Introducing the 3 L’s – Live, Laugh, and Learn!

Jennifer Brower PM 589

Course Project Part II Introducing the 3L’s - Live, Laugh, and Learn! Jennifer Brower PM 589 October 22, 2006

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Introducing the 3 L’s – Live, Laugh, and Learn!

Jennifer Brower PM 589

Risk Analysis
Five risks may seriously affect this project: Risks Problems with teachers’ unions. Impact Score High Probability Score High Combined Score 3

The contractors create code that Medium High 2.5 is nowhere near close to specifications. The system architecture originally High Medium 2.5 planned is insufficient for the project’s needs. Resources needed to complete High Medium 2.5 critical elements of the project are not available on time. The existing component planned High Medium 2.5 to handle the shopping cart is no longer compatible with the operating system that was chosen. Key: Impact Score High = 3, Medium = 2, Low =1 / Probability Score High = 3, Medium = 2, Low =1 Risk #1

Risk Identification

The first risk to be managed reads as follows: “Problems with teachers’ unions.” It has a Combined Score of 3, meaning that the Probability of the risk occurring is High and Impact of the risk would be High. If teachers’ unions become afraid that the 3L Network will cause teachers to be laid off or for schools to lose funds, the probability of the remaining employees being upset or skittish about their own jobs is high. The impact would be high because the teachers’ involvement is integral to making the service valuable. Motivation through fear does not facilitate a positive working environment.

Risk Quantification (potential $ loss)

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Introducing the 3 L’s – Live, Laugh, and Learn!

Jennifer Brower PM 589

This could potentially cause a loss of the government grant of $1,840,396; though, the homeschooler & religious institutions’ subscriber count would skyrocket. If this occurs, the payoff will come later after the system goes live.

Risk Response Development

It is necessary to mitigate and possibly share the risks. It is necessary to accept this risk. A backup plan is needed to ensure that the initial development costs covered. Relationships are already being developed with homeschooling, religious, and conservative organizations in case the need to raise funds arises. Additionally, it would be possible to raise the initial development costs via a small business loan, taking advantage of the company’s minority owned status when doing so.

Risk Response Control

This risk will be placed in the risk register due to its high impact and probability score. It will be monitored on a daily basis and assessed during a weekly Risk Management meeting. The Senior Management will maintain a relationship with the teachers’ unions and government officials to ensure that the project provides a benefit to them, as well as those who prefer an alternative to the public school system.

Risk #2

Risk Identification

The next risk is: “The contractors create code that is nowhere near close to specifications.” Like the first risk, it too has a Combined Score of 2.5, meaning that the Probability of the risk occurring is High and Impact of the risk would be Medium. Often, Project Managers have no concept of contractor’s needs or motivating factors.

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Introducing the 3 L’s – Live, Laugh, and Learn!

Jennifer Brower PM 589

They also tend to think of contractors as an expendable resource. Some developers, particularly the inexpensive ones, are fresh out of college and have no experience is planning or analyzing problems. The probability of this occurring can be high. The impact of this risk could be medium because even though they tend to be inexperienced, contractors tend to be devoted to their work.

Risk Quantification (potential $ loss)

This could potentially cause a need to hire or replace programmers and managers. If a new or additional senior programmer were required to fix errors or to ensure the project is completed on time, the rate would be $55/hr. If one programmer’s entire 6 months worth of development needs to be redone, that would require an additional senior programmer’s salary of $57,200. Potentially, up to three senior programmers may be needed and this would cost an additional $171,600.

Risk Response Development

It is necessary to avoid or possibly transfer the risks to a third party. It is necessary to accept this as a potential risk. It is important to ensure that good programmers are hired and managed by an expert technical team lead.

Risk Response Control

This risk will also be placed in the risk register due to its medium impact and high probability score. A task list consisting of the WBS codes will be developed that determines the length each task is expected to take. It will be monitored on a weekly basis via project status reports. The Project Manager will meet with the Technical Team Lead during biweekly Risk Management meetings to review these reports.

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Introducing the 3 L’s – Live, Laugh, and Learn!

Jennifer Brower PM 589

Team development team will hold weekly meetings to discuss any unforeseen issues and the status of the module developments. If the team needs any additional information or approvals, they will discussed at that time. Also, the Team Lead will have an open door policy where programmers can ask questions or make suggestions at any time. Additionally, the Team Lead will perform monthly code reviews for the staff. The development team’s input is needed and welcome. Communication is vital to the success of this project!

