SOFTWARE

SOFTWARE PROJECT
PROJECT
MANAGEMENT
MANAGEMENT
(KOE-068)
(KOE-068)
Faculty: Rajanish Jain
Course: B.Tech 6th Semester
Session 2021-22
Department of Computer Science & Engineering
04/05/24 1
 University Syllabus
Unit-1: Project Evaluation and Project Planning : :
Importance of Software Project Management – Activities – Methodologies – Categorization of Software Projects – Setting
objectives – Management Principles – Management Control – Project portfolio Management – Cost-benefit evaluation technology
– Risk evaluation – Strategic program Management – Stepwise Project Planning.
Unit-2: Project Life Cycle and Effort Estimation:
Software process and Process Models – Choice of Process models – Rapid Application development – Agile methods – Dynamic
System Development Method – Extreme Programming– Managing interactive processes – Basics of Software estimation – Effort
and Cost estimation techniques – COSMIC Full function points – COCOMO II – a Parametric Productivity Model.
Unit-3: Activity Planning and Risk Management:
Objectives of Activity planning – Project schedules – Activities – Sequencing and scheduling – Network Planning models –
Formulating Network Model – Forward Pass & Backward Pass techniques – Critical path (CRM) method – Risk identification –
Assessment – Risk Planning –Risk Management – – PERT technique – Monte Carlo simulation – Resource Allocation – Creation
of critical paths – Cost schedules.
Unit-4: Project Management and Control:
Framework for Management and control – Collection of data – Visualizing progress – Cost monitoring – Earned Value Analysis –
Prioritizing Monitoring – Project tracking – Change control –Software Configuration Management – Managing contracts –
Contract Management.
Unit-5: Staffing in Software Projects:
Managing people – Organizational behavior – Best methods of staff selection – Motivation – The Oldham – Hackman job
characteristic model – Stress – Health and Safety – Ethical and Professional concerns – Working in teams – Decision making –
Organizational structures – Dispersed and Virtual teams – Communications genres – Communication plans – Leadership.
04/05/24 2
 LECTURE-
LECTURE-

Project
Project Portfolio
Portfolio Management
Management

Faculty: Rajanish Jain

Department of Computer Science &
Engineering
04/05/24 3
 What is project Portfolio Management?
 Project Portfolio Management (PPM) is NOT Project
Management
 Project Portfolio Management is a significant advance
over traditional PM methods, (which focuses primarily
on project execution).
 What are we trying to fix?
PPM addresses a common problem where scarce
resources (money, people, facilities) are allocated to
the wrong projects.

04/05/24 4
 What is project Portfolio Management?
 PPM, therefore, goes beyond the art of "managing
projects right" and focuses on "doing the right
projects".
 The objective of PPM is to create the mix of
projects most likely to support the achievement of
the organization's goals, aligned with the preferred
strategies, and within the organization's resource
(people and funding) constraints.

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 Symptoms calling for PPM

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 Project Portfolio Life Span
 Project Portfolio Life Span (PPLS) consists of the
following phased components:
 1.Identification of needs and opportunities
 2.Selection of best combinations of projects (the
portfolios)
 3.Planning and execution of the projects (project
management)
 4.Product launch (acceptance and use of deliverables)
 5. Realization of benefits
04/05/24 7
 Organizing for PPM
 Organizing for PPM Bridges the Gap between
Projects Management(PM) and Operations
Management (OP)
 PM: Schedule/Time, Project Cost, Performance,
Stakeholder Satisfaction, Scope/Change Control
 OP: Objectives, Goals, Strategies, Project Selection
& Mix, Cash Flow, ROI
Different people, different goals, different
rewards, different languages

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 Organizing for PPM
 Key involved parties (in addition to the PMO) are
senior managers or their designees
 May include CEO, COO, CFO, CIO, Strategic
Planners, VP-Operations, etc.
 The Challenge: How do we get these different
disciplines involved and on the same track?
 And … How do we communicate with them?

