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EV Spreadsheet Template

One of the more common methods to compute EV parameters is through the use of a spreadsheet. The sample below contains a summary level project plan for a selected level of the WBS.

Percentage completion estimates for each activity are recorded in column “O.” The status point for EV evaluation is May as indicated by the vertical bar. AC data are recorded in rows 15 and 16. Answer the following questions using your knowledge of EV.

a. Translate these data to produce the project EV status.

b. What is the condition of the project based on these parameter values?

c. What is the estimated cost and schedule at completion?

 
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Although we will discuss feasibility analysis now within the context of project initiation, most project teams will revise their feasibility study throughout the SDLC and revisit its contents at various checkpoints during the project. If at any point the project’s risks and limitations outweigh its benefits, the project team may decide to cancel the project or make necessary improvements. Technical Feasibility The first technique in the feasibility analysis is to assess the technical featibility of the project, the extent to which the system can be successfully designed, developed and installed by the IT group. Technical feasibility analysis is, in essence, a technical risk analysis that strives to answer the question: “Can we build it? Many risks can endanger the successful completion of the project. First and foremost is the users and analysts’ humiliarity with the application. When analysts are unfamiliar with the business application area, they have a greater chance of misunderstanding the users or missing opportunities for improvement. The risks increase dramatically when the users themselves are less familiar with an application. such as with the development of a system to support a new business innovation (c.es Microsoft starting up a new Internet dating service). In general, the development of new systems is riskier than extensions to an existing system, because existing systems tend to be better understood. Familiarity with the technology is another important source of tectmical risk When a system will use technology that has not been used before within the bryan- ization, there is a greater chance that problems will occur and deluys will be incurred because of the need to learn how to use the technology. Risk increases dra- matically when the technology itself is new (e.g., web development using Ajax). Project size is an important consideration, whether measured as the number of people on the development team, the length of time it will take to complete the project, or the number of distinct features in the system. Larger projects present more risk, because they are more complicated to manage and because there is a greater chance that some important system requirements will be overlooked or misunderstood. The extent to which the project is highly integrated with other systems (which is typical of large systems) can cause problems, because complexity is increased when many systems must work together. Finally, project teams need to consider the compatibility of the new system with the technology that already exists in the organization Systems farcly are built in a vacuum-they are built in organizations that have numerous systems already in place. New technology and applications need to be able to integrate with the existing environment for many reasons. They may rely on data from existing sys- tems, they may produce data that feed other applications, and they may have to use the company’s existing communications infrastructure. A new CRM system, for example, has little value if it does not use customer data found across the organiza- tion in existing sales systems, marketing applications, and customer service systems. The assessment of a project’s technical feasibility is not cut and dried, because in many cases, some interpretation of the underlying conditions is needed (c-g., how large does a project need to grow before it becomes less feasible?). One approach is to compare the project under consideration with prior projects undertaken by the * We use the words build it in the best sens. Organizations can also choose to buy a commercial software package and install it, in which case the question might be “Can we select the right package and successfully installing
 
