Software Project

Management
Chapter 3
4th Edition

Programme
management and
project evaluation

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Main topics to be covered
• Programme management
• Benefits management
• Project evaluation
– Cost benefit analysis
– Cash flow forecasting
• Project risk evaluation

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 Programme management
• D.C. Ferns defined:
‘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’

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 Programmes may be
• Strategic – several projects together can implement a single
strategy
– Merging of two organizations could involve the creation of unified
payroll and accounting applications

• Business cycle programmes – collection of projects that an

organization undertakes within a particular planning cycle is
referred to as a portfoilo
– Projects to implement within the budget within the accounting
period

• Infrastructure programmes – sharing of application between

departments

• Research and development programmes-risk associated with an

innovative projects fluctuate

• Innovative partnerships - www

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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
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Projects sharing resources

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 Strategic programmes
• Different form of programme
management is where a portfolio of
projects all contribute to a common
objective.
• Business objective might be to present a
consistent and uniform front to the clients.

• Based on OGC guidelines

– PRINCE & PRINCE2 project management

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Prince2 8
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Creating a programme - PPVB
• 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

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• The programme brief – equivalent of
a feasibility study for the programme

– Vision statement
– The benefits
– Risks and issues
– Estimated costs, timescales and effort

• The vision statement – explains the

new capability that programme will give
the organization
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• The blueprint – explains the changes
to be made to obtain the new capability
– Business models outlining the new
processes required
– Organizational structure – including the
numbers of staff required in the new
systems and skills they will need
– The information systems, equipment and
other, non staff resources – needed
– Data and information requirement
– Costs, performance and service level
requirements

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Aids to programme management
• Dependency diagrams

A. System study/design
B. Corporate image design
C. Build common systems
D. Relocate offices
E. Training
F. Data migration
G. Implement corporate interface

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• Delivery planning
– Delivery dependency diagram – precursor
to programme planning
– Tranche is a group of projects that will
deliver their products as one step in the
programme
– Tranches – deliverables – tangible benefits

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 Benefits management
developers users organization

use for

the
benefits
application
build
to
deliver
•Identification , optimization and tracking of the expected benefits
from a business change in order to ensure that they are actually
acheived

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 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
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 Benefits types
• Mandatory compliance
• Quality of service
• Productivity
• More motivated workforce
• Internal management benefits
• Risk reduction
• Economy
• Revenue enhancement / acceleration
• Strategic fit

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 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
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• Evaluation of individual proejcts

• Technical assessment
– Evaluating the required functionality
against the hardware and software
available
– Constraints

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 Cost-benefit analysis
• Identifying and estimating all of the
costs and benefits of carrying out the
project and operating the delivered
application
• Expressing these costs and benefits in
common units

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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

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Over to white board

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 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
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 Pay back period
This is the time it takes to start generating a surplus
of income over outgoings. What would it be below?

Year Cash-flow Accumulated

0 -100,000 -100,000
1 10,000 -90,000
2 10,000 -80,000
3 10,000 -70,000
4 20,000 -50,000
5 100,000 50,000
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Return on investment (ROI)

ROI = Average annual profit X 100

Total investment

In the previous example

• average annual profit
= 50,000/5
= 10,000
• ROI = 10,000/100,000 X 100
= 10%
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 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
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 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
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 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

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 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

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•Calculate the NPV for the given data of three projects and decide
the best project. Consider interest rate as 7% for project A ,8% for
project B and 9% for project C .
Discount Factor=1/(1+r)t
Best project is ?
NPV= sum of Discounted cash flow
Year Project A Project B Project C

0 -8000 -8000 -10000

1 4000 1000 2000

2 4000 2000 2000

3 2000 4000 6000

4 1000 3000 2000

5 500 9000 2000

6 500 -6000 2000

Net Profit 4000 5000 6000

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 Risk evaluation
• Risk identification and ranking
• Risk and net present value
• Cost-benefit analysis
• Risk profile analysis
– Monte carlo simulation
– Decision tree

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 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
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Example of a project risk
matrix

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Decision trees

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 Monte Carlo Simulation
• The main idea behind this method is that the results are computed
based on repeated random sampling and statistical analysis.
• The Monte Carlo simulation is in fact random experimentations, in the
case that, the results of these experiments are not well known.
• Monte Carlo simulations are typically characterized by a large number
of unknown parameters, many of which are difficult to obtain
experimentally.[48]
• Many of the most useful techniques use
deterministic, pseudorandom sequences, making it easy to test and re-
run simulations. The only quality usually necessary to make
good simulations is for the pseudo-random sequence to appear
"random enough" in a certain sense.

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 Sawilowsky lists the characteristics of a high
quality Monte Carlo simulation:

• the (pseudo-random) number generator has certain

characteristics (e.g., a long "period" before the sequence
repeats)
• the (pseudo-random) number generator produces values that
pass tests for randomness
• there are enough samples to ensure accurate results
• the proper sampling technique is used
• the algorithm used is valid for what is being modeled
• it simulates the phenomenon in question.

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 Application
• In microelectronics engineering, Monte Carlo methods are applied to analyze
correlated and uncorrelated variations in analog and digital integrated circuits.
• In geostatistics and geometallurgy, Monte Carlo methods underpin the design
of mineral processing flowsheets and contribute to quantitative risk analysis.
• In wind energy yield analysis, the predicted energy output of a wind farm during
its lifetime is calculated giving different levels of uncertainty (P90, P50, etc.)
• impacts of pollution are simulated[59] and diesel compared with petrol.[60]
• In fluid dynamics, in particular rarefied gas dynamics, where the Boltzmann
equation is solved for finite Knudsen number fluid flows using the direct
simulation Monte Carlo [61]method in combination with highly efficient
computational algorithms.[62]

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 Application
• In autonomous robotics, Monte Carlo localization can determine the position of
a robot. It is often applied to stochastic filters such as the Kalman
filter or particle filter that forms the heart of the SLAM (simultaneous localization
and mapping) algorithm.
• In telecommunications, when planning a wireless network, design must be
proved to work for a wide variety of scenarios that depend mainly on the
number of users, their locations and the services they want to use. Monte Carlo
methods are typically used to generate these users and their states. The
network performance is then evaluated and, if results are not satisfactory, the
network design goes through an optimization process.
• In reliability engineering, one can use Monte Carlo simulation to generate mean
time between failures and mean time to repair for components.
• In signal processing and Bayesian inference, particle filters and sequential Monte
Carlo techniques are a class of mean field particle methods for sampling and
computing the posterior distribution of a signal process given some noisy and
partial observations using interacting empirical measures.

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 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
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