UNIT 1

SOFTWARE PROJECT MANAGEMENT

What is Project?

A project is a group of tasks that need to complete to reach a

clear result. A project also defines as a set of inputs and outputs
which are required to achieve a goal. Projects can vary from
simple to difficult and can be operated by one person or a
hundred.

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.

In software Project Management, the client and the developers

need to know the length, period and cost of the project.

Prerequisite of software project management?

There are three needs for software project management. These

are:

1. Time
2. Cost
3. Quality

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 affect the other two.

Project Manager

A project manager is a character who has the overall

responsibility for the planning, design, execution, monitoring,
controlling and closure of a project. A project manager
represents an essential role in the achievement of the projects.

A project manager is a character who is responsible for giving

decisions, both large and small projects. The project manager is
used to manage the risk and minimize uncertainty. Every
decision the project manager makes must directly profit their
project.

Role of a Project Manager:

1. Leader

A project manager must lead his team and should provide them
direction to make them understand what is expected from all of
them.

2. Medium:

The Project manager is a medium between his clients and his

team. He must coordinate and transfer all the appropriate
information from the clients to his team and report to the senior
management.

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.
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.

Activities
Software Project Management consists of many activities, that
includes planning of the project, deciding the scope of product,
estimation of cost in different terms, scheduling of tasks, etc.

The list of activities are as follows:

1. Project planning and Tracking

2. Project Resource Management
3. Scope Management
4. Estimation Management
5. Project Risk Management
6. Scheduling Management
7. Project Communication Management
8. Configuration Management

Now we will discuss all these activities -

1. Project Planning: It is a set of multiple processes, or we can

say that it a task that performed before the construction of the
product starts.

2. Scope Management: It describes the scope of the project.

Scope management is important because it clearly defines what
would do and what would not. Scope Management create the
project to contain restricted and quantitative tasks, which may
merely be documented and successively avoids price and time
overrun.
3. Estimation management: This is not only about cost
estimation because whenever we start to develop software, but
we also figure out their size(line of code), efforts, time as well
as cost.

If we talk about the size, then Line of code depends upon user or
software requirement.

If we talk about effort, we should know about the size of the

software, because based on the size we can quickly estimate
how big team required to produce the software.

If we talk about time, when size and efforts are estimated, the
time required to develop the software can easily determine.

And if we talk about cost, it includes all the elements such as:

o Size of software
o Quality
o Hardware
o Communication
o Training
o Additional Software and tools
o Skilled manpower

4. Scheduling Management: Scheduling Management in

software refers to all the activities to complete in the specified
order and within time slotted to each activity. Project managers
define multiple tasks and arrange them keeping various factors
in mind.

For scheduling, it is compulsory -

o Find out multiple tasks and correlate them.

o Divide time into units.
o Assign the respective number of work-units for every job.
o Calculate the total time from start to finish.
o Break down the project into modules.
5. Project Resource Management: In software Development,
all the elements are referred to as resources for the project. It can
be a human resource, productive tools, and libraries.

Resource management includes:

o Create a project team and assign responsibilities to every

team member
o Developing a resource plan is derived from the project
plan.
o Adjustment of resources.

6. Project Risk Management: Risk management consists of all

the activities like identification, analyzing and preparing the
plan for predictable and unpredictable risk in the project.

Several points show the risks in the project:

o The Experienced team leaves the project, and the new

team joins it.
o Changes in requirement.
o Change in technologies and the environment.
o Market competition.

7. Project Communication Management: Communication is

an essential factor in the success of the project. It is a bridge
between client, organization, team members and as well as other
stakeholders of the project such as hardware suppliers.

From the planning to closure, communication plays a vital role.

In all the phases, communication must be clear and understood.
Miscommunication can create a big blunder in the project.

8. Project Configuration Management: Configuration

management is about to control the changes in software like
requirements, design, and development of the product.

The Primary goal is to increase productivity with fewer errors.

