Course MBA – 2nd Semester

Subject Project Management

Assignment MB0049 – Set1

Q.1 Comment on the following

a. Importance of DMAIS in project management cycle

The projectised mantras of production management can be broadly identified as -

Define Measure, Analyze, Improve, Standardize (DMAIS). These projectised mantras
help in identifying, evaluating, and selecting the right improvement solutions for
managing a project. The mantras also help in identifying the critical issues thus assisting
the organization to adapt to the changes introduced through the implementation of
different solutions.

The phases associated with each projectised mantra of production management are:

1. Define: benchmark, customer requirement, process flow map, quality function

deployment, project management plan
2. Measure: data collection, defect metrics, sampling
3. Analysis: cause and effect, failure modes and effect analysis, decision and risk
analysis,root cause analysis, reliability analysis
4. Improve: design of experiments, modeling, and robust design
5. Standardize: control charts, time series, procedural adherence, performance
management, preventive activities displays the various phases of DMIAS.

b. Knowledge areas of project management

There are nine knowledge areas in Project Management:

1. Project Integration Management

2. Project Scope Management
3. Project Time Management
4. Project Cost Management
5. Project Quality Management
6. Project Human Resource Management
7. Project Communications Management
 8. Project Risk Management
9. Project Procurement Management
Each of the nine knowledge areas contains the processes that need to be accomplished
within its discipline in order to achieve an effective project management program. Each
of these processes also falls into one of the five basic process groups, creating a matrix
structure such that every process can be related to one knowledge area and one process
group.

Q.2 Write few words on:

a. Project Characteristics

The word PROJECT comes from the Latin word PROJECTUM from the Latin verb
PROICERE; which means “to throw something forwards” which in turn comes from PRO-
, which denotes something that precedes the action of the next part of the word in time
and ICERE, “to throw”. The word PROJECT thus actually originally meant “something
that comes before anything else happens”.

A project in business and science is a temporary endeavor undertaken to create a

unique product, service, or result. Basically, it is planned to achieve a particular aim. The
aim of a project is to attain its objective and then terminate. Some of the reasons to
start a project can be:

• A customer request or market demand

• An organizational need
• A customer request
• A technological advance
• A legal requirement

Projects and operations differ primarily in that operations are ongoing and repetitive,
while projects are temporary and unique. Generally, a project is a means of organizing
some activities that cannot be addressed within the normal operational limits.

Project characteristics:
• It is temporary – temporary means that every project has a definite beginning
and a definite end. Project always has a definitive time frame.
• A project creates unique deliverables, which are products, services, or results.
• A project creates a capability to perform a service.
• Project is always developed in steps and continuing by increments – Progressive
Elaboration.
b. WBS
A work breakdown structure (WBS) in project management and systems engineering, is
a tool used to define and group a project's discrete work elements in a way that helps
organize and define the total work scope of the project..

A work breakdown structure element may be a product, data, a service, or any

combination. A WBS also provides the necessary framework for detailed cost estimating
and control along with providing guidance for schedule development and control.
Additionally the WBS is a dynamic tool and can be revised and updated as needed by
the project manager

The Work Breakdown Structure is a tree structure, which shows a subdivision of effort
required to achieve an objective; for example aprogram, project, and contract. In a
project or contract, the WBS is developed by starting with the end objective and
successively subdividing it into manageable components in terms of size, duration, and
responsibility (e.g., systems, subsystems, components, tasks, subtasks, and work
packages) which include all steps necessary to achieve the objective.

The Work Breakdown Structure provides a common framework for the natural
development of the overall planning and control of a contract and is the basis for
dividing work into definable increments from which the statement of work can be
developed and technical, schedule, cost, and labor hour reporting can be established.

A work breakdown structure permits summing of subordinate costs for tasks, materials,
etc., into their successively higher level “parent” tasks, materials, etc. For each element
of the work breakdown structure, a description of the task to be performed is
generated. [3] This technique (sometimes called a System Breakdown Structure ) is used
to define and organize the total scope of a project.
The WBS is organised around the primary products of the project (or planned outcomes)
instead of the work needed to produce the products (planned actions). Since the
planned outcomes are the desired ends of the project, they form a relatively stable set
of categories in which the costs of the planned actions needed to achieve them can be
collected. A well-designed WBS makes it easy to assign each project activity to one and
only one terminal element of the WBS. In addition to its function in cost accounting, the
WBS also helps map requirements from one level of system specification to another, for
example a requirements cross reference matrix mapping functional requirements to
high level or low level design documents.
c. PMIS

Project Management Information System (PMIS) are system tools and techniques used
in project management to deliver information. Project managers use the techniques and
tools to collect, combine and distribute information through electronic and manual
means. Project Management Information System (PMIS) is used by upper and lower
management to communicate with each other.

Project Management Information System (PMIS) help plan, execute and close
project management goals. During the planning process, project managers use PMIS
for budget framework such as estimating costs. The Project Management Information
System is also used to create a specific schedule and define the scope baseline. At
the execution of the project management goals, the project management team collects
information into one database. The PMIS is used to compare the baseline with the
actual accomplishment of each activity, manage materials, collect financial data, and
keep a record for reporting purposes. During the close of the project, the Project
Management Information System is used to review the goals to check if the tasks were
accomplished. Then, it is used to create a final report of the project close. To conclude,
the project management information system (PMIS) is used to plan schedules, budget
and execute work to be accomplished in project management.

d. Project Management strategies-Internal & external

Effective Internal Project Management Strategies

Projects fail for many internal reasons, some of them technical, some of them
managerial. However, even the technical failures can often be traced back to a failure
on the part of the project's executive management to recognize and deal with these
inherent managerial risks. On the other hand, probably the majority of apparently
successful projects do not reflect their optimum potential either.

As a matter of project experience, a number of prerequisites have been identified with

the successful project. While these prerequisites do not necessarily guarantee success of
future projects, their absence may well lead to sub-optimal success, if not outright
failure. The Project's Executive has a vital role to play in achieving project success and
should therefore insist on the following:

Executive Support - The Executive must clearly demonstrate support for the project
management concept by active sponsorship and control.

External Authority - The project manager must be seen as the authoritative agent in
dealing with all parties, and be the responsible and single formal contact with them.
Internal Authority - The project manager must have the necessary managerial authority
within his organization to ensure response to his requirements.

Commitment Authority - The project manager must have the responsibility and
authority to control the commitment of resources, including funds, within prescribed
limits. The results of these decisions must be both accountable and visible.

Project Manager Involved in All Major Decisions - No major technical, cost, schedule, or
performance decisions should be made without the project manager's participation.

Competence - The project manager and his team members must be competent. Other
functional personnel assigned to the project must also be competent.

Project Team - The project manager should have a say in the assembly of his project
team, which will help him to obtain their personal commitment, support and required
quality of service.

Management Information Systems - Effective project management information and

control systems must be in place.

