Subject Code: MC4001 Subject Name: Software Project Management

UNIT-I SOFTWARE PROJECT MANAGEMENT CONCEPTS

Introduction to Software Project Management: An Overview of Project Planning: Select Project,
Identifying Project scope and objectives, infrastructure, project products and Characteristics. Estimate
efforts, Identify activity risks, and allocate resources- Six Sigma, Software Quality: defining software
quality, ISO9126, External Standards

1.1 Introduction to Software Project Management

 Coordinating and supervising software projects is the art and discipline of software project
management. Within this branch of software project management, software projects are
organised, carried out, tracked, and managed.

 Developing computer software that satisfies criteria involves a process of scheduling,

assigning, and managing resources.

 In the context of software project management, the project's duration, budget, and developers'
knowledge are all necessary.

1.1.1. Prerequisite of software project management?

There are three needs for software project management. These are:

1. Time
2. Cost
3. Quality

1.1.2. Project Manager

The person in charge of overseeing all aspects of a project's planning, design, execution, monitoring,
control, and close-out is known as the project manager.

A project manager plays a crucial part in making initiatives successful.

The person in charge of making decisions for both big and small projects is the project manager.

To reduce uncertainty and manage risk, a project manager is used.

The project manager's decisions must all directly benefit the project.

Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
 Subject Code: MC4001 Subject Name: Software Project Management

1.1.2. A Role of a Project Manager:

1. Leader

In order for his team to know what is expected of them all, the project manager must guide
them and lead by example.

2. Medium:

The project manager acts as an interface between his team and clients. Along with reporting to
senior management, he is responsible for organising and providing his team with any relevant
customer information.

3. Mentor:

He should be there to guide his team at each step and make sure that the team has an
attachment. He provides a recommendation to his team and points them in the right direction.

1.1.2.b Responsibilities of a Project Manager:

1. Managing risks and issues.

2. Create the project team and assigns tasks to several team members.
3. Activity planning and sequencing.
4. Monitoring and reporting progress.
5. Modifies the project plan to deal with the situation.

1.2 An Overview of Project Planning

The project planning phase is often the most challenging phase for a project manager, as you need to
make an educated guess about the staff, resources, and equipment needed to complete your project.
You may also need to plan your communications and procurement activities, as well as contract any
third-party suppliers.

The purpose of the project planning phase is to:

 Establish business requirements

 Establish cost, schedule, list of deliverables, and delivery dates
 Establish resources plans
 Obtain management approval and proceed to the next phase

Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
 Subject Code: MC4001 Subject Name: Software Project Management

The basic processes of project planning are:

 Scope planning – specifying the in-scope requirements for the project to facilitate creating the work
breakdown structure
 Preparation of the work breakdown structure – spelling out the breakdown of the project into tasks and
sub-tasks
 Project schedule development – listing the entire schedule of the activities and detailing their sequence
of implementation
 Resource planning – indicating who will do what work, at which time, and if any special skills are
needed to accomplish the project tasks
 Budget planning – specifying the budgeted cost to be incurred at the completion of the project
 Procurement planning – focusing on vendors outside your company and subcontracting
 Risk management – planning for possible risks and considering optional contingency plans and
mitigation strategies

When articulating the project objectives you should follow the SMART rule:

 Specific – get into the details. Objectives should be specific and written in clear, concise, and under -
standable terms.
 Measurable – use quantitative language. You need to know when you have successfully completed
the task.
 Acceptable – agreed with the stakeholders.
 Realistic – in terms of achievement. Objectives that are impossible to accomplish are not realistic and
not attainable. Objectives must be centred in reality.
 Time based – deadlines not durations. Objectives should have a time frame with an end date assigned
to them.

