Information Systems Project Management—David Olson
1-2
Chapter 1: Introduction
Information System Projects
Systems
Critical Success Factors
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson
1-3
Denver International Airport
Bozman [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 Olson
1-4
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
Information Systems Project Management—David Olson
1-5
What is a project?
–
–
–
–
definable purpose
cut across organizational lines
unique
ad hoc
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson
1-6
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
Information Systems Project Management—David Olson
1-7
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
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson
1-8
Dimensions of Complexity
• magnitude of effort
• number of groups and organizations
to be coordinated
• diversity in skills or expertise
needed
usually the MORE COMPLEX, the more
time and resources required
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson
1-9
Group Size Dimension
individual
group
organization
multiorganization
term paper
wedding
system implementation
auditing
plant construction
space shuttle
wars
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson
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
© McGraw-Hill/Irwin 2004
1-10
Information Systems Project Management—David Olson
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
1-11
Information Systems Project Management—David Olson
1-12
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
Information Systems Project Management—David Olson
1-13
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
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson
1-14
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
Information Systems Project Management—David Olson
1-15
Adages
• Brooks’s Law
Adding 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
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson
1-16
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
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson
1-17
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
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson
1-18
FoxMeyer Drug
Large drug distributor, wanted to implement ERP
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson
1-19
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)
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson
1-20
ERP Market
• Compound annual growth of 37% 19972002 (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
Information Systems Project Management—David Olson
1-21
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
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson
1-22
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
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson
1-23
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
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson
1-24
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
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson
1-25
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
Information Systems Project Management—David Olson
1-26
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 Olson
1-27
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
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson
1-28
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
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson
1-29
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
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson
1-30
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
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson
1-31
McKesson
• Bought FoxMeyer operation
• Made ERP work
– On time
– Within budget
– Full functionality
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson
1-32
Project Critical Success Factors
Belassi & 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
Information Systems Project Management—David Olson
1-33
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
© McGraw-Hill/Irwin 2004
Information Systems Project Management—David Olson
1-34
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
© McGraw-Hill/Irwin 2004