company’s new strategies. She was

also broadcasting to thousands of other employees, suppliers, and stockholders throughout the world via the

Internet. The company had come a long way in implementing new information systems to improve inventory

control, sell products using the web, and streamline the sales and distribution processes. However, the stock

price was down, the nation’s economy was weak, and the people were anxious to hear about the company’s

new strategies.

Anne began to address the audience.

“Good morning. As many of you know, our CEO promoted me to a new position as Director of the Project

Management Office. Most of what we do in this department involves projects, and my role in this new

position is to turn the company around by helping us effectively select and mange those projects. Our

challenge is to develop a culture in which we all work together to provide high-quality goods and services to

our consumers while earning a profit in this difficult market. To meet this challenge, we must decide what

projects will most benefit the company, how we can continue to leverage the power of information technology

to support our business, and how we can exploit our human capital to successfully plan and execute those

projects. If we succeed, we’ll become a world-class corporation.”


� Has a unique purpose - Create a collaborative report with ideas from people throughout the

company. The results would provide the basis for further discussions and project.

� Is temporary - Here a team might be form to come up with results within a specific time frame

� Developed in increments - Take main idea, and break it down into manageable steps.

� Requires resources - Such as people , HW, SW

� Has a primary customer / sponsor - Who will fund the project, in this case Anne would

� Involves uncertainty - Project may have overrun

Project Management is the application of knowledge, skills, tools &techniques towards activities of a

project to meet specified requirement. Figure 1 demonstrates this concept.

Figure 1: Project Management Framework

The boxes in green are called the Core Functions and these normally lead to specific objectives.

The boxes in red are called the Facilitating Functions and these are processes through which objectives

are achieved.

Nine Knowledge Areas

� Scope management – defining and managing all the work required (use WBS)

� Time management – how long it will take to complete work (use CPM, PERT)

� Cost management – preparing a budget (use NPV, ROI, payback)

� Quality management – defines the standard the project should satisfy (use six sigma, fishbone)

� Human Resource management – making effective use of people (use motivation techniques like

Maslow’s hierarchy of needs)

� Communication management – how information is disseminated (use status reports)

� Risk management – identifying, analysing & responding to risks (use make or buy analysis)

� Procurement management – acquiring goods and services from outside the organization (use

probability and input matrix)

Nine Knowledge Areas

Stakeholders’

needs and

expectations

Scope Mgt. Quality. Cost Mgt. Time Mgt.

HR Mgt. Procure. Risk Mgt. Comm.

Tools &

Techniques

Project Management Integration

Project

success


� Integration management – coordinate all of the other project management knowledge areas,

making sure all elements of a project come together at the right time to complete project

successfully (use project charter)

Tutorial 2: Project Selection

Tutorial 2: Project Selection

Details:

Projects are undertaken for various reasons, and we should have a clear justification as to why a project

was chosen.

Reason a Project Chosen

� Strategic goals of organization

� Market need

� Technology Advancement

� Competitive Advantage

� Profitability

There a two types of Project Selection

Benefits Measurement

Methods

npv roi

Selection


ganization

There a two types of Project Selection

Project Selection

Benefits Measurement

Methods

payback

Constrained Optimization

LP programming

Page | 4


Constrained Optimization

non-LP programming

Tutorial 2: Project Selection Page | 5

Benefits Measurement Methods – [Comparative Approach]

This the method most commonly used; it is based on measuring the benefits in taking up a project

and comparing the results against other projects.

Constrained Optimization – [Mathematical Approach]

Is more complex, as it uses mathematical calculation based on different worst/base case scenarios,

along with the probability of outcome and then selecting projects with the best results.

Activity:

Calculating NPV, ROI & payback of two project, and based on calculations select the best – Benefits

Measurement Methods

� Net Present Value (NPV)

Net present value (NPV) analysis is a method of calculating the expected net monetary gain or

loss from a project by discounting all expected future cash inflows and outflows to the present

point in time.

�� = � � �1 + ��⁄��…�

where t equals the year of cash flow, n is the last year of cash flow, A is the amount of cash flow

each year, and r is the discount rate.

Note:

Another way of calculating NPV is by determining the annual discount factor; this is a multiplier

for each year based on the discount rate and year. When this is calculated you then apply it to

the inflows and outflows for each year. The formula for discount factor is 1 �1 + ��⁄ where r is

the discount rate and t is the year.