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 Organizing for PPM
 Calls for establishment of a PPM Governance
Council, with representatives of aforementioned
management areas.
 Governance Council works in conjunction with
(and is supported by) the Project Management
Office (PMO).
 Decisions (project selection & de-selection) are
made by the Governance Council

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PPM Challenges

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Benefits of PPM

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 PPM Limitation
Adds another layer of bureaucracy to organizations
Difficult to perform in environments marked by frequent change
Tendency to rely too heavily on PPM tools / software for decisions
 May cause conflict, confusion and stress
(eg. due to shifting priorities and resources)
 Could require a “cultural change” in the organisation (overcoming
resistance by some managers and getting sustained commitment by
senior management)
Good project selection requires large amounts of quality information
which is often not always available at the beginning of pre-selection
stage
Cannot be effective without well-documented project plans, accurate
estimates of resource requirements and resources consumed
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 LECTURE-
LECTURE-

Cost-benefit
Cost-benefit Evaluation
Evaluation Technology
Technology

Faculty: Rajanish Jain

Department of Computer Science &
Engineering
04/05/24 14
 PROJECT EVALUATION
Project evaluation is normally carried out in step 0 of stepwise Project
Planning
Project evaluation is a step by step process of collecting, recording and
organizing information about

Project results
short - term outputs (immediate results of activities or project deliverables)
Long – term outputs (changes in behavior , practice or policy resulting from the
result.

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 COST BENEFIT ANALYSIS
 It is one of the important and common way of carrying “economic
assessment” of a proposed information system.
This is done by comparing the expected costs of development and
operation of the system with its benefits.
So it takes an account:
Expected cost of development of system
Expected cost of operation of system
Benefits obtained
Assessment is based on:
Whether the estimated costs are executed by the estimated income.
And by other benefits
For achieving benefit where there is scarce resources, projects will be
prioritized and resource are allocated effectively.
The standard way of evaluating economic benefits of any project is
done by “cost benefit analysis” 16
 COST BENEFIT ANALYSIS
Cost benefit analysis comprises of two steps:

Step-1: identifying and estimating all of the costs and benefits of carrying
out the project.
-It includes
-Development cost of system.
-Operating cost of system.
-Benefits obtained by system
-When new system is developed by the proposed system, then
new system should reflect the above three as same as proposed
system.
Example: Sales order processing system which gives benefit
due to use of new system.
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 COST BENEFIT ANALYSIS
Step-2: expressing these costs and benefits in common units.
-Calculates net benefit.
-Net benefit = total benefit - total cost.
-cost should be expressed in monetary terms.

Three types of cost :

Development costs: includes salary and other employment cost of staff
involved.
Setup costs : includes the cost of implementation of system such as
hardware, and also file conversion, recruitment and staff training.
Operational cost : cost require to operate system, after it is installed.
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 COST BENEFIT ANALYSIS
Three categories of benefits:
1)Direct benefits : directly obtained benefit by making use of/operating
the system.
Example: reduction of salary bills, through the introduction of a new ,
computerized system.
2) Assessable indirect benefits : these benefits are obtained due to
updation / upgrading the performance of current system. It is also
referred as “secondary benefits”.
Example: “use of user – friendly screen”, which promotes reduction in
errors, thus increases the benefit.
3) Intangible benefits: these benefits are longer term, difficult to quantify.
It is also referred as “indirect benefits”.
Example: enhanced job interest leads reduction of staff turnover, in turn
leads lower recruitment costs. 19
 CASH FLOW FORCASTING
It estimate overall cost and benefits of a product with respect to time
-ive cashflow during development stage.
+ive cashflow during operating life.
During development stage
Staff wages
Borrowing money from bank
 Paying interest to bank
Payment of Salaries
Amount spent for installation, buying h/w and s/w
Income is expected by 2 ways.
Payment on completion
Stage payment 20
 Cost Benefit Evaluation Techniques
It consider
othe timing of the costs and benefits
othe benefits relative to the size of the investment

Common method for comparing projects on the basic of their cash flow
forecasting.

1)Net profit
2)Payback Period
3)Return on investment (ROI)
4)Net present Value (NPV)
5)Internal rate of return (IRR)

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 1. Net Profit
calculated by subtracting a company's total expenses from total
income.
showing what the company has earned (or lost) in a given period of
time (usually one year).
also called net income or net earnings .

Net profit=Total Income-Total Cost

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1. Net Profit …

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1. Net Profit …

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 2. Pay Back Period
The payback period is the time taken to recover the initial investment.
or
is the length of time required for cumulative incoming returns to equal
the cumulative costs of an investment

Advantages
simple and easy to calculate.
It is also a seriously flawed method of evaluating investments

Disadvantages
It attaches no value to cash flows after the end of the payback period.
It makes no adjustments for risk.
It is not directly related to wealth maximization as NPV is.
It ignores the time value of money .
The “cut off” period is arbitrary. 25
2. Pay Back Period..

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 Pay back period
This is the time it takes to start generating a surplus of
income over outgoings. What would it be below?
Year Cash-flow Accumulated
0 -100,000 -100,000
1 10,000 -90,000
2 10,000 -80,000
3 10,000 -70,000
4 20,000 -50,000
5 100,000 50,000
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 Pay Back Period
Payback Period :
Project1 = 10,000+10,000+10,000+20,000+1,00,000 =1,50,000
Project 2= 2,00,000+2,00,000+2,00,000+2,00,000+3,00,000 =11,000,00
Project 3= 30,000+30,000+30,000+30,000 + 75,000 =1,95,000

It ignores any benefits that occur after the payback period and, therefore,
does not measure profitability.
It ignores the time value of money.