Effective External Project Management Strategies

Prerequisites for avoiding internal project failure, or at least sub-optimal results, were
discussed earlier. However, it has also been noted earlier that external conditions and
events also represent uncertainty and risk to the successful accomplishment of the
project. These conditions have been linked to the external stakeholders of the project.
Therefore, it is essential to develop a sound stakeholder environment.

Developing a Sound Stakeholder Environment

Just as the means of influencing the project's cultural environment, as described above,
was one of developing the right attitude, so it is with developing a sound stakeholder
environment. Perhaps this attitude is best reflected by adopting a mind set that reverses
the traditional organization chart hierarchy. In other words, place the project
stakeholders at the top of the chart, followed by the front-line project team members,
and on down to the project manager at the bottom. Perhaps the project team will then
be better visualized as a truly service organization, designed to serve the best interests
of a successful project outcome, both perceived and in reality.

Some suggested steps in this process include:

• Learn how to understand the role of the various stakeholders, and how this
information may be used as an opportunity to improve both the perception and
reception of the project
 • Identify the real nature of each stakeholder group's business and their
consequent interest in the project
• Understand their behavior and motivation
• Assess how they may react to various approaches
• Pinpoint the characteristics of the stakeholders' environment and develop
appropriate responses to facilitate a good relationship
• Learn project management's role in responding to the stakeholders drive behind
the project
• Determine the key areas which will have the most impact on the successful
reception of the project
• Remember always that even a minor stakeholder group may discover the "fatal
flaw" in the project and which could bring the project to a standstill!

Q.3 What are the various SCMo soft wares available in project management? Explain
each in brief.

The process documentation system is intranet based to provide immediate access to

current, up-to-date process documentation. The system allows users to navigate
through graphical structures to relevant documentation and processes which were
created with the ARIS-Toolset.

The content of the process documentation system includes the area supply chain
management from the Odette Supply Chain Management Group. The system includes
graphical process documentation, in the form of process chains, as well as the entire
range of documentation related to the processes. The Process Documentation System
gives, according to its objectives, an overview and a detailed view of the relevant
processes for SCMo.

The entry point in the documentations system is the model “Process Overview SCMo”.
This model is the starting point for the navigation to other models. The navigation
between models is done via the assignment symbol. The assignment symbol of a
function / process Interface indicates that there is a link to another model. The linked /
assigned models can be opened by double-clicking on the assignment symbol.
This can be classified into two different navigations as shown in figure.

a) Vertical Navigation: The vertical navigation is the navigation on different levels.

Starting on the work package level and going downwards into more detail, the first
models of processes are found on the sub-process level.

In the model “Process Overview SCMo” those processes are assigned to the functions on
Level 2. In the models there can be assignments for some functions, e.g. for a Function
Allocation Diagram or a sub-process that describes that function. These two examples
are currently the models on the lowest level.

b) Horizontal Navigation: The horizontal navigation is on the same level. Some processes
have a link to other processes, which can be at the start or end or even in the process
itself, when another process is imbedded in the process. Those links are represented by
Process Interfaces.

Microsoft has a team project management solution that enables project managers and
their teams to collaborate on projects. The Microsoft Project 2002 products in these
solutions are:

1. Microsoft Project Standard 2002

2. Microsoft Project Server 2002

3. Microsoft Project Server Client Access License (CAL) 2002.

Support Software

Having learnt the basics of application software, you would have a fair idea of how and
to what extent project management processes could be automated. However, the
challenge of “making things work” remains unchanged. While software vendors are
confident of “making it work”, two yawning gaps still remain:

1. Business processes which are not covered in such software

2. Integration of multi vendor supported software applications

The enterprise is normally in a dilemma – whether to look at the same vendors to

support such customisation or not. This normally works out too expensive for their
comfort or within their tight budgets.

Several software vendors have seized the opportunity with offerings that substantially
fill these gaps effectively at a fraction of the costs quoted by the major vendors. The
other carrot which these vendors offer is a unilateral transfer of the facility to customise
themselves which is seen as a huge advantage. The various support software that may
be used for managing projects are:

1. ARROW

2. FEDORA

3. VITAL

4. PILIN

5. MS EXCHANGE SERVER 2003

The ARROW Project

It is a consortia of institutional repository solution, combining open source and

proprietary Software .Arrow is preferred support software because it:

· Provides a platform for promoting research output in the ARROW context

· Safeguards digital information

· Gathers an institution’s research output into one place

· Provides consistent ways of finding similar objects

· Allows information to be preserved over the long term

· Allows information from many repositories to be gathered and searched in one step

· Enables resources to be shared, while respecting access constraints

· Enables effective communication and collaboration between researchers

The vision of project ARROW: “The ARROW project will identify and test software or
solutions to support best practice institutional digital repositories comprising e-prints,
digital theses and electronic publishing.” ARROW project wanted to be a solution for
storing any digital output. Their initial focus was on print equivalents such as thesis and
journal articles among others. It provided solution that could offer on-going technical
support and development past the end of the funding period of the project.

Fedora

ARROW wanted a robust, well architected underlying platform and a flexible object-
oriented data model to be able to have persistent identifiers down to the level of
individual data streams. It accommodates the content model to be able to be version
independent.
Since the beginning of the project ARROW has worked actively and closely with Fedora
and the Fedora Community. The ARROW project’s Technical Architect is a member of
Fedora Advisory Board and sits on Fedora Development Group.

This association is reinforced by VTLS Inc. VTLS President is a member of Fedora

Advisory Board and VITAL Lead Developer sits on Fedora Development Group

VITAL

VITAL refers to ARROW specified software created and fully supported by VTLS Inc. built
on top of Fedora. It currently provides:

1. VITAL Manager

2. VITAL Portal

3. VITAL Access Portal

4. VALET – Web Self-Submission Tool

5. Batch Loader Tool

6. Handles Server (CNRI)

7. Google Indexing and Exposure

8. SRU / SRW Support

9. VITAL architecture overview

VITAL is part of creative development of ARROW institutional repositories. VITAL has the
following features:

1. Inclusion of multimedia and creative works produced in Australian universities

2. Limited exposure nationally or internationally

3. Addition of annotation capability

4. Inclusion of datasets and other research output not easily provided in any other
publishing channel

5. Being developed in conjunction with the DART (ARCHER) Project

6. Exploration of the research-teaching nexus tools that will allow value added services
for repositories

7. Integration with or development of new tools that will allow value added services for
repositories (for instance the creation of e-portfolios or CVs of research output of
individual academics)

PILIN – Persistent Identifiers and Linking Infrastructure

There has been a growing realisation that sustainable identifier infrastructure is

required to deal with the vast amount of digital assets being produced and stored within
universities.

