14-1
Chapter 14
Managing Projects
Learning Objectives
1. What are the objectives of project management and why is it so essential in
developing information systems?
Chapter Outline
14.1 The Importance of Project Management
Runaway Projects and System Failure
Project Management Objectives
14.2 Selecting Projects
Management Structure for Information Systems Projects
14.3 Establishing the Business Value of Information Systems
14.4 Managing Project Risk
Dimensions of Project Risk
Change Management and the Concept of Implementation
Key Terms
The following alphabetical list identifies the key terms discussed in this chapter. The
page number for each key term is provided.
14-2
Capital budgeting, 569
Change agent, 572
Change management, 572
Counterimplementation, 577
PERT chart, 575
Portfolio analysis, 566
Project, 560
Project management, 560
Project portfolio management, 581
Teaching Suggestions
The opening case, “Nu Skin’s New Human Resources System Project Puts People First,”
illustrates the importance of understanding the corporate culture and truly putting people
first in any organizational change.
The company was very careful to select the right project team members—those who
would enhance the team based on skills and personality as well as the ability to perform
14-3
Section 14.1, “The Importance of Project Management” Spend some time discussing
why so many information system projects fail. It is because the system wasn’t built
correctly or was it really how the project was managed or mismanaged that caused the
failure? You should remind students of the biggest problems with IT projects: It takes too
Interactive Session: Management: Austin Energy’s Billing System Can’t Light Up
Case Study Questions
1. Is the Austin Energy project a failure? Explain your answer.
Yes, the project can be considered a failure for these reasons:
2. Describe the business impact of the faltering Austin Energy project.
Software bugs have led to errors in thousands of customer billings. Over 65,000
customers have not received bills entirely, and another 35,000 have received
3. How much was IBM responsible for the problems encountered by the Austin
Energy billing project? Austin Energy? Explain your answer.
IBM responsibilities: IBM was repeating mistakes during the system
implementation. Two separate errors cost the project 37 hours of delay and one of the
14-4
4. What were the specific organizational or technical factors as well as
management factors involved in this project failure?
Management: IBM’s lead manager on the project was replaced twice. Problems with
the system were not delegated to the right person. IBM and Austin Energy executives
failed early on to identify gaps outside the project’s scope and recommend solutions.
5. Describe the steps Austin Energy and IBM should have taken to better manage
this project.
Both companies should have dealt better with five major variables associated with
any major project:
• Scope: Define what work is or is not included in a project.
• Time: Assess the amount of time required to successfully complete the
Section 14.2, “Selecting Projects” Throughout the textbook, the Laudons’ have stressed
that information systems are sociotechnical and part of the organization. This is an
important point to reiterate to your students. A new information system changes the way
the organization operates. Successful organizations choose to change their structure and
Section 14.3, “Establishing the Business Value of Information Systems” This section
focuses heavily on mathematical models to evaluate the costs and benefits of information
system projects. The Learning Tracks for this chapter may help you present the payback
method, the accounting rate of return on investment, net present value, and internal rate
Section 14.4, “Managing Project Risk” This section begins by describing three
dimensions of project risk: size, structure, and experience with technology. It goes on to
explain how change management can diminish the potential failure rate of projects
regardless of these dimensions. Many organizations’ projects have failed mostly because
Interactive Session: Organizations: Westinghouse Electric Takes on the Risks of a
“Big Bang” Project
14-6
Case Study Questions
1. Identify and discuss the risks in Westinghouse Electric’s Cornerstone project.
The company decided to update its older system to support new processes,
configurations, and functionalities that related to the larger amount of business it was
2. Why was change management so important for this project and this company?
The company ensured that every element of the project was motivated by a particular
business driver or goal. It wanted to align three distinct operational regions into a
3. What management, organization, and technology issues had to be addressed by
the Westinghouse project team?
Management: The company was growing too fast for a slow implementation
process. It had to release the new systems as soon as possible in order to recoup its
return on investment sooner rather than later.
14-7
4. Should other companies use a “big–bang” implementation strategy? Why or why
not? Explain your answer.
Companies should only use a “big–bang” or “cutover” implementation strategy if they
have a great deal of confidence in the new system. Once the implementation starts,
Review Questions
1. What are the objectives of project management and why is it so essential in
developing information systems?
Describe information system problems resulting from poor project management.
When an information system fails to work properly or costs too much to develop,
Define project management. List and describe the project management activities
and variables addressed by project management.