Calculating NPV

Yr 1 Yr 2 Yr 3 Yr 4

Inflows $500,000 $250,000 $1,500,000 $400,000

Outflows $700,000 $400,000 $1,000,000 $200,000

Cash flow -$200,000 -$150,000 $500,000 $200,000

Present Value -$173,913.04 -$113,421.55 $328,758.12 $114,350.65

$155,774.17 NPV


� Return on Investment (ROI)

Return on investment (ROI) is calculated by subtracting the project costs from the benefits and

then dividing by the costs. The higher the ROI, the better.

� ROI = �total discounted inflows - total discounted outflows� / discounted outflows

Calculating NPV

Discount Factor 0.87 0.76 0.66 0.57 Total

Project A Yr 1 Yr 2 Yr 3 Yr 4

Inflows $

500,000

$

250,000

$

1,500,000

$

400,000 Discounted Inflows $

435,000

$

190,000

$

990,000

$

228,000

$

1,843,000

Outflows $

700,000

$

400,000

$

1,000,000

$

200,000 Discounted

Outflows

$

609,000

$

304,000

$

660,000

$

114,000

$

1,687,000

Discounted

(Inflows -Outflows) $

(174,000 )

$

(114,000 )

$

330,000

$

114,000

$

156,000

Project B Yr 1 Yr 2 Yr 3 Yr 4

Inflows $

-

$

300,000

$

200,000

$


-

$

228,000

$

132,000

$

285,000

$

645,000

Outflows $

140,000

$

400,000

$

100,000

$

100,000 Discounted

Outflows

$

121,800

$

304,000

$

66,000

$

57,000

$

548,800

Discounted


(121,800 )

$

(76,000 )

$

66,000

$

228,000

$

96,200

Remember: The higher the NPV, the better

Therefore in this case we would choose to do Project A


� Payback Analysis

The payback period is the amount of time it will take to recoup, in the form of net cash inflows,

the total dollars invested in a project. Payback occurs when the cumulative discounted benefits

and costs are greater than zero. Many organizations want IT projects to have a fairly short

payback period.

� �%&'%() = �*. *, &- *, ./0%123/ ,4*5 + |789�:�; <=>=�?9|@>AB:�; <=>=�?9C |789��:�; <=>=�?9|

Calculating ROI

ROI = (total discounted inflows - total discounted outflows) / discounted outflows

Project A

ROI = (1,843,000 - 1,687,000) / 1,687,000 = 0.09 ⟹ 9%

Project B

ROI = (645,000 - 548,800) / 548,800 = 0.18 ⟹ 18%

Remember: The higher the ROI, the better

Therefore in this case we would choose to do Project B


Payback = 2 + 288,00042,000 + 288,000 = 2.87 yrs

Payback = 3 + 131,80096,200 + 131,800 = 3.58 yrs

Calculating Payback

Discount Factor 0.87 0.76 0.66 0.57 Total

Project A Yr 1 Yr 2 Yr 3 Yr 4

Inflows $

500,000

$

250,000

$

1,500,000

$


435,000

$

190,000

$

990,000

$

228,000

$

1,843,000

Outflows $

700,000

$

400,000

$

1,000,000

$

200,000 Discounted

Outflows

$

609,000

$

304,000

$

660,000

$

114,000

$

1,687,000

Discounted


(174,000)

$

(114,000 )

$

330,000

$

114,000

$

156,000

Opening Balance $

-

$

(174,000 )

$

(288,000 )

$

42,000

Closing Balance $

(174,000 )

$

(288,000 )

$

42,000

$

156,000

Project B Yr 1 Yr 2 Yr 3 Yr 4

Inflows $

-

$

300,000

$

200,000

$


-

$

228,000

$

132,000

$

285,000

$

645,000

Outflows $

140,000

$

400,000

$

100,000

$

100,000 Discounted

Outflows

$

121,800

$

304,000

$

66,000

$

57,000

$

548,800

Discounted


(121,800 )

$

(76,000 )

$

66,000

$

228,000

$

96,200

Opening Balance $

-

$

(121,800 )

$

(197,800 )

$

(131,800 )

Closing Balance $

(121,800 )

$

(197,800 )

$

(131,800 )

$

96,200

Project A

Project B

Remember: organizations want IT projects to have a fairly short payback period

Therefore in this case we would choose to do Project A

Tutorial 3: Payback and Project Charter Page | 9

Tutorial 3: Payback and Project Charter

Details:

To complete Project Selection, do payback analysis. Problem below will be given for calculation of NPV /

ROI / payback

Group Project was given, along with what is required of them.