1.2.1 Selecting project

 This is the initial step which starts well outside the project planning process.
 Feasibility study of the project helps in choosing the appropriate one.
 Strategic planning process helps in evaluating the metrics of selecting the project.
 Projects differ according to size, composition, priorities, and criticality.
 The people on a project have different biases based on their experiences, principles, and fears.
 Projects are undertaken to produce a product or a service for various reasons. This includes
factors like market share, financial benefits, return on investment, customer retention and
loyalty, and public perceptions

1.2.2 Project scope & objectives

Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
Subject Code: MC4001 Subject Name: Software Project Management

 Every stakeholder involved in the project must agree on the objectives defined in determining
the success of the project.
 Scope statements may take many forms depending on the type of project being implemented
and the nature of the organization.
 The scope statement details the project deliverables and describes the major objectives.
 The objectives should include measurable success criteria for the project.
 The Scope Statement should be written before the Statement of work and it should capture, in
very broad terms, the product of the project, for example, "developing a software based system
to capture and track orders for software."
As a baseline scope statements should contain:
 The project name
 The project owner, sponsors, and stakeholders
 The problem statement
 The project goals and objectives
 The project requirements

1.2.3 Project infrastructure

 Project Infrastructure refers to the organizational structure, processes, tools, techniques

and training an organisation puts in place to make projects more successful.
 Organisational Structure – Organisational structure including such support mechanisms
as project management office, project recruiting function, financial and monitoring area
etc.
 It also covers lines of communication and escalation.
 Processes – Typically methodologies, checklists and guidelines
 Tools – Software and templates
 Techniques – Repeatable processes such as kick off meetings, PIRs, analysis techniques,
etc.
 Training – Formal and informal training and reference documentation

1.2.4 Analyse project characteristics

The project is categorized as either product-driven or an objective-driven.

A project has several characteristics:

 Projects are unique.

Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
Subject Code: MC4001 Subject Name: Software Project Management

 Projects are temporary in nature and have a definite beginning and ending date.
 Projects are completed when the project goals are achieved or it’s determined the project is no
longer viable. As the system is developed, the product is driven out of the defined objectives.
 The project must be analysed based on its quality requirements.
 Projects are prone to higher risk which needs to be handled without affecting the product
created.
 In implementing the product, user requirements are given due importance.
 Appropriate methodology and SDLC process must be chosen to suit the current product.
 Review the overall resource estimates.

1.2.5 Estimate Efforts

The effort estimation for the staff required, the probable duration and the non-staff resources
needed for every activity is determined. These estimates depend on the type of the activity.

 Effort is the amount of work that has to be done.

 Software development efforts estimation is the process of predicting the most realistic use of
effort required to develop or maintain software based on incomplete, uncertain and/or noisy
input.
 Effort estimates may be used as input to project plans, iteration plans, budgets, and investment
analyses, pricing processes and bidding rounds.
 Elapsed time is the time between the start and end of a task. With all the activities defined, the
overall duration of the project can be calculated using the activity network.
 There are many ways of categorizing estimation approaches. The top level categories are the
following:

 Expert estimation: The quantification step, i.e., the step where the estimate is produced
based on judgmental processes.

 Formal estimation model: The quantification step is based on mechanical processes, e.g.,
the use of a formula derived from historical data.

 Combination-based estimation: The quantification step is based on a judgmental or

mechanical combination of estimates from different sources. The uncertainty of an effort
estimate can be described through a prediction interval (PI).

Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
Subject Code: MC4001 Subject Name: Software Project Management

An effort PI is based on a stated certainty level and contains a minimum and a maximum effort
value.  The most common measures of the average estimation accuracy is the MMRE (Mean
Magnitude of Relative Error), where MRE is defined as: MRE
= |actual effort − estimated effort| / |actual effort|

1.2.6 Identify Activity Risks

 Activity based risks are identified for every activity based on number of assumptions.
 Risk planning reduces the impact of identified risks.
 To materialize the risk, possibility plans are specified.
 New activities can reduce risks to a certain extent when there is change in plans.
 Risks fall into three broad categories — controllable known, uncontrollable known and
unknown.
The former two, are those risks happen before they can determine how to manage them. This is done
using root cause analysis. As the name implies its goal is to look for the root cause on the problem
and solve it at that point. The four ways of handling risk are:

 Avoidance - Take action to avoid the risk

 Mitigation - Define actions to take when the risk occurs

 Transfer - Have someone else handle the risk i.e. insurance

 Acceptance - Identify the risk as acceptable and let it happen.

1.2.7 Allocate Resources

Resource allocation is used to assign the available resources in an economic way. It is part of
resource management.

In project management, resource allocation is the scheduling of activities and the resources required
by those activities while taking into consideration both the resource availability and the project time.

Staff needed and available are identified for each activity and allocated their respective tasks.

Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
 Subject Code: MC4001 Subject Name: Software Project Management

Gantt chart showing staff tasks

 A Gantt chart pictorially represents when activities have to take place and which one has to be
executed at the same time.
 The chart represents when staff will be carrying out the tasks in each month. It also shows staff
involved in more than one task.
 When allocating resources the constraints associated is estimated and included in the overall
cost.
1.3. SIX SIGMA
What Is Six Sigma?
It’s a methodology used to improve the output quality in a process. It does this by first identifying, and
then removing, the causes of defects.
This is achieved via a set of quality management methods that feature both empirical and statistical
approaches.
A staff member with Six Sigma expertise is also usually hired to monitor the process.
Six Sigma was first introduced by Motorola engineer Bill Smith in 1986 when it was registered as a
trademark. But it was 10 years later when Jack Welch made it central to his business strategy at
General Electric that it became popular in the broader business world.
Characteristics of Six Sigma
1. Statistical Quality Control: Six Sigma is derived from the Greek Letter σ (Sigma) from the
Greek alphabet, which is used to denote Standard Deviation in statistics. Standard Deviation is
used to measure variance, which is an essential tool for measuring non-conformance as far as
the quality of output is concerned.
2. Methodical Approach: The Six Sigma is not a merely quality improvement strategy in theory,
as it features a well defined systematic approach of application in DMAIC and DMADV which
can be used to improve the quality of production. DMAIC is an acronym for Design-Measure-

Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
Subject Code: MC4001 Subject Name: Software Project Management

Analyze-Improve-Control. The alternative method DMADV stands for Design-Measure-

Analyze-Design-Verify.
3. Fact and Data-Based Approach: The statistical and methodical aspect of Six Sigma shows
the scientific basis of the technique. This accentuates essential elements of the Six Sigma that is
a fact and data-based.
4. Project and Objective-Based Focus: The Six Sigma process is implemented for an
organization's project tailored to its specification and requirements. The process is flexed to
suits the requirements and conditions in which the projects are operating to get the best results.
5. Customer Focus: The customer focus is fundamental to the Six Sigma approach. The quality
improvement and control standards are based on specific customer requirements.
6. Teamwork Approach to Quality Management: The Six Sigma process requires
organizations to get organized when it comes to controlling and improving quality. Six Sigma
involving a lot of training depending on the role of an individual in the Quality Management
team.

Six Sigma Methodologies

Six Sigma projects follow two project methodologies:

1. DMAIC
2. DMADV

DMAIC

It specifies a data-driven quality strategy for improving processes. This methodology is used to
enhance an existing business process.

The DMAIC project methodology has five phases:

Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
Subject Code: MC4001 Subject Name: Software Project Management

1. Define: It covers the process mapping and flow-charting, project charter development,
problem-solving tools, and so-called 7-M tools.
2. Measure: It includes the principles of measurement, continuous and discrete data, and scales of
measurement, an overview of the principle of variations and repeatability and reproducibility
(RR) studies for continuous and discrete data.
3. Analyze: It covers establishing a process baseline, how to determine process improvement
goals, knowledge discovery, including descriptive and exploratory data analysis and data
mining tools, the basic principle of Statistical Process Control (SPC), specialized control
charts, process capability analysis, correlation and regression analysis, analysis of categorical
data, and non-parametric statistical methods.
4. Improve: It covers project management, risk assessment, process simulation, and design of
experiments (DOE), robust design concepts, and process optimization.
5. Control: It covers process control planning, using SPC for operational control and PRE-
Control.

DMADV

It specifies a data-driven quality strategy for designing products and processes. This method is used to
create new product designs or process designs in such a way that it results in a more predictable,
mature, and detect free performance.

The DMADV project methodology has five phases:

Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
Subject Code: MC4001 Subject Name: Software Project Management

1. Define: It defines the problem or project goal that needs to be addressed.

2. Measure: It measures and determines the customer's needs and specifications.
3. Analyze: It analyzes the process to meet customer needs.
4. Design: It can design a process that will meet customer needs.
5. Verify: It can verify the design performance and ability to meet customer needs.

Why Six Sigma?

The creed for Six Sigma can be broken down into three assertions:
The continuous effort to achieve stability and a predictable result from a process is what makes a
business successful.
From the top-down, the entire organization must be committed to sustaining quality improvements for
them to be achieved.
What Are the Features of Six Sigma?
Six Sigma isn’t the first technique developed to improve processes, but it differs from others in three
significant ways:
It’s focused on measurable and quantifiable financial returns.
Leadership is critical.
Data and statistics are the basis of decision-making instead of assumptions or guesses.

Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
 Subject Code: MC4001 Subject Name: Software Project Management

1.4 Software Quality: defining software quality

Software quality is defined as a field of study and practice that describes the desirable attributes of
software products. There are two main approaches to software quality: defect management and
quality attributes.
The software defect management approach is based on counting and managing defects. Defects are
commonly categorized by severity, and the numbers in each category are used for planning.
The software quality attributes approach to software quality is best exemplified by fixed quality
models, such as ISO/IEC 25010:2011

1.4.1 ISO 9126

ISO/IEC 9126 is an international standard proposed to make sure ‘quality of all software-intensive
products’ which includes a system like safety-critical where in case of failure of software lives will
be in jeopardy.
ISO i.e. International Organization for Standardization and IEC i.e. International
Electrotechnical Commission have developed ISO/IEC 9126 standards for software engineering
→ Product Quality to provide an all-inclusive specification and evaluation model for the quality of
the software product.
The standard is divided into 4 parts as depicted in the following figure:
Part-1: Software Engineering: Product Quality “Quality model”: It describes the quality model
framework which explains relationships between different approaches to quality as well as identifying
quality characteristics and sub-characteristics of software products.
Part-2: Software Engineering: Product Quality “External Metrics”: Its use is to describe external
metrics that are used to measure characteristics and sub-characteristics which are identified in part 1.
Part-3: Software Engineering: Product Quality “Internal Metrics”: Its use is to describe internal
metrics that are used to measure characteristics and sub-characteristics which are identified in part 1.
Part-4: Software Engineering: Product Quality “Quality in use metrics”: Its use is to identify
metrics that are used to measure the effects of combined quality characteristics for users.
From the above discussion, it is concluded that the first three parts are concerned with describing and
measuring the quality of software products, and the fourth part is concerned with the quality of
software products from the user’s point of view.
Internal External Quality Part
It determines the quality of a software product through six characteristics which are Functionality,
Reliability, Usability, Efficiency, Maintainability, and Portability. Each characteristic is subdivided
into related sub-characteristics which are also depicted in the above example.
Functionality

Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
Subject Code: MC4001 Subject Name: Software Project Management

The functions are those that will satisfy implied needs.

Suitability
Accuracy
Interoperability
Security
Functionality Compliance
Reliability
A set of attributes that will bear on the capability of software to maintain the level of performance.
Maturity
Fault Tolerance
Recoverability
Reliability Compliance
Usability
A set of attributes that bear on the effort needed for use by an implied set of users.
Understandability
Learnability
Operability
Attractiveness
Usability Compliance
Efficiency
A set of attributes that bear on the relationship between the level of performance of the software under
stated conditions.
Time Behavior
Resource Utilization
Efficiency Compliance
Maintainability
A set of attributes that bear on the effort needed to make specified modifications.
Analyzability
Changeability
Stability
Testability

Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
 Subject Code: MC4001 Subject Name: Software Project Management

Maintainability Compliance
Portability
A set of attributes that bear on the ability of software to be transferred from one environment to
another.
Adaptability
Installability
Co-existence
Replaceability
Portability Compliance
Quality in Use Model
It identifies the four quality characteristics.
Effectiveness
Productivity
Safety
Satisfaction
1.4.2 EXTERNAL STANDARD
External Standard: These are the standards made by an entity external to an organization. These
standards are standards that a product should comply with, are externally visible and are usually
stipulated by external parties.
The three types of external standards are :
 Customer standard: refer to something defined by the customer as per his /her business
requirement for the given product.
 National Standard: refer to something defined by the regulatory entities of the country where
the supplier / customer reside.
 International Standard: are defined at international level and these are applicable to all
customers across the globe.
Some IEEE standards devoted for software :
By Different Organizations are:
ISO - International Organization for Standardization
SPICE - Software Process Improvement and Capability Determination
NIST - National Institute of Standards and Technology
DoD - Department of Defense

Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
 Subject Code: MC4001 Subject Name: Software Project Management

UNIT II SOFTWARE EVALUATION AND COSTING

Project Evaluation: Strategic Assessment, Technical Assessment, cost-benefit analysis, Cash flow
forecasting, cost-benefit evaluation techniques, Risk Evaluation. Selection of Appropriate Project
approach: Choosing technologies, choice of process models, structured methods.