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 3. Return on Investment
It provides a way of comparing the net profitability to the investment
required.
Or
A performance measure used to evaluate the efficiency of an investment or
to compare the efficiency of a number of different investments
Disadvantages:
It takes no account of the timing of the cash flows.
Rate of returns bears no relationship to the interest rates offered or
changed by bank.

29
 Return on investment (ROI)
ROI = Average annual profit X 100
Total investment
In the previous example
• average annual profit
= 50,000/5
= 10,000
• ROI = 10,000/100,000 X 100
= 10%
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• Calculate ROI for project 1.
Ans: Total investment =1,00,000
Net Profit = 50,000
Total no. of year = 5

Average annual profit=50,000/5=10,000 Rs

ROI= (10,000/1,00,000) *100 = 10%
 4. Net Present Value (NPV)
Discounted Cash Flow (DCF) is a cash flow summary adjusted to reflect the
time value of money. DCF can be an important factor when evaluating or
comparing investments, proposed actions, or purchases. Other things being
equal, the action or investment with the larger DCF is the better decision.
When discounted cash flow events in a cash flow stream are added together,
the result is called the Net Present Value (NPV).
When the analysis concerns a series of cash inflows or outflows coming at
different future times, the series is called a cash flow stream. Each future cash
flow has its own value today (its own present value). The sum of these present
values is the Net Present Value for the cash flow stream.
The size of the discounting effect depends on two things: the amount of time
between now and each future payment (the number of discounting periods)
and an interest rate called the Discount Rate.
32
The example shows that:
As the number of discounting periods between now and the cash arrival
increases, the present value decreases.
As the discount rate (interest rate) in the present value calculations
increases, the present value decreases
.
 Discount factor
Discount factor = 1/(1+r)t
r is the interest rate (e.g. 10% is 0.10)
t is the number of years

In the case of 10% rate and one year

Discount factor = 1/(1+0.10) = 0.9091
In the case of 10% rate and two years
Discount factor = 1/(1.10 x 1.10) =0.8294

34
 Applying discount factors
Year Cash-flow Discount factor(discount Discounted cash flow
rate 10%)

0 -100,000 1.0000 -100,000

1 10,000 0.9091 9,091
2 10,000 0.8264 8,264
3 10,000 0.7513 7,513
4 20,000 0.6830 13,660
5 100,000 0.6209 62,090
NPV 618

The figure of RM618 means that RM Click618

for more would be made than if the
money were simply invested at 10%. An NPV of RM0 would be the same
amount of profit would be generated as investing at 10%. 34 34
 Example: Comparing Competing Investments with NPV.
Consider two competing investments in computer equipment. Each calls for an initial
cash outlay of $100, and each returns a total a $200 over the next 5 years making net
gain of $100. But the timing of the returns is different, as shown in the table below
(Case A and Case B), and therefore the present value of each years return is different.
The sum of each investments present values is called the Discounted Cash flow (DCF)
or Net Present Value (NPV). Using a 10% discount rate
CASE A CASE B
Discount
Timing Rate(10%) Net Cash Flow Present Net Cash Flow Present Value
Value
Now 0 1 – $100.00 – $100.00 – $100.00 – $100.00
Year 1 0.9091 $60.00 $54.54 $20.00 $18.18
Year 2 0.8264 $60.00 $49.59 $20.00 $16.52
Year 3 0.7513 $40.00 $30.05 $40.00 $30.05
Year 4 0.6830 $20.00 $13.70 $60.00 $41.10
Year 5 0.6209 $20.00 $12.42 $60.00 $37.27