� The group,

� The project name

� Project goals and objectives.

Cash Budget (Cash Flow Projections)

Yr1 Yr2 Yr3 Yr4 Yr5

Inflows Bank Loans

10.00

15.00

-

-

-

Personal Savings

2.00

-

4.00

-

-

Tangible Benefits

2.00

15.00

45.00

70.00

100.00

Outflows Principal repayment

-

2.50

2.50

2.50

2.50

Utilities

-

-

5.00

5.00

5.00

Interest on Bank

Loan

1.00

2.30

2.00

1.20

0.50

Salary/Wages

5.00

5.00

7.00

7.00

8.00

Purchases (Major)

8.00

2.00

10.00

2.00

-

Other Admin Cost

0.30

0.40

1.50

0.50

0.60

State whether or not project above is Feasible. Give reasons for your answer

Tutorial 4: Schedule Development Page | 10

Tutorial 4: Schedule Development

The WBS is designed to help break down a project into manageable chunks that can be effectively

estimated and supervised.

Some widely used reasons for creating a WBS include:

• Assists with accurate project organization

• Helps with assigning responsibilities

• Shows the control points and project milestones

• Allows for more accurate estimation of cost, risk and time

• Helps explain the project scope to stakeholders

Activity Sequencing

After finding out what activity needs to be done, from the WBS, we now need to find out the

relationship between these project activities. Activity Sequencing does just that. This is the second

process under Project Time Management, and when completed it produces the project network

diagram and Project document updates.

Network Diagram

There are two types of network diagrams:

• The Arrow Diagram Method (ADM)

Activities are represented by arrows and connected at points called nodes to illustrate the sequence

of activities (Activity-on-arrow)

• The Precedence Diagram Method (PDM)

Activities are represented on the node, in form of a box, that are connected by arrows to illustrate

sequence of activities (Activity-on-node)

PDM is most commonly used, and therefore we will concentrate on this method.


Example of PMD

Activities are defined and their dependency determined, it is now time to estimate resources (will be

done within lab) and duration of activities.

Schedule Development

Schedule Development is the process of analysing activity sequences, durations, resource requirements

and schedule constraints to create the project schedule. Besides the project schedule, schedule

development will also produce, schedule baseline, schedule data, and project document updates.

The tools and technique we will be looking at for schedule development process are:

• Gantt chart

A Gantt chart is a graphical representation of the duration of tasks against the progression of

time. People assigned to each task also can be represented.

Note: Activities on the Gantt chart should coincide with the activities on the WBS, which should

coincide with the activity list and milestone list.

• Critical path analysis

• Program Evaluation and Review Technique (PERT)

Critical Path Method (CPM)

CPM is a procedure for using network analysis to predict the duration of a project, and the activities on

the critical path. The critical path, also project duration, is the longest path through the network

Activity Prior Activity

A None

B None

C A

D A,B

E B

F C, D, E

B

C

D

E

F

A


diagram. The activities that lie on it cannot be delayed without delaying the project. The critical path can

be identified by determining the following four parameters for each activity:

• Earliest start time (ES): the earliest time at which the activity can start.

• Earliest finish time (EF): the earliest start time plus the time required to complete the activity.

• Latest finish time (LF): the latest time at which the activity can be completed.

• Latest start time (LS): the latest finish time minus the time required to complete the activity.

The slack of an activity is the length of time an activity can be delayed without delaying the entire

project. Slack can be calculated as follows: LS - ES or LF - LS

Example of CPM

Use table below to find the Critical Path of Project

Task Duration Dependency

A 7 None

B 3 None

C 6 A

D 3 B

E 3 D, F

F 2 B

G 3 C

H 2 E, G

Activity

ES EF

LS D LF

Duration


Step1 - Build Network Diagram displaying activity and duration

Step2 – Do Forward Pass (calculate ES and EF)

Note: Start nodes ES is always zero

Step3 – Do Backward Pass (calculate LS and LF)