Project management refers to the application of knowledge, skills, tools, and
techniques to achieve specific targets within specified budget and time constraints.
Project management activities include planning the work, assessing the risk,
• Risk: Refers to potential problems that would threaten the success of a project.
14-8
2. What methods can be used for selecting and evaluating information systems
projects and aligning them with the firm’s business goals?
Name and describe the groups responsible for the management of information
systems projects.
Large corporations will have a management structure to ensure the most important
systems projects receive priority.
• Corporate strategic planning group: Responsible for developing the firm’s
strategic plan, which may require the development of new systems.
Describe the purpose of an information systems plan and list the major
categories in the plan.
An information systems plan helps executives, managers, and users identify
information systems projects that will deliver the most business value. The
Explain how key performance indicators, portfolio analysis, and scoring models
can be used to select information systems projects.
14-9
Key Performance indicators (KPIs) help an organization clearly understand both its
long- and short-term information requirements. KPIs are shaped by the industry, the
firm, the manager, and the broader environment. New information systems should
focus on providing information that helps the firm meet its goals implied by KPIs.
Portfolio analysis is used to help evaluate alternative system projects. Portfolio
analysis inventories all of the firm’s information systems projects and assets,
Scoring models are useful when many criteria must be considered. It assigns weights
to various system features and then calculates the weighted totals. The scoring model
3. How can firms assess the business value of information systems projects?
List and describe the major costs and benefits of information systems.
Table 14-3 lists all of the major costs and benefits of information systems. It divides
Distinguish between tangible and intangible benefits.
Students can use Table 14-3 to answer this question.
Tangible benefits can be quantified and assigned a monetary value. They include:
increased productivity, lower operational costs, reduced workforce, lower computer
14-10
Explain how real options pricing models can help managers evaluate
information technology investments.
Appropriate strategies, such as real options pricing models (ROPM), can be applied to
evaluate and value the information system when the benefits cannot be established in
4. What are the principal risk factors in information systems projects?
Identify and describe each of the principal risk factors in information systems
projects.
Project size: The larger the project (dollars spent, the size of the implementation
staff, the time allocated, and the number of organizational units affected), the greater
Explain why builders of new information systems need to address
implementation and change management.
An information system is a sociotechnical entity, an arrangement of both technical
14-11
Explain why eliciting support of management and end users is so essential for
successful implementation of information systems projects.
The user-designer communication gap deals with the relationship that exists between
end users and information systems specialists. These two groups have different
Explain why there is such a high failure rate for implementations involving
enterprise applications, business process reengineering, and mergers and
acquisitions.
These projects are very challenging, partly because they usually require extensive
organizational change. They also often replace deeply entrenched old technologies
5. What strategies are useful for managing project risk and system
implementation?
Identify and describe the strategies for controlling project risk.
Strategies you can follow to increase the chances of a successful system include:
• New systems that involve challenging and complex technology can be helped
14-12
Identify the organizational considerations that should be addressed by project
planning and implementation.
The term implementation refers to the entire process of organizational change
surrounding the introduction of a new information system. Information systems
Explain how project management software tools contribute to successful project
management.
You can use special tools to help you manage the implementation of a new
information system (internal integration tools). The software features these
capabilities:
• Define and order tasks
Discussion Questions
1. How much does project management impact the success of a new information
system?
14-13
Clearly, any project that is not properly thought out and managed will result in a
dismal failure. Without proper management things quickly fall off the rails. Cost
overruns mount, delays are unavoidable, frustration levels rise, and lack of
2. It has been said that most systems fail because system builders ignore
organizational behavior problems. Why might this be so?
System building efforts often fail because there is too much emphasis on the
technology and not enough attention to changes in organizational structure, job
3. What is the role of end users in information systems project management?
End users play the most important role in systems development. There are two
positive outcomes from having high levels of user participation in designing and
operating information systems:
• Users have more opportunities to mold the system according to their priorities
14-14
Hands-on MIS Projects
Management Decision Problems
1. U.S. Census Bureau: Signed a $600 million contract with Harris corporation in 2006
to build 500,000 devices, but still weren’t sure which features they wanted included
in the units. Census officials did not specify the testing process to measure the
performance of the handheld devices. Four hundred change requests were added to
the project requirements. Two years and hundreds of millions of taxpayer dollars
later, the handhelds were far too slow and unreliable to be used for the 2010 U.S.
census. What could Census Bureau management and the Harris Corporation have
done to prevent this outcome?