PILIN is a particular challenge for e-research communities where massive amounts of

data are being generated without any means of managing this data over any length of
time. The broad objectives are to:

1. Support adoption and use of persistent identifiers and shared persistent identifier
management services by the project stakeholders

2. Plan for a sustainable, shared identifier management infrastructure that enables

persistence of identifiers and associated services over archival lengths of time
3. Deploy a Worldwide Site Consolidation Solution for Exchange Server 2003 at
Microsoft

4. Add Picture

5. Use Microsoft Exchange Server 2003 to consolidate more than 70 messaging sites
worldwide into seven physical locations

In this context, let us look at Microsoft Model Enterprises (MME).

Microsoft Model Enterprises (MME)

Objectives

· Maximising the number of management tasks performed centrally

· Decreasing the number of sites through the consolidation of the smaller locations into
a smaller number of RDCs

· Reducing the total number of infrastructure and application servers

· Standardising infrastructure and devices worldwide

Solution

· Consolidation of 75 tail sites into 6 regional data centers (RDCs) using local storage
area networks (SANs)

· Key Focus Areas

· Proactive, detailed monitoring and analysis of WAN bandwidth utilisation and latency

· Effective but flexible approach to project planning, scheduling, and cross-group

coordination

· Coordination and control of deployment of successive pre-release versions of Office

System 2003 (including Outlook 2003)

Business Benefits

· Four percent overall direct cost savings

· Key enabler of the Microsoft ME initiative which through fiscal year 2003 has produced
millions in overall consolidation savings including USE

IT Benefits

· Improved server utilisation

· Improved server management

· Strengthened security

· Increased reliability

Q.4 List the various steps for Risk management. Also explain GDM and its key
features.

Risk management may be classified and categorized as:

1. Risk assessment and identification The assessment and identification focuses on
numerating possible risks to the project. Methods that can aid risk identification include
checklists of possible risks, surveys, meetings and brainstorming and reviews of plans,
process and work products. The project manager can also use the process database to
get information about risks and risk management on similar projects.
2. Risk prioritization – focus on the highest risk. Prioritization requires analyzing the
possible effects of the risk event in case it actually occurs. This approach requires a
quantitative assessment of the risk probability and the risk consequences. For each risk
rate the probability of its happening as low, medium or high. If necessary, assign
probability values in the ranges given for each rating. For each risk, assess its impact on
the project as low, medium, high or very high. Rank the risk based on the probability.
Select the top few risk items for mitigation and tracking.
3. Risk Control: The main task is to identify the actions needed to minimize the risk
consequences, generally called risk mitigation steps. Refer to a list of commonly used
risk mitigation steps for various risks from the previous risk logs maintained by the PM
and select a suitable risk mitigation step. The risk mitigation step must be properly
executed by incorporating them into the project schedule. In addition to monitoring the
progress of the planned risk mitigation steps periodically revisit project. The results of
this review are reported in each milestone analysis report. To prepare this report, make
fresh risk analysis to determine whether the priorities have

Risk Analysis
The first step in risk analysis is to make each risk item more specific. Risks such as, “Lack
of Management buy in,” and “people might leave,” are a little ambiguous. In these cases
the group might decide to split the risk into smaller specific risks, such as, “manager
Jane decides that the project is not beneficial,” “Database expert might leave,” and
“Webmaster might get pulled off the project.” The next step is to set priorities and
determine where to focus risk mitigation efforts. Some of the identified risks are
unlikely to occur, and others might not be serious enough to worry about. During the
analysis, discuss with the team members, each risk item to understand how devastating
it would be if it did occur, and how likely it is to occur. For example, if you had a
risk of a key person leaving, you might decide that it would have a large impact on the
project, but that it is not very likely. In the process below, we have the group agree on
how likely it thinks each risk item is to occur,using a simple scale from 1 to 10 (where 1
is very unlikely and 10 is very likely). The group then rates how serious the impact would
be if the risk did occur, using a simple scale from 1 to 10 (where 1is little impact and 10
is very large). To use this numbering scheme, first pick out the items that rate 1 and 10,
respectively. Then rate the other items relative to these boundaries. To determine the
priority of each risk item, calculate the product of the two values, likelihood and impact.
This priority scheme helps push the big risks to the top of the
list, and the small risks to the bottom. It is a usual practice to analyze risk either by
sensitivity analysis or by probabilistic analysis. In sensitivity analysis a study is done to
analyse the changes in the variable values because of a change in one or more of the
decision criteria. In the probability analysis, the frequency of a particular event occurring
is determined, based on which it average weighted average value is calculated.

Each outcome of an event resulting in a risk situation in a risk analysis process is

expressed as a probability. Risk analysis can be performed by calculating the expected
value of each alternative and selecting the best alternative.
Ex: Now that the group has assigned a priority to each risk, it is ready to select the items
to mange. Some projects select a subset to take action upon, while others choose to
work on all of Project the items. To get started, you might select the top 3 risks, or the
top 20%, based on the priority calculation.
GDM –
The Global Delivery Model (GDM) is adopted by an Industry or Business such that it has
a capability to plan design, deliver and serve to any Customers or Clients Worldwide
with Speed, Accuracy, Economy and Reliability. The key Features of GDM are ·

Standardization
Modularization
Minimum Customization
Maximum Micro structure

Adoption of a Combination of the Greatest Common Multiple and the Least Common
Factor of a Large Mass of Microbial Components-

a) Standardization - Ingenious Design and Development of Components and

Features which are like to be accepted by 90% of Worldwide Customers. Global
Standards of Design focusing on highly standardized Methods and Processes of
manufacture or Development. Adopt Plug and socket Concepts with minimum
adaptable joints or Connections.

b) Modularization - Product or Solution split up into smallest possible individual

Identifiable Entities, with limited Individual Functioning Capability but powerful
and robust in Combination with other Modules.

c) Minimum Customization - Minimum Changes or Modifications to suit Individual

Customers.

d) Maximum micro structuring - Splitting of the Product Modules further into much
smaller entity identifiable more through characteristics rather than application
Features. Approach through Standardization of these Microbial Entities even
across Multiple Modules. Application of these Microbial Entities to rest within
multiple Projects or Products or even as add-ons suit belated Customer Needs.

Special Features of GDM

Some of the special features of GDM are ·

• Cuts across Geographical and Time Zone Barriers

• Unimaginable Speeds of Response and Introduction.
• Common Pool of Microbial Components
• Largely Independent of Skill Sets required at Delivery Stages
• Highly automated Processes
• Quality Assurance as a Concurrent rather than a Control Process
 • Near Shore Development, Manufacture and Delivery for better Logistics
• Mapping of Economical Zones rather than Geographic Zones
• Continuous Floating virtual Inventory to save Time and Efforts.
Q.5 Answer the two parts:
a. Importance of data management in project management-Comment.

The Role of Effective Data Management in the Success of Project Management

Data management consists of conducting activities which facilitate acquiring data,

processing it and distributing it. Acquisition of data is the primary function.

