UNIT-1

PROJECT EVALUATION AND PROJECT PLANNING

Software:
 A set of programs which is designed for a specific operation is called software.
 There two types of software:
1. System software: OS, Device drivers
2. Application software: MS-Word, Excel, VLC media player, MX player etc.
Project
 A project is well-defined task, which is a collection of several operations done in
order to achieve a goal (for example, software development and delivery).
 A Project can be characterized as:
1. Every project may has a unique and distinct goal.
2. Project is not routine activity or day-to-day operations.
3. Project comes with a start time and end time.
4. Project ends when its goal is achieved hence it is a temporary phase in the
lifetime of an organization.
5. Project needs adequate resources in terms of time, manpower, finance, material
and knowledge-bank.

Software Project
A Software Project is the complete procedure of software development from requirement
gathering to testing and maintenance, carried out according to the execution methodologies,
in a specified period of time to achieve intended software product.
Some characteristics of software projects

 Invisibility
 Complexity
 Conformity
 Flexibility

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Software Project Management:
 Software project management is an art and discipline of planning and supervising
software projects.
 It is a sub-discipline of software project management in which software projects
planned, implemented, monitored and controlled.
 It is a procedure of managing, allocating and timing resources to develop computer
software that fulfills requirements.
 There are three needs for software project management. These are:
1. Time
2. Cost
3. Quality

 The image above shows triple constraints for software projects. It is an essential part
of the software organization to deliver a quality product, keeping the cost within the
client’s budget and deliver the project as per schedule.
 There are various factors, both external and internal, which may impact this triple
factor. Any of three-factor can severely affects the other two.

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Importance of software project management
Software is said to be an intangible product. Software development is a kind of all new
streams in world business and there’s very little experience in building software products.

Most software products are tailor made to fit client’s requirements. The most important is that
the underlying technology changes and advances so frequently and rapidly that experience of
one product may not be applied to the other one. All such business and environmental
constraints bring risk in software development hence it is essential to manage software
projects efficiently

The image above shows triple constraints for software projects. It is an essential part of
software organization to deliver quality product, keeping the cost within client’s budget
constrain and deliver the project as per scheduled. There are several factors, both internal and
external, which may impact this triple constrain triangle. Any of three factors can severely
impact the other two. Therefore, software project management is essential to incorporate user
requirements along with budget and time constraints

Activities of Project Management

Management involves the following activities:
1. Planning – deciding what is to be done
2. Organizing – making arrangements
3. Staffing – selecting the right people for the job
4. Directing – giving instructions
5. Monitoring – checking on progress
6. Controlling – taking action to remedy hold-ups
7. Innovating –coming up with new solutions
8. Representing – liaising with clients, users, developers and other stakeholders

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Different methodologies used in Software project management.
Different methodologies used in Software project management are:
1. Agile development methodology:
 Mostly used model in today’s digital era
 Agile means “ the ability to respond to changes from requirements, technology”
 It is an incremental and iterative process of software development.
 Teams use the agile development methodology to minimize risk (such as bugs, cost
overruns, and changing requirements) when adding new functionality.
 In this method, teams develop the software in iteration that contains mini-
requirements of the new functionality.

When to use the Agile Model?

2. DevOps development methodology:

DevOps is not just a development methodology but also a set of practices that supports an
organizational culture. DevOps deployment centers on organizational change that enhances
collaboration between the departments responsible for different segments of the development
life cycle, such as development, quality assurance, and operations.

3. Waterfall development method:

 The waterfall method is a rigid linear model that consists of sequential phases
(requirement, design, implementation, verification, maintenance) focusing on distinct
goals
 There’s usually no process going back to modify the project.

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4. Rapid application development:
 Rapid application development (RAD) is a condensed development process that
produces a high-quality system with low investment costs.
 This RAD process allows our developers to quickly adjust to shifting requirements in
a fast-paced and constantly changing market.
 The ability to quickly adjust allows low investment cost.

Activities Covered by Software Project Management (SPM)

 A software project is not only concerned with the actual writing of software.
 There are three successive processes that bring a new system into being.
1. Feasibility Study
2. Planning
3. Project Execution

1. Feasibility Study:
 This investigation to decide whether a prospective project is worth starting
 Information is gathered about the requirements of the proposed application.
 The probable development and operational cost, along with value of the benefit of the
new system, will also have to be estimated.
2. Planning
Only done if project is feasible - evolving plan allows us to control the project.

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3. Execution
After the planning is done, The project can now be executed. The execution of a project often
contains design and implementation sub-phases.