Total Net CFA= $100.00 NPVA = $60.30 Net CFB= $100.00 NPVB= $43.12
 5. Internal Rate of Return (IRR)
Discounted Cash Flow (DCF) is a cash flow summary adjusted to reflect the
time value of money. DCF can be an important factor when evaluating or
comparing investments, proposed actions, or purchases. Other things being
equal, the action or investment with the larger DCF is the better decision.
When discounted cash flow events in a cash flow stream are added together,
the result is called the Net Present Value (NPV).
When the analysis concerns a series of cash inflows or outflows coming at
different future times, the series is called a cash flow stream. Each future cash
flow has its own value today (its own present value). The sum of these present
values is the Net Present Value for the cash flow stream.
The size of the discounting effect depends on two things: the amount of time
between now and each future payment (the number of discounting periods)
and an interest rate called the Discount Rate.
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 5. Internal Rate of Return (IRR)
The IRR compares returns to costs by asking: "What is the
discount
• rate that would give the cash flow stream a net
present value of 0?"
CASE A CASE B
Discount
Timing Rate(10%) Net Cash Flow Present Net Cash Flow Present Value
Value
Now 0 1 – $100.00 – $100.00 – $100.00 – $100.00
Year 1 0.9091 $60.00 $54.54 $20.00 $18.18
Year 2 0.8264 $60.00 $49.59 $20.00 $16.52
Year 3 0.7513 $40.00 $30.05 $40.00 $30.05
Year 4 0.6830 $20.00 $13.70 $60.00 $41.10
Year 5 0.6209 $20.00 $12.42 $60.00 $37.27

Total Net CFA= $100.00 NPVA = $60.30 Net CFB= $100.00 NPVB= $43.12
IRR asks a different question of the same two cash flow streams. Instead of
proposing a discount rate and finding the NPV of each stream (as with NPV),
IRR starts with the net cash flow streams and finds the interest rate
(discount rate) that produces an NPV of zero for each. The easiest way to
see how this solution is found is with a graphical summary:
oThese curves are based on the Case A and Case B cash flow figures in the table
above. Here, however, we have used nine different interest rates, including 0.0
and 0.10, on up through 0.80.
oAs you would expect, as the interest rate used for calculating NPV of the cash
flow stream increases, the resulting NPV decreases.
oFor Case A, an interest rate of 0.38 produces NPV = 0, whereas Case B NPV
arrives at 0 with an interest rate of 0.22.

Case A therefore has an IRR of 38%, Case B an IRR of 22%.

IRR as the decision criterion, the one with the higher IRR is the better
choice.
 LECTURE-
LECTURE-

Risk
Risk Evaluation
Evaluation

Faculty: K P Singh
Department of Computer Science &
Engineering
04/05/24 42
 Risk Evaluation
• Risk evaluation is meant to decide whether to proceed with the project or
not, and whether the project is meeting its objectives.
Risk Occurs:
•When the project exceed its original specification
•Deviations from achieving it objectives and so on.

Risk. Identification and ranking

Risk and Net Present Value
Cost benefit Analysis
Risk profile analysis
Decision trees
46
 Risk Identification and ranking
Identify the risk and give priority.
• Could draw up draw a project risk matrix for each project to assess risks
• Project risk matrix used to identify and rank the risk of the project

• Example of a project risk matrix

47
 Risk and Net Present Value
• For riskier projects could use higher discount rates to calculate NPV

Ex: Can add 2% for a Safe project or 5 % for a fairly risky one.
•The Project may be categorized as high, medium or low risk using a scoring
method and risk premium designed for each category.

47
 Cost benefit Analysis
More sophisticated approach to consider each possible outcome and
estimate the probability of it’s occuring and corresponding value of
outcome.

47
 Risk profile analysis
It compares the sensitivity of each factor of project profiles by varying
parameters which affect the project cost benefits.
Eg: Vary the original estimate This make use of “risk profiles” using
sensitivity analysis.
mates of risk plus or minus 5% and re-calculate the expected cost
benefits.
By studying the results of a sensitivity analysis we can identify those
factors that are most important to the success of the project.
 We then need to decide whether we can exercise greater control over
them or otherwise mitigate their effects. If neither is the case, then we must
live with the risk or abandon the project.
Risk profile analysis
Projects may be compared as in Figure , which compares three projects
with the same expected profitability. Project A is unlikely to depart far from
this expected value compared to project B, which exhibits a larger variance.
Both of these have symmetric profiles, which contrast with project C. Project
C has a skewed distribution, which indicates that although it is unlikely ever to
be much more profitable than expected, it is quite likely to be far worse.

04/05/24 49
 Decision Trees
• Identify over risky projects
• Choose best from risk
• Take suitable course of action
Decision tree of analysis risks helps us to
 Extend the existing system increase sales improve the management
information

Replace the existing system

Not replacing system leads in loss Replace it immediately will be expensive.
Decision trees
• The expected value of Extending
system=
(0.8*75,000)- (0.2*100,000)=40,000 Rs.

• The expected value of Replacing

system=
(0.2*250,000)- (0.8*50,000)=10,000 Rs.

• Therefore, organization should choose

the option of extending the existing
system.