Some reasons show the need for configuration management:

 o Several people work on software that is continually
update.
o Help to build coordination among suppliers.
o Changes in requirement, budget, schedule need to
accommodate.
o Software should run on multiple systems.

Tasks perform in Configuration management:

o Identification
o Baseline
o Change Control
o Configuration Status Accounting
o Configuration Audits and Reviews

People involved in Configuration Management:

Project Estimation
For an effective management accurate estimation of various
measures is a must. With correct estimation managers can
manage and control the project more efficiently and effectively.
Project estimation may involve the following:
 Software size estimation
Software size may be estimated either in terms of KLOC
(Kilo Line of Code) or by calculating number of function
points in the software. Lines of code depend upon coding
practices and Function points vary according to the user or
software requirement.

 Effort estimation
The managers estimate efforts in terms of personnel
requirement and man-hour required to produce the
software. For effort estimation software size should be
known. This can either be derived by managers’
experience, organization’s historical data or software size
can be converted into efforts by using some standard
formulae.
 
 Time estimation
Once size and efforts are estimated, the time required to
produce the software can be estimated. Efforts required is
segregated into sub categories as per the requirement
specifications and interdependency of various components
of software. Software tasks are divided into smaller tasks,
activities or events by Work Breakthrough Structure
(WBS). The tasks are scheduled on day-to-day basis or in
calendar months.

The sum of time required to complete all tasks in hours or
days is the total time invested to complete the project.

 Cost estimation
This might be considered as the most difficult of all
because it depends on more elements than any of the
previous ones. For estimating project cost, it is required to
consider -

 Size of software
 Software quality
 Hardware
 Additional software or tools, licenses etc.
 Skilled personnel with task-specific skills
 Travel involved
 Communication
 Training and support

Project Estimation Techniques

We discussed various parameters involving project estimation

such as size, effort, time and cost.
Project manager can estimate the listed factors using two
broadly recognized techniques –
Decomposition Technique
This technique assumes the software as a product of various
compositions.
There are two main models -
 Line of Code Estimation is done on behalf of number of
line of codes in the software product.
 Function Points Estimation is done on behalf of number
of function points in the software product.
Empirical Estimation Technique
This technique uses empirically derived formulae to make
estimation.These formulae are based on LOC or FPs.
 Putnam Model
This model is made by Lawrence H. Putnam, which is
based on Norden’s frequency distribution (Rayleigh
curve). Putnam model maps time and efforts required with
software size.

 COCOMO
COCOMO stands for COnstructive COst MOdel,
developed by Barry W. Boehm. It divides the software
product into three categories of software: organic, semi-
detached and embedded.


Project Scheduling
Project Scheduling in a project refers to roadmap of all activities
to be done with specified order and within time slot allotted to
each activity. Project managers tend to define various tasks, and
project milestones and arrange them keeping various factors in
mind. They look for tasks lie in critical path in the schedule,
which are necessary to complete in specific manner (because of
task interdependency) and strictly within the time allocated.
Arrangement of tasks which lies out of critical path are less
likely to impact over all schedule of the project.
For scheduling a project, it is necessary to -
 Break down the project tasks into smaller, manageable
form
 Find out various tasks and correlate them
 Estimate time frame required for each task
 Divide time into work-units
 Assign adequate number of work-units for each task
 Calculate total time required for the project from start to
finish.

Why is project management important?

Project management may seem like a loose term used to
describe the management of projects. Essentially, down to its
core, that is exactly what it is. However, projects tend to be
complex and multi-faceted, in need of effective planning,
organisation and monitoring.

In this point, we find the importance of Project Management as

the most important key to finish them on time and under budget.

This is where the broader, more deep understanding of project

management comes in. In this article you will learn about how
effective project management can help transform your
project from zero to hero and why it is regarded as such an
important discipline in today’s organisations.