Some ways of categorizing software projects

The Categories are

1. Compulsory versus voluntary users

2. Information System versus Embedded Systems

3. Object versus product

1. Compulsory versus voluntary users

Compulsory systems are the system which the staffs have to use if they want to do
something, such as recording a sale However, use of a system is increasingly voluntary, as in
the case of computer games.

2 Information versus embedded systems:

Information systems which is enable staff to carry out office processes and embedded
systems which controls machine

E.g: A stock control system would be an information system. An embedded system might
control the air conditioning equipment in a building.

3. Objectives versus products:

Projects may be distinguished by whether their aim is to produce a product or to meet certain

objectives.

A project rnight be to create a product, the details of which have been specified by the client.

The client has the responsibility for justifying the product.

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Setting objectives:
An effective objective for an individual must be something that is within the control of that
individual. Objectives can be broken down into goals or sub-objectives in order to achieve
them.
SMART technique is used to describe well-defined objective.
 S-specific, Effective objectives are concrete and well-defined
 M-measurable, that is, measures of effectiveness.
 A-achievable, lt must be within the power of the individual or Group to achieve the
objective
 R-relevant, that is, satisfy the purpose of the project.
➢ T-time-oriented, that is, time limit for successful achievement of the project.

Management Control:-
Management, in general, involves setting objectives for a system and then monitoring the
performance of the system. ln Figure 1 .4 the 'real world' is shown as being rather formless.

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Project Portfolio Management:-

Project portfolio management provides an overview of all the projects that an organization is
undertaking or is considering. lt prioritizes the allocation of resources to projects and decides
which new projects should be accepted and which existing ones should be dropped.

The concerns of project portfolio management include

 Identifying which project proposals are worth implementation;
 Assessing the risk involved with project
 Deciding how to share limited resources, including staff time and finance, between
projects
 Ensuring that projects do not duplicate work;
The three element of project portfolio management are
1. Portfolio Definition:
 An organization should record in a single repository detail of all current
projects.
 Must decide whether to have ALL projects in the repository or, say, only ICT
projects
2. Portfolio Management:

3. Portfolio Optimization:
The performance of the portfolio can be tracked by high-level managers on a regular
basis. A better balance of projects may be achieved.

Evaluation of individual projects: The feasibility of an individual project can be

evaluated.
1. Technical assessment
2. Cost-benefit analysis: Cost-benefit analysis comprises two steps:
1. Identifying all of the costs and benefits of carrying out the project and operating the
delivered application.
2. Expressing, these costs and benefits in common units
 Development costs, including development staff costs;

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  Setup costs, consisting of the costs of putting the system into place, mainly of
any new hardware but also including the costs of file conversion, recruitment
and staff training;
 Operational costs relating to operating the system after installation

Cash flow forecasting:-

As important as estimating the overall costs and benefits of a project is producing a cash flow
forecast which indicates when expenditure and income will take place (Figure 2.1).

Cost-benefit evaluation techniques:-

Various cost-benefit Evaluation techniques are
1. Net profit
2. Payback period
3. Return on Investment
4. Net Present Value
5. Internal Rate of Return

1. Net Profit:
The net profit of a project is the difference between the total costs and the total income over
the life of the project

Net profit = Total income – Total costs

Disadvantage: Some projects incomes are returned only towards the end of the project. This
is a major disadvantage which means that the investment must be funded for longer time.

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Example: Consider the four project cash flows given in below Table and calculate the
Net Profit for each of them.

Project 2 in above table shows the greatest net profit but this is at the expense of a large
investment.

2. Payback Period
The payback period is the time taken to break even or pay back the initial investment.
Normally, the project with the shortest payback period will be chosen on the basis that an
organization will wish to minimize the time that a project is 'in debt'.
Advantage:
The advantage of the payback period is that it is simple to calculate and is not particularly
sensitive to small forecasting errors.
Disadvantage:-
It ignores the overall profitability of the project-

Example: Consider the four project cash flows given in below Table and calculate the
payback period for each of them.

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3. Return on Investment
➢ The return on investment (ROl), also known as the accounting rate of return (ARR),
Provides a way of comparing the net profitability to the investment required
➢ Return on Investment (ROI) is calculated using the given formulae;

Eg 1: The net profit of a project id Rs.30,000 and the total investment if Rs.100, 000.
Calculate the ROI if the total period is taken as 3 years.

= 30,000 x 1 / 3 X 100
100,000
= 10%

Example2: Consider the four project cash flows given in below Table.

