TOPIC 3:

IT Projects In Depth

TOPIC:

●    Project Evaluation techniques - Net Present Value (NPV) Analysis

●    Cost Estimation

●    Review of Assignment 1

Time 110   mins

 Agenda

 Activity

20

Mins

Net Present  Value (NPV) Analysis

Activity 1: Individual activity

Complete your analysis from  last week and your tutors will be discussing and review the best solution in the next week’s applied

(From Week 2 Post Applied Activity) Compare the following two projects (on the next section) through NPV and Return on Investment (ROI) analysis. You can find more examples in the workshop #2 slides, textbooks and online resources.

●    The costs (cash outflows) and the benefits (cash inflows) are listed below for five years. Set the discount rate to 8 percent.

●    Note: Year 0 numbers are the initial costs and benefits. In many but not all IT projects, the year 0 values for benefits are zero.

●    Use the template provided in Moodle. The template also includes an example from our textbook.

40

Mins

Cost Estimation

Activity 2: Group activity

Consider this scenario from our textbook (Schwalbe, 2018, p. 86, 97 - 99):

Erica Bell is in charge of the Project Management Office (PMO) for her consulting firm, JWD Consulting, which has grown to include more than 200 full-time

consultants and even more part-time consultants. JWD Consulting provides a

variety of consulting services to assist organizations in selecting and managing IT projects. The firm focuses on finding and managing high-payoff projects and

developing strong metrics to measure project performance and benefits to the

organization after the project is implemented. The firm’s emphasis on metrics and  working collaboratively with its customers gives it an edge over many competitors. Joe Fleming, the CEO, wanted his company to continue to grow and become a

world-class consulting organization. Because the core of the business is helping other organizations with project management, he felt it was crucial for JWD

etConsulting to have an exemplary process for managing its own projects. He

asked Erica to work with her team and other consultants in the firm to develop

several intranet site applications that would allow them to share their project

management knowledge. He also thought that the firm should make some of the information available to the firm’s clients. For example, the firm could provide

project management templates, tools, articles, links to other sites, and an Ask the Expert feature to help build relationships with current and future clients. Because  JWD Consulting emphasizes the importance of high-payoff projects, Joe also

wanted to see a business case for this project before proceeding.

The main features of the project management intranet site should include the following:

1. Access to several project management templates and tools. Users must be

able to search for templates and tools, read instructions for using these templates and tools, and see examples of how to apply them to real projects. Users must 

also be able to submit new templates and tools, which should first be screened or edited by the Project Management Office.

2. Access to relevant project management articles. Many consultants sense an   information overload when they research project management information. They often waste time they should be spending with their clients. The new intranet

should include access to important articles on project management topics, which are searchable by topic, and should allow users to ask the Project Management  Office staff to find additional articles to meet their needs.

3. Links to other, up-to-date websites, with brief descriptions of the main features of the external sites.

4. An Ask the Expert feature to help build relationships with current and future clients and share knowledge with internal consultants.

5. Appropriate security to make the entire intranet site accessible to internal consultants and certain sections accessible to others.

6. The ability to charge money for access to some information. Some of the

information and features of the intranet site should prompt external users to pay for the information or service. Payment options should include credit card or similar online payment transactions. After the system verifies payment, the user should be able to access or download the desired information.

Provide a high-level cost estimates for the above proposal assuming the following: The project manager is working about 20 hours per week for six months and other internal staff is working a total of about 60 hours per week for six months.

The customer representatives would not be paid for their assistance. Please refer to the Hays (2024) for labour rates.

The initial cost estimate also includes $20,000 for purchasing a data server from suppliers (Lenovo, n.d.).

After the project is completed, maintenance costs of $40,000 are included for each year, primarily to update the information and coordinate the Ask the Expert feature and online articles.

Projected benefits are based on a reduction in hours that consultants spend researching project management information, appropriate tools, and templates. Projected benefits are also based on a small increase in profits due to new business generated by this project. If each of 400 consultants saved just 40 hours each year (less than one hour per week) and could bill that time to projects that generate a conservative estimate of $10 per hour in profits, then the projected benefit would be $160,000 per year.

If the new intranet increased business by just 1 percent, using past profit information, increased profits due to new business would beat least $40,000 each year.