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    Software Project Management 4th Edition

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    karan
    spm

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    © All Rights Reserved
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    Software Project Management 4th Edition

    Uploaded by

    karan
    36 views25 pages
    spm

    Original Title

    SPM Chapter 3

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    © © All Rights Reserved

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    spm

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    36 views25 pages

    Software Project Management 4th Edition

    Uploaded by

    karan
    spm

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 25

    Software Project

    Management
    Chapter 3
    4th Edition

    Programme
    management and
    project evaluation

    1
    ©The McGraw-Hill Companies, 2005
    Main topics to be covered
    • Programme management
    • Benefits management
    • Project evaluation
    – Cost benefit analysis
    – Cash flow forecasting
    • Project risk evaluation

    2
    ©The McGraw-Hill Companies, 2005
    Programme management
    • One definition:
    ‘a group of projects that are managed
    in a co-ordinated way to gain benefits
    that would not be possible were the
    projects to be managed independently’
    Ferns

    3
    ©The McGraw-Hill Companies, 2005
    Programmes may be
    • Strategic
    • Business cycle programmes
    • Infrastructure programmes
    • Research and development
    programmes
    • Innovative partnerships

    4
    ©The McGraw-Hill Companies, 2005
    Programme managers versus
    project managers
    Programme manager Project manager
    – Many simultaneous – One project at a time
    projects – Impersonal
    – Personal relationship relationship with
    with skilled resources resources
    – Optimization of – Minimization of
    resource use demand for
    – Projects tend to be resources
    seen as similar – Projects tend to be
    seen as unique
    5
    ©The McGraw-Hill Companies, 2005
    Projects sharing resources

    6
    ©The McGraw-Hill Companies, 2005
    Strategic programmes
    • Based on OGC approach
    • Initial planning document is the
    Programme Mandate describing
    – The new services/capabilities that the
    programme should deliver
    – How an organization will be improved
    – Fit with existing organizational goals
    • A programme director appointed a
    champion for the scheme
    7
    ©The McGraw-Hill Companies, 2005
    Next stages/documents
    • The programme brief – equivalent of
    a feasibility study: emphasis on costs
    and benefits
    • The vision statement – explains the
    new capability that the organization will
    have
    • The blueprint – explains the changes
    to be made to obtain the new capability
    8
    ©The McGraw-Hill Companies, 2005
    Benefits management
    developers users organization

    use for

    the
    benefits
    application
    build
    to
    deliver
    •Providing an organization with a capability does not guarantee
    that this will provide benefits as desired– need for benefits
    management
    •This has to be outside the project – project will have been
    completed
    •Therefore done at programme level 9
    ©The McGraw-Hill Companies, 2005
    Benefits management
    To carry this out, you must:
    • Define expected benefits
    • Analyse balance between costs and
    benefits
    • Plan how benefits will be achieved
    • Allocate responsibilities for their
    achievement
    • Monitor achievement of benefits
    10
    ©The McGraw-Hill Companies, 2005
    Benefits
    These might include:
    • Mandatory requirement
    • Improved quality of service
    • Increased productivity
    • More motivated workforce
    • Internal management benefits

    11
    ©The McGraw-Hill Companies, 2005
    Benefits - continued
    • Risk reduction
    • Economies
    • Revenue enhancement/acceleration
    • Strategic fit

    12
    ©The McGraw-Hill Companies, 2005
    Quantifying benefits
    Benefits can be:
    • Quantified and valued e.g. a reduction
    of x staff saving £y
    • Quantified but not valued e.g. a
    decrease in customer complaints by x%
    • Identified but not easily quantified –
    e.g. public approval for a organization
    in the locality where it is based
    13
    ©The McGraw-Hill Companies, 2005
    Cost benefit analysis (CBA)

    You need to:


    • Identify all the costs which could be:
    – Development costs
    – Set-up
    – Operational costs

    • Identify the value of benefits


    • Check benefits are greater than costs
    14
    ©The McGraw-Hill Companies, 2005
    Net profit
    Year Cash-flow ‘Year 0’ represents all
    0 -100,000 the costs before
    system is operation
    1 10,000
    ‘Cash-flow’ is value of
    2 10,000
    income less outgoing
    3 10,000
    Net profit value of all
    4 20,000 the cash-flows for the
    5 100,000 lifetime of the
    application
    Net
    50,000
    profit
    15
    ©The McGraw-Hill Companies, 2005
    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
    16
    ©The McGraw-Hill Companies, 2005
    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%
    17
    ©The McGraw-Hill Companies, 2005
    Net present value
    Would you rather I gave you £100 today or in
    12 months time?
    If I gave you £100 now you could put it in
    savings account and get interest on it.
    If the interest rate was 10% how much would
    I have to invest now to get £100 in a year’s
    time?
    This figure is the net present value of £100 in
    one year’s time
    18
    ©The McGraw-Hill Companies, 2005
    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
    19
    ©The McGraw-Hill Companies, 2005
    Applying discount factors

    Year Cash-flow Discount factor Discounted cash


    flow
    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

    20
    ©The McGraw-Hill Companies, 2005
    Internal rate of return

    • Internal rate of return (IRR) is the


    discount rate that would produce an
    NPV of 0 for the project
    • Can be used to compare different
    investment opportunities
    • There is a Microsoft Excel function
    which can be used to calculate

    21
    ©The McGraw-Hill Companies, 2005
    Dealing with uncertainty:
    Risk evaluation
    • project A might appear to give a better
    return than B but could be riskier
    • Could draw up draw a project risk
    matrix for each project to assess risks –
    see next overhead
    • For riskier projects could use higher
    discount rates
    22
    ©The McGraw-Hill Companies, 2005
    Example of a project risk
    matrix

    23
    ©The McGraw-Hill Companies, 2005
    Decision trees

    24
    ©The McGraw-Hill Companies, 2005
    Remember!
    • 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
    25
    ©The McGraw-Hill Companies, 2005

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