MODULE 4

PROJECT MANAGEMENT
Estimated time required: 2 lecture sessions
Learning Outcomes
 Introduction on project management
 Cost/benefit analysis
 NPV, ROI, payback period
 Roles and responsibilities
 RACI chart
 Project planning
 LOC & FP estimations
 Project scheduling
 Gantt & PERT/CPM charts
 Risk management
Introduction on project management
Project management offers the project team tools for
effective action in the following
 Decide which tasks are required to complete the
project, when to perform each task, and what the
role of each person is in the project
 Convert plans into action

 Monitor progress and take action as required to

deliver the solution on time and on budget
 Use oral, visual and written media to inform clients
and managers about progress and results
Introduction on project management
 A successful project must be completed
 On time
 Within budget

 Deliver a quality product

 that satisfies users and meets requirements

Introduction on project management
 A typical project must balance between cost, scope
and time (aka a project triangle).
Introduction on project management
 Any change in one leg of the triangle will affect the
other two legs.
 For projects at risk, the fixed leg, problem leg and
remaining leg must be identified.
 If the problem is at the fixed leg, the other two legs
must be adjusted.
 If the problem is not at the fixed leg, the remaining leg
must be adjusted.
Introduction on project management
 Example: Project must not exceed the budget (cost)
and it is starting to run over. If budget is the fixed
leg (and also the problem leg), adjust schedule
(time), or scope, or both.

 Example: Project budget is inflexible (fixed leg)

and the schedule is slipping (problem leg) then
adjustment has to made to the scope (remaining
leg).
Cost/Benefit Analysis (CBA)
 Evaluating alternatives for their impact on
organizational performance forms a critical step in
system design.
 CBA identifies and quantifies the costs and benefits for
a solution and calculate a measure of merit, for
example
 net present value (NPV),
 return on investment (ROI), or
 payback analysis.

 The alternative with the highest score should be

selected.
Cost/Benefit Analysis (CBA)
 Applying CBA for a set of alternatives consists of
three steps
 Identifythe benefits and costs for each alternative
 Select an evaluation metric – NPV, ROI,…

 Rank the alternatives

Cost/Benefit Analysis (CBA)
Benefits from an IT solution can be the following:
 Cost reduction: achieving a functionality at the lowest
possible cost
 Cost displacement: substitutes an expensive current
process with a new lower cost process
 Cost avoidance: avoid costs that otherwise might occur
in the future
 Revenue and performance enhancement: enhance
revenue or other important measure of performance, eg
quality, customer satisfaction
 Risk reduction: reduction in the risk of incurring large
losses
Cost/Benefit Analysis (CBA)
Possible sources of cost include:
 Personnel: users, managers, trainers, consultants…

 Facilities: rental, construction, security features,

furniture…
 Information technology: hardware, software,
maintenance/upgrade fees…
Cost/Benefit Analysis (CBA)
Total costs include one-time and ongoing costs for the
following categories:
 Initial development

 Implementation

 Continuing operations
Cost/Benefit Analysis (CBA)
 Initial development: incur prior to startup of the
system – team salaries, consultants, hardware,
system and application software, network
connections and development tools.
 Implementation: incur at the time the new system
goes into operation – data conversion, testing,
training, parallel operation, and changing
organization and procedures.
Cost/Benefit Analysis (CBA)
 Continuing operations: incur over the entire life of
the system – utilities, hardware, software, ongoing
training, maintenance and upgrades, and users.

 The accumulation of all of the lifetime costs for a

system across all of the organizational units
affected by the system is called the total cost of
ownership (TCO).
Net present value (NPV)
 “A dollar earned today is worth more than a dollar
earned five years from now.”