SOFTWARE PROJECT MANAGEMENT

Methodologies
Following are the most frequently used project management
methodologies in the project management practice:
1 - Adaptive Project Framework
In this methodology, the project scope is a variable.
Additionally, the time and the cost are constants for the project.
Therefore, during the project execution, the project scope is
adjusted in order to get the maximum business value from the
project.
2 - Agile Software Development
Agile software development methodology is for a project that
needs extreme agility in requirements. The key features of agile
are its short-termed delivery cycles (sprints), agile requirements,
dynamic team culture, less restrictive project control and
emphasis on real-time communication.
3 - Crystal Methods
In crystal method, the project processes are given a low priority.
Instead of the processes, this method focuses more on team
communication, team member skills, people and interaction.
Crystal methods come under agile category.
4 - Dynamic Systems Development Model (DSDM)
This is the successor of Rapid Application Development (RAD)
methodology. This is also a subset of agile software
development methodology and boasts about the training and
documents support this methodology has. This method
emphasizes more on the active user involvement during the
project life cycle.
5 - Extreme Programming (XP)
Lowering the cost of requirement changes is the main objective
of extreme programming. XP emphasizes on fine scale
feedback, continuous process, shared understanding and
programmer
CATEGORIZATION OF SPM
In project management, there are many categories that need to
plan as well while planning the project. You will see each
category in detail that how we can define the categories of the
project. You will see categories like scope and significance, type
of the project, level of technology, size, and scale of operations,
ownership, and control, implementations, and purpose of the
project are generally used categories.
If you’re planning a project and want to implement then you can
consider these categories. Projects are often categorized on the
basis of their scope, size, speed of implementation, location,
type, and technology. The project can be classified on the
grounds of the following.

Scope and Significance :

The projects are generally classified on the basis of coverage
and magnitude of their operations. So on the basis of scope
projects can be National or International.
1. National Projects –
There are also projects which are undertaken either by the
government itself or assigned to private entrepreneurs in a
country. In a country like India Public and Private sectors
coexist to undertake major and minor projects. Government
projects and private projects operate in vastly different
 environments, associated with different advantages and
disadvantages. The only purpose of the National Project is the
growth and development of the economy and maintenance of
existing standards of living.
2. International Projects –
The projects which are embarked on by “Foreign investors”
either by establishing a solitary or a branch of their unit or by
mere participation in the equity of any domestic company are
called International Projects. These can be in the form of joint
ventures, MNC’s, and collaborations between two
companies.
Type :
According to the type, projects can be industrial and non-
industrial.
1. Industrial –
These are those projects which are undertaken with a view to
developing the economy.
2. Non-Industrial –
These projects can be related to welfare and maintenance of a
standard of living in an economy.
Level of Technology :
Technology plays a significant role in managing projects.
Projects can be sub-divided into four categories on the basis of
technology. These are as follows.
 Conventional Technology Projects –
These are the projects which use acquainted and known
technology in the continuous process. e.g. steel, cement,
sugar, chemicals, and fertilizers, etc.
 Non-Conventional Technology –
Such kinds of projects apply if not the latest at least
contemporary mode technology e.g. projects using cranes i.e.
a mechanical way of lifting.
 High-Tech Project –
Huge investments are made in technology in these types of
projects, e.g., space projects, nuclear power projects, etc.
 Low Investment Projects –
These types of projects demand low investment in technology
e.g., cosmetics and household utilities, etc.
Size and Scale of Operations :
On the basis of size and scale of operations, projects can be
large scale, medium scale, and small scale.
 Small Scale Projects –
These are the projects which can be completed within a time
period of 1-2 years and with investment below Rs. 5 crores.
 Medium Scale Projects –
These are the projects which can be completed within a time
period of 2-5 years and with investment between Rs. 5 to Rs.
10 crores.
 Large Scale Projects –
These are the projects which can be completed within a time
period of 5-10 years and with investment over and above Rs.
100 crores.
Ownership and Control :
Projects can be divided into 3 categories according to their
governance.
 Public Sector Projects –
These are fully owned and controlled by the government e.g.,
generating power and extracting minerals, etc.
 Private Sector Projects –
These are fully owned by individuals and companies e.g.,
newspapers and magazines, etc.
 Joint Sector Projects –
These projects are run and controlled by both government
and private individuals are under this category.
Speed of Implementation :
According to the speed of implementation, projects can be
normal, crash, and disaster projects.
 Normal Projects –
In this category, an adequate time is allowed for
implementation. It requires minimal capital costs.
 Crash Projects –
In this category, additional capital is incurred to save time.
 Disaster Projects –
In this category, naturally capital cost will go up, but project
time will get drastically reduced. Failure of quality is
accepted.
Purpose :
There is always a purpose for everything. So, the projects are
classified according to purpose as follows.
 Rehabilitation Projects –
These projects are undertaken by financially sound investing
groups to service sick units. It is very risk and success are
very less in such projects.
 Balancing Projects –
These are undertaken to cope with changes in the supply side
of economies of factors of production, to eliminate the
underutilization of the actual capacities, and enhance
efficiency and effectiveness.
 Maintenance Projects –
These projects involve overhauling the machinery, repairs,
and patching up activities at regular intervals.
 Modernization Projects –
Modernization of old plants is required to cope with the
dynamic environment.
Others :
Some other types of projects are as follows.
1. Capacity Expansion Projects –
This involves enlarging the existing capacity of the products.
2. Employees Welfare Project –
The objective of such projects is to install infrastructural
facilities for improving working conditions and labor
relations as well as to develop the skills of the staff.
2
Objectives of Project Management
While preparing a project, you should look into these
perspectives, which helps to give a much better understanding of
the whole process.