To be useful, data should have three important characteristics – timeliness, sufficiency

and relevancy. Management of acquisition lies in ensuring that these are satisfied
before they are stored for processing and decisions taken on the analysis.

There should be data about customers, suppliers, market conditions, new technology,
opportunities, human resources, economic activities, government regulations, political
upheavals, all of which affect the way you function. Most of the data go on changing
because the aforesaid sources have uncertainty inherent in them. So updating data is a
very important aspect of their management. Storing what is relevant in a form that is
available to concerned persons is also important. When a project is underway dataflow
from all members of the team will be flowing with the progress of activities. The data
may be about some shortfalls for which the member is seeking instructions. A project
manager will have to analyse them, discover further data from other sources and see
how he can use them and take decisions. Many times he will have to inform and seek
sanction from top management.
The management will have to study the impact on the overall organisational goals and
strategies and convey their decisions to the manager for implementation. For example,
Bill of Materials is a very important document in Project Management. It contains
details about all materials that go into the project at various stages and has to be
continuously updated as all members of the project depend upon it for providing
materials for their apportioned areas of execution. Since information is shared by all
members, there is an opportunity for utilising some of them when others do not need
them. To ascertain availability at some future point of time, information about orders
placed, backlogs, lead times are important for all the members. A proper MIS will take
care of all these aspects. ERP packages too help in integrating data from all sources and
present them to individual members in the way they require. When all these are done
efficiently the project will have no hold ups an assure success.

b. What is the significance of reviewing ROI?

ROI - Return on Investment (ROI) is the calculated benefit that an organization is

projected to receive in return for investing money (resources) in a project. Within the
context of the Review Process, the investment would be in an information system
development or enhancement project. ROI information is used to assess the status of
the business viability of the project at key checkpoints throughout the project’s lifecycle.
ROI may include the benefits associated with improved mission performance, reduced
cost, increased quality, speed, or flexibility, and increased customer and employee
satisfaction. ROI should reflect such risk factors as the project’s technical complexity,
the agency’s management capacity, the likelihood of cost overruns, and the
consequences of under or nonperformance. Where appropriate, ROI should reflect
actual returns observed through pilot projects and prototypes.

ROI should be quantified in terms of dollars and should include a calculation of the
breakeven point (BEP), which is the date when the investment begins to generate a
positive return. ROI should be recalculated at every major checkpoint of a project to se
if the BEP is still on schedule, based on project spending and accomplishments to date. If
the project is behind schedule or over budget, the BEP may move out in time; if the
project is ahead of schedule or under budget the BEP may occur earlier. In either case,
the information is important for decision making based on the value of the investment
throughout the project lifecycle. Any project that has developed a business case is
expected to refresh the ROI at each key project decision point (i.e., stage exit) or at least
yearly.
Exclusions

If the detailed data collection, calculation of benefits and costs, and capitalization data
from which Return on Investment (ROI) is derived was not required for a particular
project, then it may not be realistic or practical to require the retrofit calculation of ROI
once the project is added to the Review portfolio. In such a case, it is recommended that
a memorandum of record be developed as a substitute for ROI. The memorandum
should provide a brief history of the program, a description of the major benefits
realized to date with as much quantitative data as possible, and a summary of the
process used to identify and select system enhancements.

Some of the major benefits experienced by sites that installed the information system
that would be important to include in the memorandum are:

a) Decommissioning of mainframe computers

b) Reduction/redirection of labour
c) Elimination of redundant systems
d) Ability to more cost effectively upgrade all sites with one standard upgrade package.

In each case above, identify the specific site, systems, and labour involved in
determining the cited benefit. Identify any costs or dollar savings that are known or
have been estimated. The memorandum will be used as tool for responding to any
future audit inquiries on project ROI.

For the Project Management Review, it is recommended that the project leader replace
the text on the ROI document through -

1) a note stating which stage of its cycle the project is in;

(2) A bulleted list of the most important points from the memorandum of record; and

(3) a copy of the memorandum of record for the Review repository.

In subsequent Reviews of the information system, the ROI slide can be eliminated form
the package. There is one notable exception to this guidance. Any internal use software
project in the maintenance phase of its lifecycle that adds a new site or undertakes an
enhancement or technology refresh that reaches the cost threshold established by
Standard will need to satisfy capitalization requirements. It requires all agencies to
capitalize items acquired or developed for internal use if the expected service life is two
or more years and its cost meets or exceeds the agency’s threshold for internal use
software. The standard requires capitalization of direct and indirect costs, including
employee salaries and benefits for both Federal and Contractor employees who
materially participate in the Software project. Program managers are considered to be
the source of cost information for internal use software projects. If capitalization data is
collected for the project in the future, the project would be expected to calculate and
track its ROI.

Q.6 XYZ Company implements CMMI level-03. To make further changes it decides on
starting a new division in the organization. It decides to advance the existing project
management. What are the steps to be followed by the organization to drive project
management to a new horizon?

Capability Maturity Model Integration (CMMI) is a process improvement approach that

helps organizations improves their performance. CMMI can be used to guide process
improvement across a project, a division, or an entire organization.

CMMI in software engineering and organizational development is a process

improvement approach that provides organizations with the essential elements for
effective process improvement. CMMI is a trademark owned by Software Engineering
Institute of Carnegie Mellon University.

According to the Software Engineering Institute (SEI, 2008), CMMI helps "integrate
traditionally separate organizational functions, set process improvement goals and
priorities, provide guidance for quality processes, and provide a point of reference for
appraising current processes."[2]

CMMI currently addresses three areas of interest:

1. Product and service development — CMMI for Development (CMMI-DEV),

2. Service establishment, management, and delivery — CMMI for Services (CMMI-
SVC), and
3. Product and service acquisition — CMMI for Acquisition (CMMI-ACQ).

CMMI was developed by a group of experts from industry, government, and the
Software Engineering Institute (SEI) at Carnegie Mellon University. CMMI models
provide guidance for developing or improving processes that meet the business goals of
an organization. A CMMI model may also be used as a framework for appraising the
process maturity of the organization.[1]

CMMI originated in software engineering but has been highly generalised over the years
to embrace other areas of interest, such as the development of hardware products, the
delivery of all kinds of services, and the acquisition of products and services. The word
"software" does not appear in definitions of CMMI. This generalization of improvement
concepts makes CMMI extremely abstract. It is not as specific to software engineering as
its predecessor, the Software CMM.
CMMI was developed by the CMMI project, which aimed to improve the usability of
maturity models by integrating many different models into one framework. The project
consisted of members of industry, government and the Carnegie Mellon Software
Engineering Institute (SEI). The main sponsors included the Office of the Secretary of
Defense (OSD) and the National Defense Industrial Association.

CMMI is the successor of the capability maturity model (CMM) or software CMM. The
CMM was developed from 1987 until 1997. In 2002, CMMI Version 1.1 was released.
Version 1.2 followed in August 2006.