2.1 PROJECT EVALUATION

A high level assessment of the project
 to see whether it is worthwhile to proceed with the project
 to see whether the project will fit in the strategic planning of the whole organization
Why
 Want to decide whether a project can proceed before it is too late
 Want to decide which of the several alternative projects has a better success rate, a higher
turnover, a higher ...
Who
 Senior management
 Project manager/coordinator
 Team leader
When
Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
 Subject Code: MC4001 Subject Name: Software Project Management

• Usually at the beginning of the project e.g. Step 0 of Step Wise Framework
What
 Strategic assessment
 Technical assessment
 Economic assessment
How
o Cost-benefit analysis
o Cash flow forecasting
o Cost-benefit evaluation techniques
1 Strategic Assessment
2 Technical Assessment
3 Cost Benefit Analysis
4 Cash Flow Forecasting
5 Cost Benefit Evaluation Techniques
6 Risk Evaluation
2.1.1 Strategic Assessment
Used to assess whether a project fits in the long-term goal of the organization
 Usually carried out by senior management
 Needs a strategic plan that clearly defines the objectives of the organization
 Evaluates individual projects against the strategic plan or the overall business objectives
Programme management
 suitable for projects developed for use in the organization Portfolio management
 suitable for project developed for other companies by software houses
 SA – Programme Management
 Individual projects as components of a programme within the organization
 Programme as “a group of projects that are managed in a coordinated way to gain benefits
that would not be possible were the projects to be managed independently
SA – Programme Management Issues
Objectives
How does the project contribute to the long-term goal of the organization?
Will the product increase the market share? By how much?
IS plan
Does the product fit into the overall IS plan?
How does the product relate to other existing systems?
Organization structure

Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
Subject Code: MC4001 Subject Name: Software Project Management

How does the product affect the existing organizational structure? the existing workflow? the overall
business model?
MIS
What information does the product provide?
To whom is the information provided?
How does the product relate to other existing MISs?
Personnel
What are the staff implications?
What are the impacts on the overall policy on staff development?
Image
How does the product affect the image of the organization?
SA – Portfolio Management
 suitable for product developed by a software company for an organization
 may need to assess the product for the client organization
 Programme management issues apply need to carry out strategic assessment for the providing
software company
 Long-term goal of the software company
 The effects of the project on the portfolio of the company (synergies and conflicts)
 Any added-value to the overall portfolio of the company
2.1.2 Technical Assessment
 Technical assessment of a proposed system consists of evaluating the required functionality
against the hardware and software available.
 Where an organization has a strategic information systems plan, this is likely to place
limitations on the nature of solutions that might be considered.
 The constraints will, of course, influence the cost of the solution and this must be taken into
account in the cost benefit analysis
2.1.3 Cost Benefit Analysis
The most common way of carrying out an economic assessment of a proposed information system, or
other development, is by comparing the expected costs of development and operation of the system
with the benefits of having it in place.

The standard way of evaluating the economic benefits of any project is to carry out a cost-benefit
analysis, which consists of two steps.

Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
Subject Code: MC4001 Subject Name: Software Project Management

o Identifying and estimating all of the costs and benefits of carrying out the project This includes
development costs of the system, the operating costs and the benefits that are expected to accrue from
the operation of the system.

o Expressing these costs and benefits in common units We must evaluate the net benefit, which is the
difference between the total benefit and the total cost. To do this, we must express each cost and each
benefit in monetary terms.

o Development costs - include the salaries and other employment costs of the staff involved in the
development project and all associated costs.

o Setup costs - include the costs of putting the system into place. These consist mainly of the costs of
any new hardware and ancillary equipment but will also include costs of file conversion, recruitment
and staff training.

o Operational costs - consist of the costs of operating the system once it has been installed. ✓ Benefits,
on the other hand, are often quite difficult to quantify in monetary terms even once they have been
identified. Benefits may be categorized as follows.

o Direct benefits - these accrue directly from the operation of the proposed system. These could, for example,
include the reduction in salary bills through the introduction of a new, computerized system

2.1.4 CASH FLOW FORECASTING

As important as estimating the overall costs and benefits of a project is the forecasting of the cash
flows that will take place and their timing. A cash flow forecast will indicate when expenditure and
income will take place.