Following are the main Software Project Management

Objectives:

 How does the project fit into the organization?

 How will the project evolve over time?
 What skills are required to manage the project
successfully?
 Development and Implementation of procedures
 Efficient communication, collaboration, and productive
guidelines
 Achieve project goals within the estimated time with high
quality
 Allocate and optimize necessary resources to meet project
goals
 Meet the exclusive needs and requirements of the client

Setting Objectives of SPM

Objectives can often be set under three headings:

1. Performance and Quality

The end result of a project must fit the purpose for which it was
intended. At one time, quality was seen as the responsibility of
the quality control department. In more recent years the concept
of total quality management has come to the fore, with the
responsibility for quality shared by all staff from top
management downwards.

2. Budget

The project must be completed without exceeding the authorised

expenditure. Financial sources are not always inexhaustible and
a project might be abandoned altogether if funds run out before
completion. If that was to happen, the money and effort invested
in the project would be forfeited and written off. In extreme
cases the project contractor could face ruin. There are many
projects where there is no direct profit motive, however it is still
important to pay proper attention to the cost budgets, and
financial management remains essential.

3. Time to Completion

Actual progress has to match or beat planned progress. All

significant stages of the project must take place no later than
their specified dates, to result in total completion on or before
the planned finish date. The timescale objective is extremely
important because late completion of a project is not very likely
to please the project purchaser or the sponsor.

Conclusion

Project management has developed over the years, and involves

various activities before a project is completed. Objectives
should be specific so they are measurable, and although there
may be one major project objective, there may be minor
objectives throughout the project.

PRINCIPLES OF SPM
Here are the nine principles of project management:

 Formal project management structure

 Invested and engaged project sponsor
 Clear and objective goals and outcomes
 Documented roles and responsibilities
 Strong change management
 Risk management
 Mature value delivery capabilities
  Performance management baseline
 Communication plan

Let’s take a look at each one of these in a bit more detail.

1. Formal structure
Projects need to have a formalized structure, including
processes, procedures, and tools. If you’ve ever tried to
complete a project without a formalized structure (“off the
books”), you know how hard it can be to control it and provide
the attention it deserves. A project should have a project charter,
project plan, and a designated project team to successfully
prioritize and manage the project.

2. Project sponsor
An effective project sponsor is critical to the success of a
project. Sponsors champion your project and act as a
spokesperson to other executives. Having an engaged sponsor
makes it easier to communicate progress, escalate issues to
overcome roadblocks, and guide stakeholders through decision-
making processes.