CMMI representation

CMMI exists in two representations: continuous and staged. The continuous

representation is designed to allow the user to focus on the specific processes that are
considered important for the organization's immediate business objectives, or those to
which the organization assigns a high degree of risk. The staged representation is
designed to provide a standard sequence of improvements, and can serve as a basis for
comparing the maturity of different projects and organizations. The staged
representation also provides for an easy migration from the SW-CMM to CMMI.

CMMI model framework

Depending on the CMMI constellation (acquisition, services, development) used, the

process areas it contains will vary. Key process areas are the areas that will be covered
by the organization's processes. The table below lists the process areas that are present
in all CMMI constellations. This collection of eight process areas is called the CMMI
Model Framework, or CMF.

Capability Maturity Model Integration (CMMI) Model Framework (CMF)

Maturity
Abbreviation Name Area
Level
REQM Requirements Management Engineering 2
PMC Project Monitoring and Control Project Management 2
PP Project Planning Project Management 2
CM Configuration Management Support 2
MA Measurement and Analysis Support 2
Process and Product Quality
PPQA Support 2
Assurance
Process
OPD Organizational Process Definition 3
Management
CAR Causal Analysis Support 5
Maturity Levels

There are Five maturity levels. However, maturity level ratings are awarded for levels 2
through 5.

Maturity Level 2 - Managed

• CM - Configuration Management
• MA - Measurement and Analysis
• PMC - Project Monitoring and Control
• PP - Project Planning
• PPQA - Process and Product Quality Assurance
• REQM - Requirements Management
• SAM - Supplier Agreement Management

Maturity Level 3 - Defined

• DAR - Decision Analysis and Resolution

• IPM - Integrated Project Management +IPPD
• OPD - Organizational Process Definition +IPPD
• OPF - Organizational Process Focus
• OT - Organizational Training
• PI - Product Integration
• RD - Requirements Development
• RSKM - Risk Management
• TS - Technical Solution
• VAL - Validation
• VER - Verification

Maturity Level 4 - Quantitatively Managed

• QPM - Quantitative Project Management

• OPP - Organizational Process Performance

Maturity Level 5 - Optimizing

• CAR - Causal Analysis and Resolution

• OID - Organizational Innovation and Deployment

CMMI models

CMMI best practices are published in documents called models, each of which
addresses a different area of interest. The current release of CMMI, version 1.2,
provides models for three areas of interest: development, acquisition, and services.
 • CMMI for Development (CMMI-DEV), v1.2 was released in August 2006. It
addresses product and service development processes.
• CMMI for Acquisition (CMMI-ACQ), v1.2 was released in November 2007. It
addresses supply chain management, acquisition, and outsourcing processes in
government and industry.
• CMMI for Services (CMMI-SVC), v1.2 was released in February 2009. It addresses
guidance for delivering services within an organization and to external
customers.
• CMMI Product Suite (includes Development, Acquisition, and Services), v1.3 is
expected to be released in 2010. CMMI Version 1.3—Plans for the Next Version

Regardless of which model an organization chooses, CMMI best practices should be

adapted by an organization according to its business objectives.

Appraisal

An organization cannot be certified in CMMI; instead, an organization is appraised.

Depending on the type of appraisal, the organization can be awarded a maturity level
rating (1-5) or a capability level achievement profile.

Many organizations find value in measuring their progress by conducting an appraisal.

Appraisals are typically conducted for one or more of the following reasons:

1. To determine how well the organization’s processes compare to CMMI best

practices, and to identify areas where improvement can be made
2. To inform external customers and suppliers of how well the organization’s
processes compare to CMMI best practices
3. To meet the contractual requirements of one or more customers

Appraisals of organizations using a CMMI model must conform to the requirements

defined in the Appraisal Requirements for CMMI (ARC) document. There are three
classes of appraisals, A, B and C, which focus on identifying improvement opportunities
and comparing the organization’s processes to CMMI best practices. Appraisal teams
use a CMMI model and ARC-conformant appraisal method to guide their evaluation of
the organization and their reporting of conclusions. The appraisal results can then be
used (e.g., by a process group) to plan improvements for the organization.

The Standard CMMI Appraisal Method for Process Improvement (SCAMPI) is an

appraisal method that meets all of the ARC requirements.

A class A appraisal is more formal and is the only one that can result in a level rating.
Results of an appraisal may be published (if the appraised organization approves) on the
CMMI Web site of the SEI: Published SCAMPI Appraisal Results. SCAMPI also supports
the conduct of ISO/IEC 15504, also known as SPICE (Software Process Improvement and
Capability Determination), assessments etc.

Achieving CMMI compliance

The traditional approach that organizations often adopt to achieve compliance with the
CMMI involves the establishment of an Engineering Process Group (EPG) and Process
Action Teams (PATs).This approach requires that members of the EPG and PATs be
trained in the CMMI, that an informal (SCAMPI C) appraisal be performed, and that
process areas be prioritized for improvement. More modern approaches that involve
the deployment of commercially available, CMMI-compliant processes, can significantly
reduce the time to achieve compliance. SEI has maintained statistics on the "time to
move up" for organizations adopting the earlier Software CMM and primarily using the
traditional approach.[6] These statistics indicate that, since 1987, the median times to
move from Level 1 to Level 2 is 23 months, and from Level 2 to Level 3 is an additional
20 months. These statistics have not been updated for the CMMI.

The Software Engineering Institute’s (SEI) Team Software Process methodology and the
Capability Maturity Modeling framework can be used to raise the maturity level.

Applications

The SEI published that 60 organizations measured increases of performance in the

categories of cost, schedule, productivity, quality and customer satisfaction.[7] The
median increase in performance varied between 14% (customer satisfaction) and 62%
(productivity). However, the CMMI model mostly deals with what processes should be
implemented, and not so much with how they can be implemented. These results do
not guarantee that applying CMMI will increase performance in every organization. A
small company with few resources may be less likely to benefit from CMMI; this view is
supported by the process maturity profile (page 10). Of the small organizations (<25
employees), 70.5% are assessed at level 2: Managed, while 52.8% of the organizations
with 1001–2000 employees are rated at the highest level (5: Optimizing).

Interestingly, Turner & Jain (2002) argue that although it is obvious there are large
differences between CMMI and agile methods, both approaches have much in common.
They believe neither way is the 'right' way to develop software, but that there are
phases in a project where one of the two is better suited. They suggest one should
combine the different fragments of the methods into a new hybrid method. Sutherland
et al. (2007) assert that a combination of Scrum and CMMI brings more adaptability and
predictability than either one alone. David J. Anderson (2005) gives hints on how to
interpret CMMI in an agile manner. Other viewpoints about using CMMI and Agile
development are available on the SEI Web site.
The combination of the project management technique earned value management
(EVM) with CMMI has been described (Solomon, 2002). To conclude with a similar use
of CMMI, Extreme Programming (XP), a software engineering method, has been
evaluated with CMM/CMMI (Nawrocki et al., 2002). For example, the XP requirements
management approach, which relies on oral communication, was evaluated as not
compliant with CMMI.