 NPV analysis is a method of calculating the

expected net monetary gain or loss from a project
by discounting all expected future cash inflows and
outflows to the present point in time.
Net present value (NPV)
 A positive NPV means that the return from a project
exceeds the cost of capital.
 Projects with higher NPVs are preferred to ones
with lower NPVs.
Which is better?
Example
NPV terms
 Project completed in year 0 and cost/benefit is not
discounted right away.
 Values are discounted from year 1 beyond.
 Discount factor is calculated by 1/(1 + r)t
r is the discount rate
 t is the year

 Usually rounded to TWO decimal places

 Discounted cost/benefit is calculated by multiplying

the cost/benefit with the discount factor
NPV terms
 NPV is the total discounted benefits – the total
discounted costs
 Payback period is the amount of time required to
recoup the total dollars invested
 How much time will elapse before the cumulative
benefits overtake the cumulative costs
Return on investment (ROI)
 ROI = (total discounted benefits – total discounted
costs) / discounted costs
 ROI will always be a percentage but can be
negative or positive
 The higher the ROI the better the investment
 Example: if you invest $100 today and next year
it’s worth $110, your ROI is (110-100)/100 = 10%
Return on investment (ROI)
 Organizations usually have a required rate of
return.
 It is the minimum acceptable ROI on an investment
 The organization bases the required rate of return
on what it could expect to receive elsewhere for an
investment of comparable risk.
Payback analysis
 Payback period is the amount of time required to
recoup the total dollars invested
 How much time will elapse before the cumulative benefits
overtake the cumulative costs
 Payback occurs when the net cumulative benefit equal
the net cumulative costs
 Organization typically prefer a payback period of 6
to 24 months for an IT solution
 Example: If a new system costs $10,000 to create and
produces net benefits of $500 each month, the
payback period is 20 months.
Roles and responsibilities
 Identifying and describing roles and responsibilities
for project staff is necessary to ensure there is
accountability within the project.
 Defining roles, often used as job descriptions on a
project, will be the responsibility of the project
management office.
 Each member of the project team will need to know
 What is expected of them
 Who they will report to
 What will they be evaluated on
Sample summary of roles
Sample detailed description of roles
RACI charts
 RACI charts show four key roles for project
stakeholders
 Responsibility: who does the task?
 Accountability: who signs off on the task of has
authority for it?
 Consultation: who has information necessary to
complete the task?
 Informed: who needs to be notified of task status and
results?
RACI charts
 List tasks vertically
 List individuals/groups horizontally
 Each intersecting cell contains R, A, C, or I
 Each task can have multiple R, C, or I entries
 Only one A entry per row to clarify who is accountable
for each task
Example

 Mechanic is responsible for installing the parts but

the shop owner is accountable for the installation
being done properly
Project planning
 Includes identifying all project tasks and estimating
the completion time and cost of each.
Estimation
 “Planning requires you to make an initial
commitment, even though it’s likely that this
commitment will be proven wrong. Whenever
estimates are made, you look into the future and
accept some degree of uncertainty as a matter of
course.” – Pressman
Estimation
 Software project estimation can be a series of steps
that provide estimates with acceptable risks.
 The options are:
1. Delay estimation until late in the project
2. Base estimates on similar projects
3. Use relatively simple decomposition techniques
4. Use one or more empirical models
Estimation
Delay estimation until late in the project
 Can achieve 100% accuracy if after project

completed.
 Obviously not practical because estimates need to be

provided up-front.
 But the longer you wait, the more you know and the
less likely a serious error is made in the estimates
Estimation
Base estimates on similar projects
 Base on similar projects that have been completed.

 Can work reasonably well if project influences (eg

customer, business conditions, deadlines) are roughly
equivalent.
 Past experience may not always be a good indicator
of future results.
Estimation
Use relatively simple decomposition techniques
 Take a divide-and-conquer approach.