3. Goals and outcomes

Without precise requirements and approval criteria, it will be
difficult to measure a project’s success. You may think that your
final product does everything requested, only to have the
customer or user complain that you left out a critical
component. The most common factor behind failed projects is a
lack of clear goals. Project requirements and approval criteria
should be determined and documented at the beginning of the
project. These must be reviewed and approved by all key
stakeholders, including the sponsor and customer.

4. Roles and responsibilities

Two forms should be used to document and define the roles and
responsibilities of everyone involved with a project. For project
team members, RACI or RASCI is used to determine duties and
expectations. RASCI stands for:

 R: Responsible
 A: Accountable

 S: Sign-off authority (not always used)

 C: Consulted

 I: Involved

In a RACI chart, team members are listed along the top, with
tasks along the sides. Each member is assigned a letter (R, A, C,
and I) according to their role for each job. A stakeholder register
documents stakeholders outside the primary team, as well as
important information such as the following:

 Communication preferences (type and frequency)

 Contact information
 Level of influence on the project
 Engagement level with the project
 Their role within the company
 Other relevant details or notes

5. Management of project changes

A project needs a well-defined scope to ensure the outcome
meets customer expectations. Without strong change
management, a project could suffer from scope creep and
gradually grow beyond the initial project guidelines. To give an
example, team members or stakeholders may want to add
additional features to a product. However, if you don’t carefully
control changes, you could end up with a great product that
costs twice what you expected and is delivered six months late.
6. Risk management
Since we cannot execute projects in a bubble, they all face some
risks. Risk can affect your resources, technology, or processes.
It’s important to manage risk to minimize or eliminate its impact
on your projects. This involves identifying, evaluating, and
monitoring risks and deciding upon action plans to implement if
they occur.

7. Value delivery capabilities

Your value delivery capabilities are the project tools, processes,
and procedures that help you deliver value to your customers.
This can include your project systems, like your scheduling
software. It may also include your processes, such as using an
Agile project methodology. If you have established and tested
approaches for delivering successful projects, you'll be better
equipped than if you’re starting from scratch. The more mature
your processes and procedures are, the more likely your project
will be a success.

8. Performance management baseline

Projects typically have three basic components: cost, schedule,
and scope. Each of these components should have a baseline or
plan against which performance can be measured. When these
baselines are integrated, it’s called a performance management
baseline — then, if you have a change in any one of these
components, its impact will be reflected in the others.
Say you have a scope change. With your performance
management baseline, you can see how this will impact your
project schedule and cost, allowing you to better monitor the
overall effect of changes on a project. A performance
management baseline improves decision-making, as you can
view the whole picture and identify all impacts of potential
decisions.

9. Communication
If you’ve worked in project management for a while, you may
have heard the saying that project management is 90%
communication. A project’s success requires communication of
project activities, risks, issues, and status, both within the
project team and with other stakeholders. Communication is
essential for a variety of reasons, including:

 Keeping stakeholders engaged

 Coordinating tasks and schedules
 Decision-making and problem-solving
 Identifying and resolving conflicts
 Escalating risks and issues

PROJECT PORTFOLIO MANAGEMENT

When there are many projects run by an organization, it is vital

for the organization to manage their project portfolio. This helps
the organization to categorize the projects and align the projects
with their organizational goals.
Project Portfolio Management (PPM) is a management process
with the help of methods aimed at helping the organization to
acquire information and sort out projects according to a set of
criteria.

Objectives of Project Portfolio Management

Same as with financial portfolio management, the project
portfolio management also has its own set of objectives. These
objectives are designed to bring about expected results through
coherent team players.
When it comes to the objectives, the following factors need to
be outlined.

The need to create a descriptive document, which contains

vital information such as name of project, estimated
timeframe, cost and business objectives.

The project needs to be evaluated on a regular basis to

ensure that the project is meeting its target and stays in its
course.

Selection of the team players, who will work towards

achieving the project's objectives.