CMMI can be appraised using two different approaches: staged and continuous. The
staged approach yields appraisal results as one of five maturity levels. The continuous
approach yields one of six capability levels. The differences in these approaches are felt
only in the appraisal; the best practices are equivalent and result in equivalent process
improvement results
Course MBA – 2nd Semester

Subject Project Management

Assignment MB0049 – Set2

Q.1 Providing adequate resource is key to productivity-Comment.

Concept of PMO is gaining ground in Project Management because enterprises need to

optimize resources – especially knowledge and people – across many projects.
Economies are achieved and customer satisfaction gained resulting in more profits and
repeat contracts. The review of projects – their methodology and the important of
interpersonal relations will help in achieving the productivity of the personnel.
Productivity at the junior level can be assumed and controlled only if all other
supporting elements of business are well balanced. Higher productivity cannot be
expected if they are not motivated. Through one of the mail point is
Adequate availability of resources; otherwise frustration sets in and commitment is lost;

Key elements of a Productivity Improvement Program:

Obtain Upper Management Support. Without top management support, experience
shows a PIP likely will fail. The Chief Executive Officer should issue a clear,
comprehensive policy statement. The statement should be communicated to everyone
in the company. Top management also must be willing to allocate adequate resources
to permit success.
2. Create New Organizational Components. A Steering Committee to oversee the PIP
and Productivity Managers to implement it are essential. The Committee should be
staffed by top departmental executives with the responsibilities of goal setting,
guidance, advice, and general control. The Productivity Managers are responsible for
the day-to-day activities of measurement and analysis. The responsibilities of all
organizational components must be clear and well established.
3. Plan Systematically. Success doesn't just happen. Goals and objectives should be set,
problems targeted and rank ordered, reporting and monitoring requirements
developed, and feedback channels established.
4. Open Communications. Increasing productivity means changing the way things are
done. Desired changes must be communicated. Communication should flow up and
down the business organization. Through publications, meetings, and films, employees
must be told what is going on and how they will benefit.
5. Involve Employees. This is a very broad element encompassing the quality of work
life, worker motivation, training, worker attitudes, job enrichment, quality circles,
incentive systems and much more. Studies show a characteristic of successful, growing
businesses is that they develop a "corporate culture" where employees strongly identify
with and are an important part of company life. This sense of belonging is not easy to
engender. Through basic fairness, employee involvement, and equitable incentives, the
corporate culture and productivity both can grow.
6. Measure and Analyze. This is the technical key to success for a PIP. Productivity must
be defined, formulas and worksheets developed, sources of data identified, benchmark
studies performed, and personnel assigned. Measuring productivity can be a highly
complex task. The goal, however, is to keep it as simple as possible without distorting
and depreciating the data. Measurement is so critical to success, a more detailed
analysis is helpful.
Q.2 Compare the following:
a. Traditional Vs. Projectised Organization.
b. Bottom-up Vs. Top-down estimation

A. Traditional Vs. Projectised Organization.

Traditional organizations: These have the formal organisation structure, with

departments, functions, sections having an hierarchy of managers and their assistant.
All of them function on a continuous basis catering to a series of requirements issued by
the planning department. An assembly of various units of their production forms a
products and a variety of such products make up the business of the company. No one
particular member or a department or a team is responsible for the completion of any
particular product. Their creativity and innovation is particular respect of jobs. Most of
them do not get exposed to other areas of operations in the organisation. They will
become specialists and be insular.

Projectised organizations: These have teams comprising members who are responsible
for completing one completely deliverable product. They will have all the resources
required to do all jobs or operations to complete it. Most importantly, they have a time
schedule within which all the elements of the projects have to be completed. It has
been found that a sense of ‘ownership’ of the project motivates them for being creative,
cooperate among themselves to achieve high productivity.
Traditional Organisations Projectised Organisations
They have the formal organisation structure, They have teams comprising members
with departments, functions, sections having a who are responsible for completing one
hierarchy of managers and their assistants. entire deliverable product.
All of the managers function on a continuous The teams will have all the resources
basis catering to a series of requirements required to finish the jobs.
issued by the planning department.
An assembly of various units of their They have a time schedule within which
production forms a products and a variety of all the elements of the projects have to
such products make up the business of the be completed.
company.
No particular member or a department or a There is greater accountability among
team is responsible for the completion of any team members and everyone is
particular product. Their creativity and responsible for the delivery.
innovation is in particular respect of their jobs.
Most of the members do not get exposed to It is found that a sense of ‘ownership’
other areas of operations in the organisation. of the project motivates team members
They become specialists and insular. to be creative, cooperative among
them to achieve high productivity.

B. Bottom-up Vs. Top-down estimation

Estimation Approaches There are two types of estimation approaches:

Bottom up approach

The bottom up approach consists of the following

 Project manager first divides the product under development into major
modules

 Each module is subdivided into smaller units

 Project manager defines a standard for manufacturing and self-testing as

o Identify modules in the system and classify them as simple, medium or

complex.

o As much as possible, use either the provided standard definitions or

definitions from past projects
 o If a project specific baseline exists, get the average build effort for
simple/medium/complex (S/M/C) programs from the baseline.

o If a project specific baseline does not exist, use project type, technology,
language and other attributes to look for similar projects in process
database. Use data from these projects to define the build effort of
S/M/C program.

o If no similar project exist in the process database and no project specific

baseline exist refine the estimates based on project specific factors.

Top-Down Approach

The top down approach consists of the following

 Get the estimate of the total size of the product in function points

 Using the productivity data from the project specific capability baseline from the
general process capability baseline, or from similar projects, fix the productivity
level for the project

 Obtain the overall effort estimate from the productivity and size estimates. Use
effort distribution data from the process capability baselines or similar projects
to estimate the effort for the various phases. Refine the estimates taking project
specific factors into consideration.

Q.3 List out the macro issues in project management and explain each.

Macro issues in project management

Evolving Key Success Factors (KSF) Upfront: In order to provide complete stability to
fulfillment of goals, one needs to constantly evaluate from time to time , the
consideration of what will constitute the success of completing a project and assessing
its success before completion. The KSF should be evolved based on a basic consensus
document (BCD). KSF will also provide an input to effective exit strategy (EES). Exit here
does not mean exit from the project but from any of the drilled down elemental
activities which may prove to be hurdles rather than contributors. Broad level of KSF
should be available at the conceptual stage and should be firmed up and detailed out
during the planning stage. The easiest way would be for the team to evaluate each step
for chances of success on a scale of ten. KSF should be available to the management
duly approved by the project manager before execution and control stages. KSF rides
above normal consideration of time and cost – at the levels encompassing client
expectation and management perception – time and cost come into play as subservient
to these major goals.
Empowerment Title (ET): ET reflects the relative importance of members of the
organization at three levels:

 Team members empowered to work within limits of their respective allocated

responsibilities – the major change from bureaucratic systems is an expectation
from these members to innovate and contribute to time and cost.
 Group leaders are empowered additionally to actindependently towards client
expectation and are also vested with some limited financial powers.
 Managers are empowered further to act independently but to maintain a
scientific balance among time, cost, expectation and perception, apart from
being a virtual advisor to the top management.