Both organizations could have done a much better job of defining project objectives
2. Caterpillar: The company wants to end its support for its Dealer Business System
(DBS), which it licenses to its dealers to help them run their businesses. The software
is becoming out of date and senior management wants to turn support over to
Accenture Consultants. The dealers were never required to use the system but it had
become a de facto standard for business processes. Approximately 150 dealers
worldwide use some version of the system. Before Caterpillar turns the product over
to Accenture, what factors and issues should it consider? What questions should it
ask? What questions should its dealers ask?
Using an information systems plan, senior managers can analyze the idea of turning
the system over to outside consultants and determine strategies for doing so. Step 2,
Improving Decision Making: Using Spreadsheet Software for Capital Budgeting for
a New CAD System
Software skills: Spreadsheet formulas and functions
Business skills: Capital budgeting
Your company would like to invest in a new computer-aided-design (CAD) system
that requires purchasing hardware, software, and networking technology, as well as
expenditures for installation, training, and support. The Laudon Web site,
MyMISlab, for Chapter 14 contains tables showing each cost component for the new
system as well as annual maintenance costs over a five-year period. It also features a
Learning Track on capital budgeting models. You believe the new system will
produce annual savings by reducing the amount of labor required to generate
designs and design specifications, thus increasing your firm’s cash flow. Using the
data provided in these tables, create a worksheet that calculates the costs and
benefits of the investment over a five-year period and analyze the investment using
the four capital budgeting models presented in this chapter’s Learning Track. Is
this investment worthwhile? Why or why not?
Improving Decision Making: Using Web Tools for Buying and Financing a Home
You have found a new job in Denver, Colorado and would like to purchase a home
in that area. Ideally, you would like to find a single-family house with at least three
bedrooms and one bathroom that costs between $150,000 and $225,000 and finance
it with a 30-year fixed rate mortgage. You can afford a down payment that is 20
14-16
1. Locate homes in your price range in Denver, Colorado. Find out as much
information as you can about the houses, including the real estate listing agent,
condition of the house, number of rooms, and the school district.
When you are finished, evaluate the whole process. For example, assess the ease of
use of the site and your ability to find information about houses and mortgages; the
accuracy of the information you found; the breadth of choice of homes and
mortgages; and how helpful the whole process would have been for you if you were
actually in the situation described in this project.
Naturally, students will select different properties in the Denver area. Some of the
Video Cases
You will find video cases illustrating some of the concepts in this chapter on the Laudon
Collaboration and Teamwork: Identifying Implementation Problems
Form a group with two or three other students. Write a description of the
implementation problems you might expect to encounter in one of the systems
described in the Interactive Sessions or chapter-ending cases in this text. Write an
14-17
Answers for this project will vary. In addition to the models presented in this chapter,
here are a few more suggestions for managing the implementation of information
systems:
• Fully document the firm’s applications and IT infrastructure and conduct periodic
reviews of the firm’s IT portfolio.
• Ensure that information systems investments are closely aligned with the firm’s
Case Study: NYCAPS and CityTime: A Tale of Two New York City IS Projects
Case Study Questions
1. How important were the NYCAPS and CityTime projects for New York City?
What were their objectives? What would have been their business benefits?
In terms of improving efficiencies and cutting costs, both projects were extremely
important for New York City. The goal of the NYCAPS project was to create a
2. Evaluate the key risk factors in both projects.
The key risk factors in both projects were out-of-control time and costs, lower quality
14-18
3. Classify and describe the problems each project encountered as the NYCAPS
and CityTime systems were being implemented. What management,
organization, and technology factors were responsible for these problems?
Management: A lack of qualified and responsible oversight, a lack of management,
and a lack of leadership led to the failure of both projects. The NYCAPS project was
controlled by government officials who did not have the authority or expertise to
4. What were the similarities and differences in the management of both projects?
Both projects used hourly billing vs. fixed cost payments at one time or another. That,
along with improper management and oversight, invites fraud, waste, and abuse.
5. What was the business impact of these botched implementations? Explain your
answer.
Ideally, new systems improve efficiencies, reduce costs, reduce fraud and waste, and
provide executives, managers, and employees with better information on which to
6. Describe the steps that should have been taken to prevent negative outcomes in
these projects.
The first step in managing project risk involves identifying the nature and level of risk
confronting the project. Implementers can then handle each project with the tools and
risk-management approaches geared to its level of risk.