Benefits of Project Portfolio Management

Project portfolio management ensures that projects have a set of

objectives, which when followed brings about the expected
results. Furthermore, PPM can be used to bring out changes to
the organization which will create a flexible structure within the
organization in terms of project execution. In this manner, the
change will not be a threat for the organization.
The following benefits can be gained through efficient project
portfolio management:
Greater adaptability towards change.
 Constant review and close monitoring brings about a
higher return.

Management's perspectives with regards to project

portfolio management is seen as an 'initiative towards
higher return'. Therefore, this will not be considered to be a
detrimental factor to work.

Identification of dependencies is easier to identify. This

will eliminate some inefficiency from occurring.

Advantage over other competitors (competitive advantage).

Helps to concentrate on the strategies, which will help to

achieve the targets rather than focusing on the project
itself.

The responsibilities of IT is focused on part of the business

rather than scattering across several.

The mix of both IT and business projects are seen as

contributors to achieving the organizational objectives.

Project Portfolio Management Tools

There are many tools that can be used for project portfolio
management. Following are the essential features of those tools:

A systematic method of evaluation of projects.

 Resources need to be planned.

Costs and the benefits need to be kept on track.

Undertaking cost benefit analysis.

Progress reports from time to time.

Access to information as and when its required.

Communication mechanism, which will take through the

information necessary.

Techniques Used to Measure PPM

There are various techniques, which are used to measure or

support PPM process from time to time. However, there are
three types of techniques, which are widely used:

Heuristic model.

Scoring technique.

Visual or Mapping techniques.

The use of such techniques should be done in consideration of

the project and organizational objectives, resource skills and the
infrastructure for project management.

Why Project Managers to Focus on PPM?

PPM is crucial for a project to be successful as well as to
identify any back lags if it were to occur. Project Managers
often face a difficult situation arising from lack of planning and
sometimes this may lead to a project withdrawal.
It's the primary responsibility of project managers to ensure that
there are enough available resources for the projects that an
organization undertakes. Proper resources will ensure that the
project is completed within the set timeline and delivered
without a compromise on quality.
Project managers also may wish to work on projects, which are
given its utmost priority and value to an organization. This will
enable project managers to deliver and receive support for
quality projects that they have undertaken. PPM ensures that
these objectives of the project management will be met.

The Five Question Model

The five question model of project portfolio management
illustrates that the project manager is required to answer five
essential questions before the inception as well as during the
project execution.
The answers to these questions will determine the success of the
implementation of the project.

Conclusion

Project portfolio management is aimed at reducing inefficiencies

that occur when undertaking a project and eliminating potential
risks, which can occur due to lack of information or systems
available.
It helps the organization to align its project work to meet the
projects whilst utilizing its resources to the maximum.
Therefore, all the project managers of the organization need to
have an awareness of the organizational project portfolio
management in order to contribute to the organizational goals
when executing respective projects.
What Is Cost-Benefit Analysis in
Project Management?
Knowing how to conduct a cost-benefit analysis before
investing organizational time and resources into a new project or
business proposal can make the difference between eventual
success and failure.
A cost-benefit analysis (CBA), sometimes referred to as benefit-
cost analysis (BCA), makes it clear what projects or investments
are most viable, possible, and beneficial for an organization at
any given time.
Below, we’ll delve into what cost-benefit analysis is and why
it’s important. We’ll also outline the cost-benefit analysis
steps to follow so you can make the best possible decision
before embarking on new projects or taking on new
investments.

Cost-benefit analysis in project

management
A cost-benefit analysis in project management is a tool to
evaluate the costs vs. benefits of an important project or
business proposal. It is a practical, data-driven approach for
guiding organizations and managers in making solid investment
decisions. It helps determine if a project or investment is
financially feasible and beneficial for the organization.
A formal CBA identifies and quantifies all project costs and
benefits, then calculates the expected return on investment
(ROI), internal rate of return (IRR), net present value (NPV),
and payback period. The difference between the costs and the
benefits of moving forward with the project is then calculated.
In a CBA, costs may include the following:

 Direct costs: These are costs that are directly related to the
proposed project or investment, e.g., materials, labor, and
equipment.
 Indirect costs: These are related fixed costs that
contribute to bringing the project or investment to life,
e.g., overhead, administrative, or training expenses.
 Opportunity costs: These are the benefits or opportunities

foregone when a business chooses one project or

opportunity over others. To quantify opportunity costs,
you must weigh the potential benefits of the available
alternatives.
 Future costs: These are costs that may come up later in

the project. These costs depend on certain factors

happening, e.g., costs of mitigating potential risks.
Cost-benefit analysis facilitates a structured cost
management process, helping project managers and company
executives prioritize projects and allocate resources effectively
to achieve the organization’s main goals.
Benefits may include:

 Tangible benefits: These are measurable outcomes that

can be easily quantified in monetary terms, e.g., increased
revenue or reduced costs.
 Intangible benefits: These benefits are difficult to

measure in monetary terms. They are indirect or

qualitative outcomes, such as improved customer
satisfaction or increased employee morale.
Although intangible benefits may be difficult to quantify in
financial terms, it is necessary to factor them in when
conducting a CBA, as they still have a significant impact on the
overall value of a project.
Quantifying intangible benefits
One way to account for intangible benefits in a CBA is to use
qualitative measures to assess their value. For example, a survey
or focus group can be used to gather information about customer
satisfaction or employee morale. The results are then used to
inform estimates of the value of these intangible benefits.
In some cases, it may be possible to estimate the value of an
intangible benefit based on its impact on other tangible benefits,
such as increased productivity or reduced costs. Even though
intangible benefits are more subjective and less precise than
tangible benefits, ignoring them in your cost-benefit analysis
can create an incomplete picture of the overall impact of a
proposed project.

Why is conducting a cost-benefit analysis important?

Conducting a project cost-benefit analysis helps to:

 Identify project costs and benefits: A project cost-

benefit analysis ensures all costs and benefits associated
with a project are identified and quantified. This reduces
cases of hidden expenses and future hurdles or losses,
which may only be apparent with a closer look at the
project.
 Provide a framework for analysis: A CBA provides a
structured framework for analyzing the costs and benefits
of a potential project. This helps ensure all factors are
considered and the most optimal decision is made from a
business perspective.
 Make better-informed decisions: A cost-benefit analysis
helps decision-makers determine whether a proposed
project or investment is worthwhile. By comparing the
costs and benefits of the project, decision-makers make
 better-informed decisions and allocate organizational
resources effectively.
 Promote transparency: A CBA promotes transparency
by making the costs and benefits of any potential project
visible and quantifiable. This can help ensure that
decision-making is objective and all stakeholders have a
clear understanding of the project’s potential impacts.
 Facilitate communication: A cost-benefit analysis in
project management facilitates trust and a foundation for
communication between various stakeholders by providing
a common language and framework for analyzing a
potential project. This helps ensure all parties are on the
same page and decisions are made collaboratively and
aligned with business goals and objectives.

How to conduct a cost-benefit analysis

for a project
Conducting a project cost-benefit analysis is a straightforward
process. Follow the four steps of cost-benefit analysis outlined below
to get started.

1. Define project goals and objectives

The first step in conducting a cost-benefit analysis is to define the
project scope and objectives. This includes identifying the following:

 The problem the project aims to solve

 The project goals
 The expected outcomes
Defining the project goals and objectives creates a solid foundation
for the CBA to be as accurate as possible. The goals provide a
framework and parameters the project must adhere to be successful.
Once decided, list your project goals in a business case or project
proposal. This will be useful in determining the metrics you’ll use to
measure and compare the costs and benefits, and interpreting the
results of the CBA.

2. Identify costs and benefits

The next step is to identify and list all the costs and expected benefits
associated with the proposed project.

Create two lists: one for all the estimated costs and the other for the
expected benefits. Include direct, indirect, opportunity, and future
costs. After identifying the individual costs, assess the potential
benefits of the project. Include all tangible and intangible benefits,
even those that are difficult to quantify.