Partnering Decision Making (PDM): PDM is a substitute to monitoring and control. A

senior with a better decision making process will work closely with the project managers
as well as members to plan what best can be done to manage the future better from
past experience. The key here is the active participation of members in the decision
making process. The ownership is distributed among all irrespective of levels – the term
equally should be a\voided here since ownership is not quantifiable. The right feeling of
ownership is important. This step is most difficult since junior members have to respond
and resist to being pushed through sheer innovation and performance – this is how
future leaders would emerge. The PDM process is made scientific through:

i. Earned value management system (EVMS)

ii. Budgeted cost of work scheduled (BCWS)
iii. Budgeted cost of work performed (BCWP)
iv. Actual cost of work performed (ACWP)

Management By Exception (MBE): “No news is good news” . If a member wants help he
or she locates a source and proposed to the manager only if such help is not accessible
for free. Similarly, a member should believe that a team leaders silence is a sign of
approval and should not provoke comments through excessive seeking of opinions. In
short leave people alone and let situation perform the demanding act. The bend limit of
MBE can be evolved depending on the sensitivity of the nature and size of the project.
MBE provides and facilitates better implementation of effectiveness of empowerment
titles .MBE is more important since organizations are moving toward multi skilled
functioning even at junior most levels.

Q.4 Describe the traits of a professional manager in details?

Traits of the professional manager:

The following traits enable a manager to be effective in his functioning. Endowed with
these it will be easy to be effective. The top management will look for these in a person
who they want to employ for project management.

 Leadership – These managers lead by exhibiting the characteristics of leadership.

They know what they should do, know why they are doing it, know how to do it
and have the courage and will to do it.They have the power of taking along with
them others.

 People Relationships - Any leader without followers cannot be successful. They

have excellent human relationship skills. The manager builds up his team based
on the core values of sincerity, objectivity and dedication. He ensures that his
subordinates get opportunities for growth based on performance. He makes
them a part of the decision making process, thus ensuring cooperation and
commitment during implementation. He delegates freely and supports them.

 Integrity - Highest levels of trust, fairness and honesty are expected while
dealing with people both within an outside the organisation. This includes the
customers, shareholders, dealers, employees, the government and society at
large. They ensure that functioning is clean. Their transactions will be
transparent. Ethics is something they practice diligently.

 Quality – The quality philosophy should not cover only the product quality, but
every process that has gone into making it. Economy of words when instructions
are given, acknowledging compliance, arriving on time, remembering the
promises and above all a keen eye for details and patience tomake others know
what they want are components of quality

 Customer Orientation - It is now recognized that every organized two sets of

customers. Internal customers are people in the organisation – employees,
directors, team members – any person who needs your services, whose needs of
demands you satisfy. External customers – clients and all members of society we
come in contact in connection with our business. They need our solutions for
their problems. So, the manager’s thinking about any problem is – what can I do
for him and all actions will be in that direction.

 Innovation and creativity - Professional managers think beyond the obvious.

They exhibit a keenness to go behind a problem and attempt to find the root
cause of the problem. They will draw from their experience from diverse fields,
seek further information and consider all possible alternatives and come out
with some new and unique solution. This happens when they have open minds.
A saying goes the human mind is like a parachute, it is useful only when it is
open. Such a work culture is very conducive for problem solving – which is the
aim of all creativity. Their persistence will reward them. Such actions observed
 by their team members enthuse them and a spirit of adventure will bring about
better solutions faster.

 Performance Management The professional manager not only ensures that his
performance is at peak all times, but motivates his entire team to do it. This
comes by appreciation and encouragement. If there any shortfalls he arranges
for training them so that their performance improves. Thus the team members
know that they are expected to perform, that they get help to do so and their
effort is recognized. This is the simple path of performance management. The
following seven step model will be useful:
• Objectives/Performance standards are set.
• These are communicated to the employees.
• Review/monitor the above.
• Check actual performance Vs. Standards set.
• Identify gaps.
• Jointly decide on corrective action, if needed.
• Reset objectives for next period

Objectives/Performance standards are set.

To mange any criterion, it is necessary to measure the factors that were

responsible for ‘what is’. The quality of the input, their quantity and their
intended usage. Then measures of the utilizationthe processes used, their
suitability, and the difficulties faced in utilization and how they were resolved.
Then the outcomes – are they as they were expected. Performance closer or
beyond expectation is the degree of quality. For every employee the level of
achievement is set in terms of quantities and extent to which the performance
approached the standard. This is the basis for evaluating performance.

These are communicated to the employees

This procedure ensures that they know what is expected of them and help them
to adjust their activities in such a way as to meet them. This enables them to
seek help, consult their colleagues or bosses, learn– so that they will meet the
expectations. It is possible that some objectives cannot be met at all. The
communication to his boss, may help in reallocating the job, so that there will be
no hiccups at the end of the period

Review/monitor the above

Review helps in resetting the goals when they cannot be achieved for various
reasons – shortage of resources, time etc. By monitoring, the shortfalls can be
made up with the allocation of extra resources, or even diverting the operation.

Check actual performance Vs. Standards set

 This is the evaluation phase. Comparison on every detail is made. Differences are
recorded. Particular areas are chosen for improvement.

Identify gaps
Gaps mean the shortfall in performance standards. The immediate supervisor is
also involved. The extent to which they affect the functions of the job itself are
identified

Jointly decide on corrective action, if needed

There is a possibility that the performance has exceeded the set standards. But if
performance is not good the reasons and extent having been identified, the
course of action for effecting corrections are decided. Giving extra
responsibilities, training, relocation is considered.

Reset objectives for next period

The targets are revised either upward or downward depending on the conclusion
of the appraisal process.

 Identification with the organisation A sense of pride and belonging goes with
the “ownership” of the job, the project, team members and organisation. This is
brought about by the culture and communication system in the organisation.
Information sharing brings in trust and promotes belongingness. The tendency
seen is that most managers strongly identify with their own departments, units
or divisions and they lack a sense of organisation.

In the light of increased competition and ever changing strategies to develop

business orientation, which in effect means every manager should be aware of
the company’s plans, products and policies. An obvious corollary to this is that
the organization’s communication policy too should be conducive to such
information sharing. Today, many organizations are using interventions such as
team building, survey feedback, and other activities, to ensure that employees
build up a strong sense of identity and pride in the organisation they work for.