A

0 7

7

B

0 3

3

C

7 13

6

D

3 6

3

E

6 9

3

F

3 5

2

G

13 16

3

H

16 18

2

S F Take the largest EF

from predecessors

Take the largest EF

from predecessors

A

7

B

3

C

6

D

3

E

3

F

2

G

3

H

2

S F


Note: Finish nodes LF is equal to the largest EF of all finish nodes

Step4 – Calculate Slack

Note: An activity with the slack of 0 is critical

Slack = 0 Slack = 0 Slack = 0

Slack = 0

Slack = 7

Slack = 7

Slack = 8

Slack = 7

A

0 7

0 7 7

B

0 3

7 3 10

C

7 13

7 6 13

D

3 6

10 3 13

E

6 9

13 3 16

F

3 5

11 2 13

G

13 16

13 3 16

H

16 18

16 2 18

S F

A

0 7

0 7 7

B

0 3

7 3 10

C

7 13

7 6 13

D

3 6

10 3 13

E

6 9

13 3 16

F

3 5

11 2 13

G

13 16

13 3 16

H

16 18

16 2 18

S F

Take the smallest LS

from successors


A delay in the critical path delays the project. Similarly, to accelerate the project it is necessary to reduce

the total time required for the activities in the critical path.

Program Evaluation and Review Technique (PERT)

PERT charts depict task, duration, and dependency of an activity in a given project. It is commonly used

in conjunction with the critical path method. It takes into consideration three estimates;

• Optimistic (a). the best-case estimate

• Most likely (m). the most realistic estimate

• Pessimistic (b). the worst-case estimate

These values are used to calculate an Expected Duration (E) value and a Variance (var), where:

T = �% + 4U + '� 6⁄

3% = V�' − %� 6X YZ

Example

Given the following data determine the expected project completion time and variance and the

probability that the project will be completed in 25 days or less.

Activity Predecessors Time Estimates in weeks

Optimistic Most-likely Pessimistic

A None 2 4 6

B None 3 5 9

C A 4 5 7

D B 4 6 10

E C 4 5 7

F C 3 4 8

G D, E 3 5 8

H E, G 2 3 6


Step1 - Find Expected Time and Variance

Remember:

T = �% + 4U + '� 6⁄ 3% = ��' − %� 6⁄ �Z

Activity Predecessors Optimistic Most-likely Pessimistic E var

a m b

A None 2 4 6 4 4/9

B None 3 5 9 5 1

C A 4 5 7 5 1/4

D B 4 6 10 6 1

E C 4 5 7 5 1/4

F C 3 4 8 5 2/3

G D, E 3 5 8 5 2/3

H E, G 2 3 6 3 4/9

Step1 - Build Network Diagram

A

4

B

5

C

5

D

6

E

5

F

5

G

5

H

3

S F


Step2 – Forward Pass

Note: Project Duration is 22 weeks

Step3 – Backward Pass

A

0 4

0 4 4

B

0 5

3 5 8

C

4 9

4 5 9

D

5 11

8 6 14

E

9 14

9 5 14

F

9 14

17 5 22

G

14 19

14 5 19

H

19 22

19 3 22

S F

A

0 4

4

B

0 5

5

C

4 9

5

D

5 11

6

E

9 14

5

F

9 14

5

G

14 19

5

H

19 22

3

S F


Step4 – Calculate Slack and find critical activities

Step5 – Calculate Standard Deviation (σ)

Critical nodes ⟹ A, C, E, G, H

Sum of above nodes variance ⟹ [\ + �[ + �[ + Z] + [\ = 1 Z

_ = √3% ∴ _ = b1 25 Now to answer the question; if project can be completed in 25 week, we will use confidence interval.

c = d − e_

μ = 22 (project duration) and x = 25

c = Z^fZZg�hi

= 2.55 (See Table7 for Distribution table)

∴ �*'�d ≤ 25� = 0.5 + 0.49461

= 0.99461 * 99%

Slack = 3 Slack = 3 Slack = 0

Slack = 8

Slack = 0 Slack = 0

Slack = 0 Slack = 0

A

0 4

0 4 4

B

0 5

3 5 8

C

4 9

4 5 9

D

5 11

8 6 14

E

9 14

9 5 14

F

9 14

17 5 22

G

14 19

14 5 19

H

19 22

19 3 22

S F

Tutorial 4: Schedule Development

Table 1: Distribution Table

Page | 19

Tutorial 5: PERT cont’d Page | 20

Tutorial 5: PERT cont’d

Details:

Given the Project below with the specified three-point estimates, find the following

a. What is the probability that this project will be completed by week 16?

b. What is the probability that this project will be completed by week 14?

c. What is the probability that this project will be completed between week 14 and 16?

Activities Must

Follow

Optimist

(a)

Must

likely

(m)

Pessimist

(b)

A - 2 3 5

B A 1 2 3

C B,D 3 4 6

D - 2 5 7

E D 5 5 5

F C 4 6 9

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