 By decomposing to major functions and activities,

costs and effort estimation can be performed in
stepwise fashion.
Estimation
Use one or more empirical models
 Can be used to complement decomposition

techniques.
 A model is based on experience (historical data) and

takes the form

𝑑 = 𝑓 𝑣𝑖
◼𝑑 is one of a number of estimated values (eg cost, effort,
project duration)
◼ 𝑣𝑖 is the selected independent parameters (eg estimate line
of code, function points)
Decomposition Techniques:
Software size
 Size refers to the quantifiable outcome of the project
 A project estimation is only as good as the estimate of
the size of the work to be accomplished.
 If a direct approach is taken, size can be measured in
lines of code (LOC).
 If an indirect approach is taken, size can be measured
as function points (FP).
 FP measures the functionality delivered by the system.
 Subjective, does not have direct physical meaning, difficult
to collect after the fact.
Decomposition Techniques:
Software size
 Estimate a range of values using historical or intuition
for each function or count for each information domain
value.
 Optimistic, Most likely, Pessimistic

 The expected value for the estimation variable (size)

𝑆 can be computed as a weighted average of the
optimistic (𝑆𝑜𝑝𝑡 ), most likely (𝑆𝑚 ), and pessimistic (𝑆𝑝𝑒𝑠𝑠 )
estimates.
𝑆𝑜𝑝𝑡 +4𝑆𝑚 + 𝑆𝑝𝑒𝑠𝑠
 𝑆=
6
Decomposition Techniques:
LOC-based estimation
Problems with LOC
 Programming language dependent

 A report or GUI generator can generate thousands

of lines of codes in minutes

 Complexity of code is based on the software
Decomposition Techniques:
LOC-based estimation
 Identify the major software functions then estimate
the LOCs.

 Eg: The range of LOC estimates for the “3D

geometric analysis” function is
 Optimistic – 4600 LOC
 Most likely – 6900 LOC

 Pessimistic – 8600 LOC

 Therefore the expected value would be 6800 LOC.

Decomposition Techniques:
LOC-based estimation
Decomposition Techniques:
LOC-based estimation
 Based on historical data, the average productivity
for these type of system is
 620 LOC / person-month
 Labor rate of $8,000 per month

 Each LOC is $13

33,200
 Estimated effort is = 54 person-months
620
 Estimated total costs is 54 𝑥 8,000 = $432,000

#Person-month is the amount of work performed on average by a

worker for one month
Decomposition Techniques:
FP-based estimation
 Focus on information domain values
Steps
1. Estimate inputs, outputs, inquiries, files and
external interfaces
2. Classify each component to be weighted as
simple, average or complex
3. Compute the value adjustment factor
4. Estimate the FP
Decomposition Techniques:
FP-based estimation
Decomposition Techniques:
FP-based estimation
 Step 3: Assign a value from 0 (“not present”) to 5
(“strong influence throughout”) to each of 14 factors
 Add up each factor, 𝐹𝑖
Decomposition Techniques:
FP-based estimation
 Step 4:
𝐹𝑃𝑒𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 = 𝑐𝑜𝑢𝑛𝑡 𝑡𝑜𝑡𝑎𝑙 𝑋 (0.65 + 0.01 𝑋 ෍ 𝐹𝑖 )

𝐹𝑃𝑒𝑠𝑡𝑖𝑚𝑎𝑡𝑒𝑑 = 320 𝑋 0.65 + 0.01 𝑋 52 = 375

Decomposition Techniques:
FP-based estimation
 Based on historical data, the average productivity
for these type of system is
 6.5FP/person-month
 Labor rate of $8,000 per month

 Each FP is $1230

375
 Estimated effort is = 58 person-months
6.5
 Estimated total costs is 58 𝑥 8,000 = $464,000
Empirical estimation model:
COCOMO II model
 COnstructive COst MOdel
 Addresses the following
 Application composition model. Used during early
stages (eg when prototyping interfaces, consideration
of system interaction, assessment of performance, etc).
 Early design stage model. Used once requirements
stabilized and basic architecture established.
 Post-architecture-stage model. Used during
construction of system.
COCOMO II model
 Sizing options available
 Function points, lines of code, object points