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 NPV (Rs)

Ex 1: Further extension
0.5
-100,000

80,000
Extend
0.5 No extension

D2 Further extension
0.5 200,000
0.1
Extend Replace
0.5
No extension -30,000
0.9
D1 Further extension
Replace 0.1
-100,000

0.9
No extension 75,000
Replace

0.2
Further extension

0.8 250,000
No extension -50,000
 • A project may fail not through poor management but
because it should never have been started
• A project may make a profit, but it may be possible to do
something else that makes even more profit
• A real problem is that it is often not possible to express
benefits in accurate financial terms
• Projects with the highest potential returns are often the
most risky

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 LECTURE-
LECTURE-

Stepwise
Stepwise Project
Project Planning
Planning

Faculty: Rajanish Jain

Department of Computer Science &
Engineering
04/05/24 54
 Introduction to Project Planning
3  Project planning
 guides the execution of the project, coordinating the activities.
 facilitates better communication between the project Stakeholders.
 provides a means of tracking and monitoring the progress.
 provides a detailed documentation regarding planning decisions .
 Project planning is of significant importance for
the success of the project.
 Careful planning helps prevent costly mistakes.
 Good planning is the key to meet the project objectives within defined
time and budget.
04/05/24 56
 Step 0: Select Project
• Called Step 0 because it is actually outside the main project
planning steps.
• While feasibility study suggests that there is a business case
for the project, it would still need to be established that it
should have priority over other projects.
• This evaluation can be part of project portfolio management.

04/05/24 57
 Step 1: Identify Project Scope and Objectives
• 1.1. Identify objectives and practical measures of the effectiveness in meeting
those objectives
How do we know we are successful?
• 1.2: Establish a project authority
Who is the boss?
• 1.3. Stakeholder analysis – identify all stakeholders in the project and their
interests
Who does what?
• 1.4. Modify objectives in the light of stakeholder analysis
What shall we do for the commitment of stakeholders to the project?
• 1.5. Establish methods of communication with all parties
– How do we stay in touch and informed?

04/05/24 58
• Step 2 : Identify project infrastructure
Step 2.2 : Identify installation standard and procedures
Step 2.3 : Identify project team organization
• Step 3 : Analyse project characteristics
Step 3.1 : Distinguish the project as either objectives- or product-driven.
Step 3.2 : Analyse other project characteristics
Step 3.3 : Identify high-level project risks
Step 3.4 : Take into account use requirements concerning implementation
Step 3.5 : Select development methodology and life-cycle approach
Step 3.6 : Review overall resource estimates

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 Step 4: Identify Project Products & Activities
 4.1. Identify and describe project products (or deliverables)

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 4.2. Document generic product flows

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 4.3. Recognize product instances
 4.4. Produce ideal activity network

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 4.5. Modify the ideal to take into account need for stages
and checkpoints
• Assumption of ideal activity network:
 an activity will start as soon as the preceding ones upon which it
depends have been completed.
• But we need to divide the project into stages and introducing
checkpoint activities
 to check that products of preceding activities are compatible.

• Milestones represent the completion of important stages of the

project of which managers would want to take particular note.
 Checkpoint activities are often useful milestones.

04/05/24 63
 Step 5: Estimate Effort for Each Activity
17  5.1. Carry out bottom-up estimates
Estimates for each activity is produced about
 staff effort required
 probable elapsed time
 non-staff resources

Elapsed time is different from effort!

 Effort is the amount of work that needs to be done.
 Elapsed time is the time between the start and end of a
task.
 5.2. Revise plan to create controllable activities
 breakup very long activities into a series of smaller ones
 Step 6: Identify Activity Risks
18  6.1. Identify and quantify activity-based risks
Look at each activity in turn and assess the risks to its successful
outcome.
The damage that each risk could cause and the likelyhood of its
occurrence must be evaluated.
 6.2. Plan risk reduction and contingency measures where appropriate
Contingency plans specify action that is to be taken if a risk
materializes.
 6.3. Adjust overall plans and estimates to take account of risks
 Step 7: Allocate Resources
19  7.1. Identify and allocate resources
 7.2. Revise plans and estimates to take into account resource
constraints
 Step 8: Review/Publicize Plan
20  8.1. Review quality aspects of the project plan
Each task should have quality criteria.
These quality checks have to be passed before the activity can be
“signed off” as completed.
 8.2. Document plans and obtain agreement
Plans should be carefully documented.
All the parties to the project must understand and agree on the plan.
 Steps 9/10: Execute Plan/Lower Levels of Planning
21
 Once the project is under way, plans will need to be drawn up in greater
detail for each activity as it becomes due.
 Detailed planning of the later stages will need to be delayed because
more information will be available nearer the start of the stage.
 It is necessary to make provisional plans for the more distant tasks.