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The scconi element of a leasibility analysis is to perform an economic feasibility analysis (also called a cost benefit malysis) that identifies the financial risk associ- ated with the project. This attempts to answer the question “Should we build the system?” iconomic feasibility is determined by identifying costs and benefits asso- ciated with the system, assigning values to them, and then calculating the cash flow and return on investment for the project. The more expensive the project, the more rigorous and detailed the analysis should be. Figure 1-8 lists the steps to perform a cost–benclit analysis, cach step will be described in the upcoming sections. Identify Costs and Benefits The first task when developing an cconomic feasibility analysis is to identify the kinds of costs and benefits the system will have and list them along the left-hand column of a sprcadshect. Figure 1-9 lists examples of costs and benefits that may be included. The costs and benefits can be broken down into four categories: (1) de.elopment costs, (2) operational costs, (3) tangible benefits, and (4) intangibles. Development costs are those tangible expenses that are incurred during the creation of the system. such as salaries for the project team, hardware and software expenses, consultant fecs, training, and office space and equipment. Development costs are usually thought of as one-time costs. Operational costs are those tangible costs that are required to operate the system, such as the salaries for operations staff, software licensing fees, equipment upgrades, and communications charges. Operational costs are usually thought of ns ongoing costs. 1. Identify Costs and Benefits 2. Assign Volves to Costs and Benefits 3. Determine Cash Flow 4. Assess Project’s Economic Value Return on Investment (RON) • Break-Even Point (BEP) list the tangible costs and benefits for the project Include both one-time and recurring costs. Work with business users and IT clessionals to create numbers for each of the costs and benebts . Even inkungids shouki te whail of all poble Forecast what the costs and benelits will be over colloin period, usually, three to live years. Apply a growth role to the values, i recessory Lvclucatie: popus op led chun comparison ils costs. Use one or more of the following evaluation techniques: Calculate the role of cum canned on the money invested in the project, using the Rol formula. Find the year in which the cumukative project benefits exceed cumulative project costs. Apply the breakeven formules, using ligures for that year. This calculation measures how long it will take for the system to produce benefits that cover its costs. Restale all costs and benelits in today’s dolor terms Ipresent valucl using an appropriale discount rate. Determine whether the Iclal present value of benefits is greater than or less than the tolal presenl value of costs. • Net Present Value (NPV)
 
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Hailey was recently promoted to the position of production manager in the manufacturing plant of a company that makes desktop printers for commercial and home use. Her department is responsible for producing the printer drums that house the cartridges. Hailey has an undergraduate degree in industrial engineering and an MBA. She aspires toward eventually holding a high-level leadership position in manufacturing or operations. Hailey therefore considers her promotion to production manager to be a building block in her career. She says: “Our country became great by building things. That’s why I love manufacturing. Here’s my chance at age 26 to make a difference as a manufacturing leader.” Having worked as an industrial engineer for two years at the plant, Hailey understands the technology behind printer drums, as well as the manufacturing process. During her first week in her new assignment, Hailey spent a lot of time talking with her two supervisors and many production technicians. She was particularly looking for ways in which she could provide leadership to the group. Hailey asked Jud, an experienced supervisor, what changes needed to be made in the functioning of the department. Jud replied: “Right now things are going well. Despite the worldwide decline in the number of desktop computers purchased, we have a nice steady demand for new drums. The office-supply stores still sell a lot of replacement drums for existing printers. I notice too that morale is okay in my department. Just keep the year-end raises and bonuses flowing (said with a laugh).” Hailey asked Jenna, a supervisor with five years of experience, the same question. Jenna said: “I think the biggest problem we face is not having enough new, qualified production technicians. Maybe making drums is hum-drum, but you need skill to do the job right. These days, most young people don’t want to make things. They just want to stay glued to their mobile devices. Also, a lot of the people we recruit for entry-level jobs can’t do much math, and they don’t want to talk. We need to find a pipeline of new blood for our basic production jobs.” Hailey spoke with Barney, a production technician with twenty-five years of experience, about what changes he thought a department leader should bring about. Barney replied: “Not much, Hailey. I know that you are well educated and very smart, but don’t worry much about changes right now. The other guys and gals in the department and I are all happy that our jobs have not been shipped to another country. We also like the idea that we have not been replaced by robots so far.” Hailey was particularly interested in the comments of Gloria, another production technician, who said: “I am a little worried about the future of our department. We are making printer drums, but how long can this last? Maybe you as the leader can find another product for us to make that will keep us going at least until I retire.” Hailey reflected: “I have been collecting a lot of information. But what do I do with the information? As the department leader, how can I make a difference now and in the near future?” 1. Advise Hailey on where she should get started in making a difference as a leader in the drum-manufacturing department. 2. To what extent do you think it is advisable for Hailey to interview workers in the department to get some input as to what she should do as their leader?

 

 
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