Product life cycle cash flow

We need to spend money, such as staff wages, during the development stages of a project. Such
expenditure cannot be deferred until income is received (either from using the software if it is being
developed for in-house use or from selling it). It is important that we know that we can fund the
development expenditure either from the company's own resources or by borrowing from the bank.

Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
Subject Code: MC4001 Subject Name: Software Project Management

✓ In any event, it is vital to have some forecast of when expenditure such as the payment of salaries
and bank interest will take place and when any income is to be expected, such as payment on
completion or, possibly, stage payments.

✓ Accurate cash flow forecasting is not easy, as it generally needs to be done early in the project's life
cycle (at least before any significant expenditure is committed) and many items to be estimated
(particularly the benefits of using software or decommissioning costs) might be some years in the
future.

✓ When estimating future cash flows, it is usual to ignore the effects of inflation. Trying to forecast
the effects of inflation increases the uncertainty of the forecasts. Moreover, if expenditure is increased
due to inflation it is likely that income will increase proportionately.

2.1.5 Cost Benefit Evaluation Techniques

Cost-Benefit Evaluation-Techniques
 Costs and benefits have to be expressed using the same scale to be comparable Usually
expressed in payments at certain times (cash flow table)
 Payments at different points in time are not comparable based only on the amount Time of
payment should be considered
Techniques
– Net profit
– Payback period
– Return on investment
– Net present value
– Internal rate of return
Cost-Benefit Evaluation Techniques -Net Profit
Difference between total cost and total income
Pros
Easy to calculate
Cons
– Does not show profit relative to size investment (e.g., consider Project 2)
– Does not consider timing of payments (e.g., compare Projects 1 and 3) Not very useful other than
for "back of envelope" evaluations
Cost-Benefit Evaluation Techniques -Payback Period

Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
Subject Code: MC4001 Subject Name: Software Project Management

Time taken to break even

Pros
– Easy to calculate
– Gives some idea of cash flow impact Cons: Ignores overall profitability
Not very useful by itself, but a good measure for cash flow impact
Costs-Benefit Evaluation Techniques-Return On Investment
Also known as the accounting rate of return (ARR)
Provides a way of comparing the net profitability to the investment required The common formula–
ROI = (average annual profit/total investment) X 100
Cost-Benefit Evaluation Techniques -Return On Investment
Pros: Easy to calculate
Cons
– Does not consider the timing of payments
– Misleading: does not consider bank interest rates Not very useful other than for "back of envelope"
evaluations

Cost-Benefit Evaluation Techniques-Net Present Value

A project evaluation technique that takes into account the profitability of a project and the timing of
the cash flows that are produced
Sum of all incoming and outgoing payments, discounted using an interest rate, to a fixed point in time
(the present)
Cost-Benefit Evaluation Techniques-Net Present Value
Present value = (value in year t)/(1+r)^t
– r is the discount rate
– t is the number of years into the future that the cash flow occurs
– (1+r)^t is known as discount factor
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
Pros

Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
 Subject Code: MC4001 Subject Name: Software Project Management

– Takes into account profitability

– Considers timing of payments
– Considers economic situation through discount rate
Cons
Discount rate can be difficult to choose
Standard measure to compare different option
Cost-Benefit Evaluation Techniques -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 to calculate IRR
Pros: Calculates figure which is easily comparable to interest rates
Cons: Difficult to calculate (iterative)
Cost-benefit Evaluation Techniques
• Net profit= Total income – Total costs
• Payback period = Time taken to break even

• Return on Investment ( ROI)

Cost-benefit Evaluation Techniques – NPV Net present value (NPV)
It is the sum of the present values of all future amounts.
Present value is the value which a future amount is worth at present
It takes into account the profitability of a project and the timing of the cash flows
Let n be the number of yea r and r be the discount rate, the present value (PV) is given by

Issues in NPV
Choosing an appropriate discount rate is difficult
Ensuring that the rankings of projects are not sensitive to small changes in discount rate
2.1.6 Definition of Risk
A risk is a potential problem – it might happen and it might not conceptual definition of risk
– Risk concerns future happenings
Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
Subject Code: MC4001 Subject Name: Software Project Management

– Risk involves change in mind, opinion, actions, places, etc.