 Object point is an indirect software measure that is

computed using counts of the number of
 screens (at the user interface)
 reports
 components likely to be required to build the application
 Object point is then multiplied with the complexity
weightage
 The summed up to obtain the total object point count
COCOMO II model
 Object points need to be discounted if the project is
a component based development or a general
software reuse.
 Then the new object point is divided by the
productivity rate to determine the estimated effort.
 Productivity
rate differs for levels of developer
experience and development environment maturity.
Project scheduling
 Involves the creation of a specific timetable, usually
in the form of charts that show tasks, dependencies
and critical tasks that might delay project.
 Involves selecting and staffing the project team and
assigning tasks to team members.
 Uses Gantt charts and PERT/CPM charts.
Gantt chart
 A Gantt chart is a bar chart with project
activities on the left and time across the top.
 For each activity, a bar of expected time is

drawn from the scheduled starting date to the

ending date.
 As activities are completed, the bar is filled in.
Gantt chart
 Advantage:
 Ableto show graphically the entire schedule for a
large, complex project, including progress to date
and status.
 Disadvantage:
 The chart does not show the relationship between
activities like the PERT chart does.
Gantt chart
PERT/CPM
 Program Evaluation Review Technique (PERT); Critical
Path Method (CPM)
 A PERT diagram requires that all activities in a project
be identified along with the activities that precede
and follow them.
 These activities are used to draw a PERT diagram,
which consists of a network of:
 Arrows—representing activities that require time and
resources.
 Nodes—representing completion and initiation of activities.
PERT/CPM
 Completion time estimates are made, and the
critical path is determined.
 Criticalpath—the path requiring the greatest
amount of time.
 If any activity on the critical path is delayed, the
whole project is delayed.
 Resources may be shifted to the critical path to
reduce the delay.
PERT/CPM

3d 4d

1d 1d
3d 2d 2d

5d 6d

 Available paths:
 1-2-3-5-7-8 = 12 days
 1-2-3-6-7-8 = 9 days
 1-2-4-8 = 14 days
 Critical path: 1-2-4-8
Tracking
 If properly developed, project scheduling becomes
a road map that defines tasks and milestones to be
tracked and controlled as the project proceeds.
Tracking
 Tracking can be done by:
 Periodic project status meetings where team member reports
progress and problems.
 Evaluating results of reviews conducted throughout

 Determining if project milestones have been accomplished

 Comparing planned to actual start date for each project

task
 Informal meeting with members to obtain subjective
assessment
 Using earned value analysis
Earned value analysis
 A quantitative analysis compared to the other 5
qualitative approach to project tracking.
 Enables the assessment of “percentage of
completeness”.
Earned value analysis
Step #1:
 Budgeted cost of work scheduled (BCWS) is
determined for each work task in the schedule.
 During estimation, the work (in person-month, or
person-days) for each task is planned.
 To determine progress at a given point along the
project schedule, the value of BCWS is the sum of
the BCWSi values for all work tasks that should
have been completed by that point in time on the
project schedule.
Earned value analysis
Step #2:
 The BCWS values for all work tasks are summed to

derive the budget at completion, BAC.

 Hence, BAC = ∑ (BCWSk) for all tasks k
Earned value analysis
Step #3:
 Next, the value for budgeted cost of work

performed (BCWP) is computed.

 The value for BCWP is the sum of the BCWS values

for all work tasks that have actually been

completed by a point in time on the project
schedule.
BCWS vs BCWP
 The distinction between the BCWS and the BCWP is
that
 the BCWS represents the budget of the activities that
were planned to be completed and
 the BCWP represents the budget of the activities that
actually were completed
Earned value analysis
Schedule performance index, SPI = BCWP/BCWS
 SPI is an indication of the efficiency with which the
project is utilizing scheduled resources.
 An SPI value close to 1.0 indicates efficient
execution of the project schedule.

