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PAE AcFn621Ch-4a Project Alaysis and Selection
PAE AcFn621Ch-4a Project Alaysis and Selection
• Cost cutting/avoidance
• Revenue
maintenance/enhancement
• Entering new market
• Gaining market share
Measurement of Project Effect
• Intangibles
– Difficult to measure cost and benefits
• Hidden outcomes
– time, budget subject to great error
• Change of Information Technology
– technology changes rapidly
• outdating many good project idea
• Technology is highly dynamic
Measurement of Project Effect
• Allowing non-technical staffers to give estimates.
• Underestimating design time and debugging time
• Inadequate/unclear requirements.
• Poorly defined scope of work.
• Omissions.
• Optimism.
• Failure to assess risk and uncertainty.
• Time pressure.
• External pressure.
• Failure to involve task performers.
Organizational Treatment of Projects
• Focusing on bottom line justification misleads
companies with respect to evaluation of
Information technology investment, by
treating project as capital which requires a
rigid cost/benefit analysis.
• The most common justification for project
adoption:
- reduction of payroll
- accomplishing a strategic objective (often
disregarded because it is difficult to measure)
Organizational Project Management Process
• Traditional organizational
structures come in four general types,
functional, divisional, matrix and flat.
• But with the rise of the digital marketplace,
decentralized, team-based
org structures are disrupting old business
models
Organizational Treatment of IS Projects
• Hinton & Kaye (1996) - survey of 50
organizations
CAPITAL: rigid cost-benefit analysis
REVENUE: need to invest to keep up
Investment Capital Mix Revenue
training 0% 01% 99%
marketing 04% 9% 87%
info tech 39% 41% 20%
operations 58% 31% 11%
Organizational Treatment of Projects
• Cost benefit analysis should consider
cost over the entire life cycle of the
project.
Sales of 70,000
business
Value Analysis
(is an alternative to cost/benefit analysis)
• Decision Support System benefits usually very
vague.
• Unfair to apply cost-benefit analysis
– benefit estimates unreliable
• Costs - identify as in cost-benefit
• Benefits - leave in subjective terms
• Managerial decision: are you willing to pay this
much for that set of benefits?
• Quantify the intangible in terms of value not in
dollars.
Multi-criteria analysis
• Multi-Criteria Analysis (MCA) is a decision-making tool
developed for complex problems.
• By using MCA the members don't have to agree on the relative
importance of the Criteria or the rankings of the alternatives. Each
member enters his or her own judgment, and makes a distinct,
identifiable contribution to a jointly reached conclusion.
• SMART is a very simple means of quantitatively combining diverse
sets of benefits by converting them all to an abstract measure of
value. (two factors here are weight and score)
• SMART Simple Multi-Attribute Theory
– identify criteria (risk, market share)
– measure utilities of alternatives over each criterion
– elicit preference weights
• From the most important to the least important
value = S of weights times scores
Weighted Scoring Model
Criteria Weight Project 1 Project2 project3
criteria1 25% 90 90 50
criteria2 30% 70 90 50
Criteria3 40% 50 80 60
Criteria4 5% 80 90 50