Risk #3

Risk Identification

The third risk is: “The system architecture originally planned is insufficient for the project’s needs.” The Probability of the risk occurring is Medium and Impact of the risk would be High. Therefore, the Combined Score is slightly less at 2.5. Often, the system architecture is a second thought when planning the software and assessing the project’s needs. This could have a very negative impact is severely neglected.

Risk Quantification (potential $ loss)

This could potentially cause a need to temporarily increase the workload of a programmer. If a new or additional senior programmer were required to fix errors or to ensure the project is completed on time, the rate would be $55/hr. If one programmer needs to do an additional 160 hours worth of development, that would require an additional senior programmer’s salary of $8,800.

Risk Response Development

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Introducing the 3 L’s – Live, Laugh, and Learn!

Jennifer Brower PM 589

This risk would be transferred to a third party called EDS. EDS handles the hardware, backup, disaster recovery, and business continuity planning. It is necessary to accept this as a potential risk. Potentially, a programmer or two may need to do extra work to adapt the system to the new needs.

Risk Response Control

This risk will also be placed in the risk register due to its high impact and medium probability score. The system architecture needs will be monitored on a weekly basis. The Project Manager will discuss this issue with the Technical Team Lead monthly during the Risk Management meetings.

The development team will also discuss this issue during weekly meetings to discuss any unforeseen issues and the status of the module developments. Again, the Team Lead will have an open door policy with the programmers.

Risk #4

Risk Identification

The fourth risk is: “Resources needed to complete critical elements of the project are not available on time.” The Probability of the risk occurring is Medium and Impact of the risk would be High. Therefore, the Combined Score is slightly less at 2.5. It is generally possible to schedule resources effectively. However, there is a moderate chance that problems will arise, especially when people are involved. The impact of not having essential resources available can be quite high.

Risk Quantification (potential $ loss)

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Introducing the 3 L’s – Live, Laugh, and Learn!

Jennifer Brower PM 589

It may be necessary to switch the order of functions being developed. Since all the equipment and labor are available from the beginning to end of the project, new resources will not be brought into the project. So, the only risk is that a computer breaks down or a programmer needs to be replaced.

This could potentially cause a need to replace a junior programmer with a new senior programmer to carry the load. If a new or additional senior programmer were required, the rate would be $55/hr rather than $30/hr for a junior programmer. This is an additional $25/hr. If one programmer needs to do an additional 160 hours worth of development, that would require an additional senior programmer’s salary of $4,000 per month. So, the total additional cost would be between $4,000 and $24,000 for 6 months of development.

Risk Response Development

This risk would be mitigated. It is necessary to accept this as a potential risk. A junior programmer may need to be replaced with a senior programmer who could get the tasks completed quickly and effectively. Alternatively, a laptop may need to be replaced.

Risk Response Control

This risk will also be placed in the risk register due to its high impact and medium probability score. The AON diagram and task lists will be monitored on a weekly basis. The Project Manager will discuss this issue with the Technical Team Lead weekly during the Risk Management meetings. In addition, the Team Lead will ask all staff to inform him of any needs for new software or hardware.

Risk #5

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Introducing the 3 L’s – Live, Laugh, and Learn! Risk Identification

Jennifer Brower PM 589

The last risk to be discussed is: “The existing component planned to handle the shopping cart is no longer compatible with the operating system that was chosen.” The Probability of the risk occurring is Medium and Impact of the risk would be High. Therefore, the Combined Score is 2.5. The impact of having a component fail that was expected to work is extremely high. It would require a major rescheduling of the project and potentially a need to hire programmers to fix the problem. The probability for this to happen is medium since business people tend to rely on components but have no idea how they work or what will break them. They also tend to ignore advice from programmers.

Risk Quantification (potential $ loss)

This could potentially cause a need to replace a junior programmer with a new senior programmer to create or assist in adapting a new shopping cart technology. If a new or additional senior programmer were required, the rate would be $55/hr rather than $30/hr for a junior programmer. This is an additional $25/hr. If one programmer needs to do an additional 160 hours worth of development, that would require an additional senior programmer’s salary of $4,000 per month. So, the total additional cost would be between $4,000 and $24,000 for 6 months of development. Also, EDS could provide a newer shopping cart that works with there servers at $100 per month.

Risk Response Development

This risk would be transferred and mitigated. It is necessary to accept this as a potential risk. A new technology would be purchased and then adapted to work

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Introducing the 3 L’s – Live, Laugh, and Learn!

Jennifer Brower PM 589

with the existing system. A junior programmer may need to be replaced with a senior programmer who could fix the shopping cart quickly and effectively.