Schedule variance, SV = BCWP – BCWS

 SV is simply an absolute indication of variance from
the planned schedule.
Earned value analysis
Percent scheduled for completion = BCWS/BAC
 Provides an indication of the percentage of work

that should have been completed by time, t

Percent complete = BCWP/BAC

 Provides a quantitative indication of the percent of

completeness of the project at a given point in time,

t
Risk management
 Risk management is the process of identifying,
analyzing, anticipating and monitoring risks to
minimize their impact on the project.
Reactive vs Proactive strategies
Reactive
 Majority of software teams rely on reactive risk

strategies.
 Does nothing about risks until something goes wrong.

 When the attempt to correct the problem fails, crisis

management takes over and the project will be in
jeopardy.
Reactive vs Proactive strategies
Proactive
 More intelligent strategy for risk management.

 Potential risks are identified, their probability and

impact are assessed and they are ranked by

importance.
 The a plan is established to manage the risks.

 Although the primary plan is to avoid risk,

contingency plans are developed to enable

controlled and effective response.
Risk management
Sources of risk can be the following:
 Technology and vendor: Vendor and customer

miscommunication. Delivered product does not meet

customer needs.
 Staff: May not begin project with adequate staff or

staff leave during project. Risk of key staff

members leaving. Staff may not have enough
experience or knowledge.
Risk management
 Sponsor: Sponsor may leave or be overruled by a
superior. Get into control struggle with another
senior person and demand features impossible to
implement.
 Competition: System may promise large benefits
because it offers features that competitors do not
have. However, by the time the system is ready, the
competitors have as good or better systems in
place.
Risk management
The development team can help the client to reduce risk
by:
 Following safe design practices

 Keep client informed of possible risks/problems

 Make both client and sponsor understand the risk of the

solution
 Provide backup for high risk alternative

 Use a shorter payback period for higher risk

alternative
 Use judgment to get a ranking of alternatives that
combines cost/benefit and risk
Risk management
Some discussions about risks
1. Risk goes up with size as measured in person
months to complete the project.
 Small projects are low risk because they are easy to
manage and if they fail, not much is lost.
2. Risk goes up with lack of familiarity and
experience.
 A website developer on an android application
project runs a higher risk if the developer is not
familiar with the development environment.
Risk management
3. Risk goes up with emerging technologies.
 Lack of experience with the new technology is a risk
but there could also be unexpected problems with the
technology itself.
Basic steps in risk management
1. Develop a risk management plan
2. Identify the risks
3. Analyze the risks
Basic steps in risk management
Develop a risk management plan
 A risk management plan includes a review of the

project’s scope, stakeholders, budget, schedule, and

any other internal or external factors that may
affect the project.
 The plan should define roles and responsibilities,

risk management methods and procedures,

categories of risks and contingency plans.
Basic steps in risk management
Identify the risks
 List each risk and identify the likelihood that it could

affect the project.

 Would include a means of identification, and a

brief description of the risk, what might cause it to

occur, who would be responsible for responding and
the potential impact of the risk.
Basic steps in risk management
Analyze the risk
 Two step process:-

 qualitative risk analysis

 Evaluateseach risk by estimating the probability it

would occur and the degree of impact.
 quantitative risk analysis.
 To understand the impact in terms of dollars, time,
scope or quality.
END
References
 Van Horn RL, Schwarzkopf AB, Price RL. Information
systems solutions. Ch3 Project Management, Ch9
Alternatives, Evaluation and Recommendation
 Rosenblatt. Systems analysis and design. Ch3
Managing systems projects
 Schwalbe K. Information technology project
management. Ch4 Project integration management,
Ch9 Project human resource management
References
 Motiwalla LF, Thompson J. Enterprise systems for
management. Ch 9 Organizational change and
business process reengineering
 Pressman RS. Software Engineering: A practitioner’s
approach. Ch26 Estimation for software projects,
Ch27 Project scheduling.
 Romney MB, Steinbart PJ. Accounting Information
Systems. Ch20 Introduction to Systems Development
and Systems Analysis.