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ROI (project 2), = 100'000/5 x 100 = 2%
10, 00,000
ROI (project 3) = 50'000/5 x 100 = 10%
100,000
ROI (project 4) = 75'000/5 x 100 = 12.5%
120,000
Hence, Project 4 is is the most worthwhile

4. Net Present Value (NPV)

 The calculation of Net Present Value is a project evaluation technique that takes into
account the profitability of the project and the timing of the cash flows that are
produced.

Where ‘r’ denotes the discount rate expressed as a decimal value,

‘t’ represents the number of years into the future that the cash flows occurs

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

5. Internal Rate of Return (IRR):-

Calculated as that percentage discount rate that would produce an NPV of zero

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Exercise 03:

Exercise 04

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Solution
Net profit:

Conclusion

Conclusion:
Project A>Project C > project B

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What is Risk?
Risk is 'an uncertain event or condition that, if it occurs, has a positive or negative effect on a
project's objectives'.
Categories of Risk:
Risk can be categorized as follows:
1. Project risks
2. Business risks

Risk Evaluation
➢ Risk is associated with almost every project. Risk can become an important factor when
the project is not able to meet its objectives.
➢ Every possible risk must be identified, analyzed and minimized during the development of
the software system

1. Risk Identification and Ranking

 ln any project evaluation we should identify the risks and quantify their effects.
One approach is to construct a project risk matrix utilizing a checklist of possible
risks and classifying risks according to their relative importance and likelihood.
 Table 2.5 illustrates a basic project risk matrix listing some of the business
risks for a project, with their importance and likelihood classified as high (l-l),
medium (M), low (L)or exceedingly unlikely (-).
 The project risk matrix nray be used as a way of evaluating projects (those with hiSh
risks being less favoured) or as a means of identifying and ranl<ing the risl<s for a
specific project.

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2. Risk and net present value
 If project is relatively risky then use a higher discount rate to calculate net present
value. This risk premium might, for example, be an additional 2% for a reasonably
safe project or 5% for a fairly risky one.
 Projects may be categorized as high, medium or low risk using a scoring method and
risk premiums designated for each category. The premiums, even if arbitrary, provide
a consistent method of taking risk into account.

3. Cost-benefit analysis:-
 It is required to consider each possible outcome and estimate the probability of its
occurring and the corresponding value of the outcome.
 Instead of single cash flow forecast for a project, we will then have a set of cash flow
forecasts, each with an associated probability of occurring.
 The value of the project is then obtained by summing the cost or benefit for each
possible outcome weighted by its corresponding probability.

A Payroll projects cost-benefit Analysis by company X

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Introduction to Step-Wise Project Planning
The framework of basic steps in project planning illustrates the various activities involved in
the development process.

‘Step wise’- an Overview

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Overview of the stepwise planning
Step 0: Selecting project

Step 1: Identify Project scope & objectives

Step 2: Identify project infrastructure

Step 3: Analyze project characteristics

Step 4: Identify Project products and activities

Step 5: Estimation effort for each project

Step 6: Identify activity risks

Step 7: Allocate resources

Step 8: Review / publicize plan

Step 9: Execute plan / Low level planning

Step 0: 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.
 There are three types of feasible analysis
 Technical:- it is based on resources
 Economical :-it is based on cost
 Operational:-whether the employee able to work the project

Step 1: Identify Project scope & objectives

 The activities in this step ensure that all the parties to the project agree on the
objectives and are committed to the success of the project.

 Every stakeholder involved in the project must agree on the objectives defined in
determining the success of the project.

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Step 2: Identify project infrastructure
 Project Infrastructure refers to the organizational structure, processes, tools,
techniques and training an organisation puts in place to make projects more
successful.

Step 3: Analyze project characteristics

 Distinguish the proiect as either obiective- or product-driven
 Analyse other pro¡ect characteristics (including qual¡ty-based ones)
 ldentify high-level proiect risks

Step 4: Identify Project products and activities

 ldentify and describe proiect products
 Document gener¡c product flows

Step 5: Estimation effort for each project

 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.

Step 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.
Step 7: Allocate resources
 Resource allocation is used to assign the available resources in an economic way.

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

Step 8: Review / publicize plan

 When a task is completed it leads to the quality review. These quality checks have to
be passed before the activity is completely signed-off.
 Every plan has to be documented and all stakeholders must have agreed to all
constraints and understand the project.

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Step 9: Execute plan / Low level planning
 Finally, the execution of the project is drawn with each specified activity as it is
approached.
 Detailed planning of later stages is necessary because more information will be
available than the start stage.
 Project planning and execution becomes an iterative process where as each activity
which is to be carried out approaches, they should be reviewed in detail.

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