Orange County Convention Center Orlando, Florida June 3-5, Using SAP PS Earned Value to Manage IT Projects Michael Kim

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Orange County Convention Center Orlando, Florida | June 3-5, 2014

Using SAP PS Earned Value to Manage IT Projects

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 What is a typical problem with IT projects?

 _{What is Earned Value (EV)?}  How can EV help IT projects?

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 Steps to get IT projects ready for Earned Value (EV)

 _{Steps to set up SAP EV in Project System (PS)}  How to make the best use of EV for your

organization

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 Unlike projects that build physical objects such as buildings or houses, it is hard to measure progress on IT projects

 On IT projects, it is easy to spend money without knowing where it is being spent

 Money is spent with no meaningful or measurable progress

 Money & resources are gone and you still have work that is

not complete

 By the time you realize your mistakes, it is TOO LATE

 You cannot Manage what you cannot Measure

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 Earned Value Management is a project management technique for measuring project performance and progress in an objective manner.

 EV is commonly used by government contractors and companies that work on Engineering and

Construction projects, such as Power Plants and Aircraft Development

 NASA, DOD, DOE, Utilities, Aerospace & Defense Contractors

and Construction Companies are some of the biggest EV users

 Using the objectivity EV provides, it can help

alleviate the typical IT problem we discussed earlier

 _{For more examples and explanations of EV, please}

refer to http://en.wikipedia.org/wiki/Earned_value

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 Most Plan vs. Actual Reports show planned vs. actual only

 This does not provide enough insight into progress

 Is the project shown below…behind or ahead on schedule

and budget?

Most Reports do not show

Progress

0 20 40 60 80 100 120 140 1 2 3 4 5 6 Cum. Budget Cum. Actual Period 1 2 3 4 5 6 Cum. Budget 20 40 60 80 100 120 Cum. Actual 17 34 50

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 EV ($54) is greater than Actual Costs ($50), i.e., project “earned” more than it spent – got more bang for the buck

 EV ($54) is less than Plan ($60) – project is behind schedule

EV adds the third dimension,

Progress

0 20 40 60 80 100 120 140 1 2 3 4 5 6 Cum. Budget EV Cum. Actual Period 1 2 3 4 5 6 Remarks

Cum. Budget 20 40 60 80 100 120 BAC (Budget At Completion)

% Complete 15% 30% 45% PC (Percent Complete)

Earned Value 18 36 54 EV = PC * BAC

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 Using EV forces Project Manager to use rigor & discipline  Since you cannot manage what you cannot measure, break

up IT deliverables in measurable “chunks” of work

 For each project, come up with a list of deliverables or tasks

in chunks of 80 to 100 hours each

 For example, if an Enhancement requires 400 hours of work,

try to divide it down to four 100 hours per deliverable

 Use an objective EV method such as Start/Finish (0/100,

20/80, or 50/50) or Milestones to determine progress

 If possible, try to avoid Percent Complete (Estimates) method

- it is hard to make this a consistently objective figure

 Measure progress every week or two, and identify issues and

risks early on, before these turn into disasters

 EV can be used as an early warning system for IT projects.

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 Eight EV methods are supported in Standard SAP PS

 _{For IT Projects Milestones & Start/Finish Methods}

are recommended

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 Shown below are the minimum CONFIGURATION Steps Required

 Create a Progress Version (a special CO Version)  100 is a Standard Progress Version reserved for EV, so

this can be used

 More than one Progress Version can be used

 Set Plan Version, EV basis, Early/Late Dates

 Set up PS Value Categories

 Labor, Material, ODC, OH, G&A, etc. are recommended

 The best way to do this is to map CO CE Groups to PS Value Categories

 Assign Default Methods for WBS, NW Activity, CO/PM Order, etc.

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Shown below are APPLICATION Steps

Required

 Depending on business requirements, more steps may be required

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Use CJ20N to perform the following tasks:

 Plan labor, material, and ODC on WBS or Network Activity

 Assign EV methods on WBS or Network Activity

 Perform Progress Update on WBS or NWA each period

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_{Use CNE1 to calculate EV}

 After the EV parameters are set up, CNE1 should run to update EV figures in ECC

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_{Run EV Reports}

 CNE5 – Tabular Report and Period Drilldown Report

 S_ALR_87015124 - Report Painter Report

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 Using a typical PS structure, EV can be set up on the WBS element or NW Activity Level

 _{The Start/Finish 20/80 Method is selected}

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 The Milestones Method is shown as an example  Milestones method chosen for both Plan & Actual

 Prog. Analysis must be checked with POC completed

 Multiple Milestones can be set up for WBS/NWA

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 Using a typical PS structure, EV can be set up on the WBS element or NW Activity Level

 _{The Estimates Method is shown as an example}

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 Resistance from Change Management Perspective

 Many PM’s will view EV as a tax on their time and resources

 How to Handle the Challenge

 After Senior Management agrees to implement EV, use a

small number of key projects to implement EV to demonstrate the following:

 EV is a standard solution in SAP – it is free and you already have it

 You already have it. Why not use it to improve project management and objectivity in evaluating performance?

 Use 3 to 6 pilot projects and savvy Project Analysts to start with

 After initial training and set up, EV is simple to maintain

 EV - by definition - will enforce discipline among project personnel

 Incorporate lessons learned from pilot

 Come up with company-wide EV requirements and Rollout to

strategically important projects

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 CNE5 shows the basic three key figures in EV: BCWS, BCWP and ACWP or Plan EV, Actual EV and Actual Costs.

 In CNE5 use Period Drill Down Menu Selection for the Graph

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 S_ALR_87015124 shows the key EV figures as well as Performance Indicators such as CPI, SPI and EAC

 _{This is a Report Painter Report that can be modified}

without ABAP

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 Get Senior Management Buy In - without this you will fail

 Allocate budget for EV implementation – it takes time to set up and maintain

 Educate Project Managers and PM Analysts on Earned Value

 Align the Charge Numbers - Cost Objects such as WBS,

Network Activity, Internal Order, PM/PP Order, etc. - with the Work or Work Packages for which you want to

implement EV

 Ideally, the charge numbers to work packages should be one

to one

 However, in reality, many organizations using one charge

number for multiple work packages and EV can still work if you set it up properly

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 What is Earned Value?

 Project Management Technique used by many PM’s

 How can it help IT projects?

 By introducing rigor and discipline, it can be useful as an early

warning system for IT projects

 What will it take for EV to be successful for my organization?

 Management Leadership, Commitment, and Support

 Business Readiness

 Rigor and Discipline

 Willingness to put in rigor for meaningful and measurable

progress

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THANK YOU

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