Risk Response Control

This risk will also be placed in the risk register due to its high impact and medium probability score. The Project Manager will discuss this issue with the Technical Team Lead at the beginning of the project and then a month prior to the beginning of the task during the Risk Management meetings. And, the Team Lead will ask all staff to inform him of any needs for new software or hardware.

Economic Analysis
Depreciation

Depreciation is not a concern. The 3L Network only owns the software. It does not own the servers or equipment being used. Also, the office space is being provided by a partner company that will handle any depreciation to office equipment, etc.

PW

With an interest rate of 10%, initial investment of $2,337,816 and the following cash flows over a three year time period: CF for Year 1 $1,158,096 CF for Year 2 $2,316,192 CF for Year 3 $2,547,811 PW = (2,337,816) + 1,158,096 (P/F,10%,1) + 2,316,192 (P/F,10%,2) + 2,547,811 (P/F,10%,3) PW = (2,337,816) + 1,158,096(0.9091) + 2,316,192 (0.8264) + 2,547,811 (0.7513)

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Introducing the 3 L’s – Live, Laugh, and Learn! PW = (2,337,816) + 1,052,825.07 + 1,914,101.07 + 1,914,170.55 The PW is 2,543,280.69. FW

Jennifer Brower PM 589

The savings at the end of Year 3 is $2,547,811 and is expected to increase $254,781 annually until the end of Year 7. The MARR is 20%.

[2,337,816 + $254,781(A/G 20,5)](F/A 20,5) [2,337,816 + $254,781(1.6405)](7.4416) 2,337,816 + 417,968.23(7.4416) The FW is $20,507,443.93 by the end of Year 7.

Payback Period

$2,337,816.00 is the Initial Investment $1,052,825.07 is the net benefit in Year 1 $2,316,192 is the net benefit in Year 2 Payback Period is 1.55 years.

Sensitivity Analysis

The first year’s profit will be $1,052,825.07 and there is no salvage value. Assume a MARR of 10% for 3 years.

Cash Flow Estimates ($000s) Item Annual Revenues Annual Expenses Lower Limit 6,993 5,198 Base 7,770 5,776 Upper Limit 8,547 6,354

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Introducing the 3 L’s – Live, Laugh, and Learn! Solution: PW(Lower): = (6,993,000 – 5,198,000)(P/A,10%,3) = 1,795,000(2.4869) PW(Lower)= $4,463,985.50 PW(Base): = (7,770,000 – 5,776,000)(P/A,10%,3) = 1,994,000(2.4869) PW(Base)= $4,958,878.60 PW(Upper): = (8,547,000 – 6,354,000)(P/A,10%,3) = 2,193,000(2.4869) PW(Upper)= $5,453,771.50

Jennifer Brower PM 589

Based on the estimated range of cash flows, the project should proceed because all scenarios have a positive PW.

Rationale for Acceptance
Project Summary & Argument

This project, Introducing the 3L’s - Live, Laugh, and Learn!, or the 3L’s, is an educational software subscription service that is in demand by the target audience of teachers, parents, and students at the K-12 levels. This service would also provide a means for home schoolers to pool their resources and share their knowledge. The goal of the 3L network is to encourage the joy of learning and to facilitate interaction among those involved in educating children. The 3L Network staff would upload lessons, videos, online encyclopedia, reference materials, interactive maps, and language lab etc to the Educational

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Introducing the 3 L’s – Live, Laugh, and Learn!

Jennifer Brower PM 589

Materials module. Each uploaded item can be shared publicly or within a private group and can be labeled by interest; i.e. “Christian-friendly” or “German.” The Educational Requirements module would indicate the requirements that each state has for each grade. It would also act as a repository for legal forms pertaining to home schooling. The Message Board module would be provide discussion areas like “Homework Help” for students, “Coffee Clutch” for the home schooling parents, and “Around the Apple” for parents and teachers to discuss problems with lessons, as well as issues like bullying. There is an educational Games module. Finally, the 3L Network Store would use a very simple shopping cart technology that sells items like flash cards, maps, and tickets to field trip-type events like Renaissance Faires and museums.

This project will easily make a profit within the first year and is expected to have an annual increase in revenues by 10% each year if no additional modules or enhancements are made to the system. Costs are low and well managed. The Sensitivity Analysis shows a positive Present Worth in the worst, expected, and best case scenarios. The risk of failure is very low. The project’s Payback Period is a mere 1.55 years. The Present Worth is $2,543,280.69. The Future Worth is

$20,507,443.93 by the end of Year 7 All that would be required to create this network that has been demanded by the target audience would be achieved via an initial investment of $2,337,816 given by a government grant. To not proceed with this project would be a great mistake!

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