Small Information Technology Projects Prioritisation The first step in project management is deciding what projects to undertake. Therefore, project initiation starts with identifying potential projects, using realistic methods to select which projects to work on, and then formalising their initiation by issuing a project charter. In addition to using SWOT analysis organisations often follow a detailed process for project selection. Organisations identify many potential projects as part of their strategic planning processes, and they often rely on experienced project managers to help them make project selection decisions. However, organisations need to narrow down the list of potential projects to those projects that will be of most benefit. Selecting projects is not an exact science, but it is a necessary part of project management. Many methods exist for selecting from among possible projects. Five common techniques include: Focussing on broad organisational needs Categorising information technology projects Performing financial analysis Using a weighted scoring model Implementing a balanced scorecard In practice organisations usually use a combination of these approaches to select projects. Each approach has its advantages and disadvantages, and it is up to management to decide the best approach for selecting projects based on their particular organisation. You are a member of a priority team in charge of evaluating and selecting small information technology project proposals. Management in your organisation have deemed a combination of focussing on broad organisational needs, performing financial analysis and using a weighted scorecard as appropriate tools to evaluate and rank potential projects. Your organisation has set a discount rate of 9% and a minimum return on investment of 30%. Review each of the proposals presented and answer the questions. Financial Analysis:

PROJECT 1 Discount rate: 0.09 YEAR 0 1 2 3 4 TOTAL $ $ $ $ $ $ Inflows 120,000 180,000 155,000 160,000 615,000 Outflows 280,000 30,000 30,000 30,000 30,000 400,000 Cumulative Net Flow (280,000) (190,000) (40,000) 85,000 215,000 215,000 Discount Factor 1.0000 0.9174 0.8417 0.7722 0.7084 Discounted Inflows 0 110,092 151,502 119,688 113,348 494,631 Discounted Outflows 280,000 27,523 25,250 23,166 21,253 377,192 Cumulative Discounted Net Flows (280,000) (197,431) (71,179) 25,344 92,095 117,439 ROI 31% NPV 117,439 Payback years PROJECT 2 YEAR 0 1 2 3 4 TOTAL $ $ $ $ $ $ Inflows 110,000 110,000 110,000 110,000 110,000 550,000 Outflows 280,000 40,000 20,000 15,000 10,000 365,000 Cumulative Net Flow (170,000) (190,000) (40,000) 85,000 215,000 185,000 Discount Factor 1.0000 0.9174 0.8417 0.7722 0.7084 Discounted Inflows 110,000 100,917 92,585 84,940 77,927 466,369 Discounted Outflows 280,000 36,697 16,834 11,583 7,084 352,198 Cumulative Discounted Net Flows (170,000) 64,220 75,751 73,357 70,843 114,171 ROI 32% NPV 114,171 Payback years Weighted Score: Criteria Weight PROJECT 1 PROJECT 2 Supports explicit business objectives 25% 90 90 Has strong internal sponsor 15% 70 80 Has strong customer support 15% 50 70 Uses realistic level of technology 10% 25 30 Can be implemented in one year or less 5% 20 20 Provides positive NPV 20% 60 60 Low risk in meeting scope, time and cost goals 10% 30 40 Weighted Project Scores 100% (Schwalbe, 2014; Larson et al, 2014) Question C1 a). Explain what is indicated by the NPV figure in each of the above projects. b). Explain what is indicated by the ROI figure in each of the above projects. c). Using the appropriate formula calculate the payback period for each project. Which project has the earliest payback period? [1+1+3=5 marks] Question C2 a). Calculate the weighted scores in the above projects. b). Based on your analysis of the information (NPV, ROI, payback period and weighted scores) which project you would recommend your organisation to invest in? Justify the reasons for your choice.