– Risk involves choice and the uncertainty that choice entails two characteristics of risk
– Uncertainty – the risk may or may not happen, that is, there are no 100% risks (those, instead, are
called constraints)
– Loss – the risk becomes a reality and unwanted consequences or losses occur
1 Risk Categorization – Approach
Project risks
They threaten the project plan
If they become real, it is likely that the project schedule will slip and that costs will increase
Technical risks
They threaten the quality and timeliness of the software to be produced if they become
real, implementation may become difficult or impossible
Business risks
They threaten the viability of the software to be built
If they become real, they jeopardize the project or the product Sub-categories of Business risks
Market risk – building an excellent product or system that no one really wants
Strategic risk – building a product that no longer fits into the overall business strategy for the
company
Sales risk – building a product that the sales force doesn't understand how to sell
Management risk – losing the support of senior management due to a change in focus or a change in
people
Budget risk – losing budgetary or personnel commitment
Known risks
Those risks that can be uncovered after careful evaluation of the project plan, the business and
technical environment in which the project is being developed, and other reliable information sources
(e.g., unrealistic delivery date)
Predictable risks
Those risks that are extrapolated from past project experience (e.g., past turnover)
Unpredictable risks
Those risks that can and do occur, but are extremely difficult to identify in advance
Steps for Risk Management
Identify possible risks; recognize what can go wrong

Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
Subject Code: MC4001 Subject Name: Software Project Management

Analyze each risk to estimate the probability that it will occur and the impact (i.e., damage) that it will
do if it does occur
Rank the risks by probability and impact
- Impact may be negligible, marginal, critical, and catastrophic
Develop a contingency plan to manage those risks having high probability and high impact
Risk Identification
Risk identification is a systematic attempt to specify threats to the project plan
By identifying known and predictable risks, the project manager takes a first step
toward avoiding them when possible and controlling them when necessary
Generic risks
– Risks that are a potential threat to every software project
Product-specific risks
– Risks that can be identified only by those a with a clear understanding of the technology, the people,
and the environment that is specific to the software that is to be built
– This requires examination of the project plan and the statement of scope
– "What special characteristics of this product may threaten our project plan?"

Risk Item Checklist

Used as one way to identify risks
Focuses on known and predictable risks in specific subcategories (see next slide)
Can be organized in several ways
– A list of characteristics relevant to each risk subcategory
– Questionnaire that leads to an estimate on the impact of each risk
– A list containing a set of risk component and drivers and their probability of occurrence
Known and Predictable Risk Categories
Product size – risks associated with overall size of the software to be built
Business impact – risks associated with constraints imposed by management or the
marketplace
Customer characteristics – risks associated with sophistication of the customer and the
developer's ability to communicate with the customer in a timely manner

Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
Subject Code: MC4001 Subject Name: Software Project Management

Process definition – risks associated with the degree to which the software process has been
defined and is followed
Development environment – risks associated with availability and quality of the tools to be
used to build the project
Technology to be built – risks associated with complexity of the system to be built and the
"newness" of the technology in the system
Staff size and experience – risks associated with overall technical and project experience of the
software engineers who will do the work
Questionnaire on Project Risk
Have top software and customer managers formally committed to support the project?
Are end-users enthusiastically committed to the project and the system/product to be built?
Are requirements fully understood by the software engineering team and its customers?
Have customers been involved fully in the definition of requirements?
Do end-users have realistic expectations?
Is the project scope stable?
Does the software engineering team have the right mix of skills?
Are project requirements stable?
Does the project team have experience with the technology to be implemented?
Is the number of people on the project team adequate to do the job?

Risk Components and Drivers

The project manager identifies the risk drivers that affect the following risk components
– Performance risk - the degree of uncertainty that the product will meet its requirements and be fit for
its intended use
– Cost risk - the degree of uncertainty that the project budget will be maintained
– Support risk - the degree of uncertainty that the resultant software will be easy to correct, adapt, and
enhance
– Schedule risk - the degree of uncertainty that the project schedule will be maintained and that the
product will be delivered on time
The impact of each risk driver on the risk component is divided into one of four
impact levels
– Negligible, marginal, critical, and catastrophic
Risk drivers can be assessed as impossible, improbable, probable, and frequent
Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology
Subject Code: MC4001 Subject Name: Software Project Management

Prepared by: Savithri S, Department of MCA, Assistant Professor, Dhanalakshmi Srinivasan College of
Engineering and Technology