 Empowering employees: The professional manager should possess the ability to

empower his employees down the line. Many managers are not even ready to
delegate their authority to subordinates and end up only delegating
responsibility. Empowerment is the process by which employees are encouraged
to take decisions pertaining to their area of work. Empowerment ensures
execution of his duties. This leads employees developing a sense of pride in their
jobs. But managers often hesitate to empower their subordinates as they feel
insecure and show a sense of uncertainty. The professional manager practices
empowerment and encourages employees to grow and develop in their
 positions.

 Coping with changes: It is often said – ‘The only constant in this world is change’.
A professional manager has the ability and capacity to cope with change. He
accepts the fact that change is inevitable and is ready to implement change at
the workplace. To implement change successfully, it is essential that employees
are involved in the implementation of change. Further the positive and negative
consequences of change need to be discussed and understood before
implementation. Thus a professional manager has the attitude to accept change
as a way of life and takes it in his stride

Q.5 List the major participants of project review process. Also highlight roles and
responsibilities of each.

The following is a list of key participants and their responsibilities in the Project
Management Review Process.

 Chief Information Officer (CIO) – conduct project senior management reviews,

monitor project progress, facilitate resolution of related project issues.

 Chief Financial Officer – Approve investments in corporate / major information

systems projects.

 Systems Owners – develop or approve project deliverable, present project

status, facilitate resolution of project issues.

 Program Managers – develop or approve project deliverables, approve changes

to project scope, ensure project reporting, present project status, conduct
project management reviews, manage project funding and authorize work
activities.

 Project Managers - performs day to day project management, develop project

deliverables, prepare project management review and senior management
review presentations, present project status, manage resolution of project
issues.

 Corporate management Investment process Program staff – Evaluate major

information systems which receive CMIP funding and prepare report to the top.

 Program Manager – review and comment on project deliverables and work

products, schedule and support the review meetings, provide support to systems
owners and project managers, advise the CIO and associate CIO’s.
  Key project stake holders and other invited participants – attend the review
meeting, participate in discussion, provide input as appropriate.

Q.6 ABC organization has been in software business since last 20 years. The senior
management feels that although they are making profits, but the profit on an average
is the same each year. They decide that they would make some additions to the
business and decided to go ahead with development of some high technology for
better profits. Can you suggest some guidelines, which the management should follow
in this venture?

Ans. Every business aims to commence its activities in the foreign market. The foreign
market provides with both opportunities and risks. Therefore some prefer to enter in
to strategic relationships and one such is the Joint Ventures.

A Joint Venture is an entity formed between two or more parties to undertake

economic activity together. The JV parties agree to create, for a finite time, a new
entity and new assets by contributing equity. They then share in the revenues,
expenses, and assets and the control of the enterprise. Therefore the basic
characteristics of joint venture can be summed up as:
1) Based on a Contractual Agreement.
2) Specific limited purpose and duration.
3) Joint Property Interest
4) Common Financial and Intangible goals and objectives.
5) Shared profits, losses, management and control.

Reasons for setting Joint Ventures abroad

The reasons for setting up joint ventures can be contributed to three main factors and
they are:
1. Internal Reasons.
2. Competitive Goals.
3. Strategic Goals.

1. The Internal reasons are as follows:

• Building on company’s strength.
• Spreading on costs and risks.
• Improving access to financial resources.
• Economies of scale and advantages of size.
• Access to new technologies and customers.
• Access to innovative managerial practices.
 2. The Competitive Goals are as follows:
• Influencing structural evolution of the industry.
• Defensive response to blurring industry boundaries.
• Creation of stronger competitive units.
• Speed to market.
• Improved Agility.

3. The Strategic Goals are as follows:

• Diversification
• Synergies.
• Transfer of technology/skill

Indian Joint Ventures Abroad

India started opening its economy a decade ago to integrate with global economy.
The business ventures abroad are not a new phenomenon in the independent India.
The initiatives were taken way back in the 1960s with the first ventures of Birlas in
Ethopia in the year 1964. However, it has assumed specific significance after the
Indian government started economic reforms in the year 1991, making globalization
of Indian business an integral part of economic reforms.

Significance of Indian Joint Ventures Abroad

International trade is considered to be imperative for economic development.
Economic borders of various countries have been opened on this premise under the
aegis of world trade organization. In countries, whose economy has moved from the
level of necessity to comforts and luxuries levels, there are increasing pressures for
newer, better and superior products with consistent quality, high reliability and
attractive finish etc. Further, with the labour becoming increasingly costly, the firms
have to go for development of capital intensive technologies. The huge investments in
new product and technology development demands higher levels of production to
ensure operations of the firms above the breakeven point. The scale of operations
required over a period of time reaches a level that is well above the entire domestic
demand in most of the developed countries, which generally have small population.
The firms thus face the problem of searching new markets and cheaper sources
of raw material, labour and other resources. Their growth and development, thus,
depends upon internationalization of the business.

Advantages and Disadvantages

A business while deciding upon whether to go for a joint venture should make a
thorough analysis on its business goals.
Advantages
 • Financial resources can be shared.
• Allows for Investor diversification.
• Reduces local Friction.
• Reduce Fixed costs per product.
• Direct management of business activities.
• Competitive strengths of two parties can be combined.
• A local JV partner knows the market.
• Economic incentives add value to JVs.

Disadvantages
• JV profits are shared.
• Shared technologies can be used beyond JV.
• Local Management of a JV can be unknown

Broadly there are two schemes under which an Indian Party can set up a JV
abroad, namely the Automatic Route and the Normal Route/Approval Route.

Automatic Route
Under the Automatic Route, an Indian Party does not require any prior approval from
the Reserve Bank for setting up a JV abroad (in case of investment in the financial
sector, however, prior approval is required from the concerned regulatory authority
both in India and abroad).

The criteria for direct investment under the Automatic Route are as under:
• The total µfinancial commitment of the Indian Party in JVs in any
country other than Nepal, Bhutan and Pakistan is up to 100% of its net worth and the
investment is in a lawful activity permitted by the host country
• The Indian Party is not on the Reserve Banks exporters caution list / list
of defaulters to the banking system published/ circulated by the Credit Information
Bureau of India Ltd. (CIBIL)/RBI or under investigation by the Enforcement Directorate
or any investigative agency or regulatory authority;
• The Indian Party routes all the transactions relating to the investment in
a JV through only one branch of an authorized dealer to be designated by it.

N ormal Route
Proposals not covered by the conditions under the automatic route require the
prior clearance of the Reserve Bank for which a specific application in form ODI with
the documents prescribed therein is required to be made to RBI.
 Requests under the normal route are considered by taking into account inter
alias the prima facie viability of the proposal, business track record of the promoters,
experience and expertise of the promoters, benefits to the country, etc