3. Add up all potential costs and benefits

Once you have your lists of costs and benefits, assign current, realistic
monetary values to each one and then sum up both sides. Ensure that
you use credible data sources. For instance, you can gather data from
financial reports, market research, and expert opinions.

Also, perform a project cost analysis and estimate the timing of the
costs and benefits. Some may occur immediately, while others may
crop up later on. By accurately calculating the timing of the project
costs and benefits, you can determine their present value and
evaluate the project’s financial feasibility.

4. Evaluate predicted outcomes

After adding up both sides of your analysis, you can calculate
the total cost and benefit for the proposed project. If the benefits
exceed the costs, the project may be worth pursuing.
Conversely, if the costs exceed the benefits, it’s advisable to
reconsider investing in it.
However, comparing the two totals is not the end. At this stage,
revisiting the project goals and objectives set out in the first step
of the CBA is helpful to check if the analysis shows you can
achieve the set goals. Ask questions like:

 Can your organization pool the needed funds to cover all

costs?
 Will the benefits come in time to keep business

operations running smoothly?

Next, conduct a sensitivity analysis to test the robustness of the
CBA results. This may require changing assumptions about
costs, benefits, and discount rates to see how sensitive the
analysis results are to changes.
Finally, interpret the results of the CBA and communicate them
to stakeholders to make informed decisions about the project. A
general rule of thumb to remember when evaluating project
cost-benefit analysis is that the costs should be less than 50% of
the benefits, and the payback period should not exceed a year.

Project Risk Management

Managers can plan their strategy based on four steps of risk
management which prevails in an organization. Following are
the steps to manage risks effectively in an organization:

Risk Identification
 Risk Quantification

Risk Response

Risk Monitoring and Control

Let's go through each of the step in project risk management:

Risk Identification

Managers face many difficulties when it comes to identifying

and naming the risks that occur when undertaking projects.
These risks could be resolved through structured or unstructured
brainstorming or strategies. It's important to understand that
risks pertaining to the project can only be handled by the project
manager and other stakeholders of the project.
.
Resource risk occurs when the human resource used in the
project is not enough or not skilled enough. Budget risk would
refer to risks that can occur if the costs are more than what was
budgeted.

Risk Quantification

Risks can be evaluated based on quantity. Project managers

need to analyze the likely chances of a risk occurring with the
help of a matrix.
Using the matrix, the project manager can categorize the risk
into four categories as Low, Medium, High and Critical. The
probability of occurrence and the impact on the project are the
two parameters used for placing the risk in the matrix
categories. As an example, if a risk occurrence is low
(probability = 2) and it has the highest impact (impact = 4), the
risk can be categorized as 'High'.

Risk Response

When it comes to risk management, it depends on the project

manager to choose strategies that will reduce the risk to
minimal. Project managers can choose between the four risk
response strategies, which are outlined below.

Risks can be avoided


Pass on the risk


Take corrective measures to reduce the impact of risks


Acknowledge the risk


Risk Monitoring and Control

Risks can be monitored on a continuous basis to check if any
change is made. New risks can be identified through the
constant monitoring and assessing mechanisms.

STEPWISE PROJECT PLANNING

Step 0: Select Project

Step 1: Identify project scope and objectives

Step 1.1 : Identify objectives and practical
measures of the effectiveness in meeting those
objectives
Step 1.2 : Establish a project authority
Step 1.3 : Stakeholder analysis - identify all
stakeholders in the project and their interests.
Step 1.4 : Modify objectives in the light of
stakeholder analysis.
Step 1.5 : Establish methods of communication
with all parties.

Step 2 : Identify project infrastructure

Step 2.2 : Identify installation standard and
procedures
Step 2.3 : Identify project team organization

Step 3 : Analyse project characteristics

Step 3.1 : Distinguish the project as either
objectives- or product-driven.
Step 3.2 : Analyse other project characteristics
Step 3.3 : Identify high-level project risks
Step 3.4 : Take into account use requirements
concerning implementation
Step 3.5 : Select development methodology and
life-cycle approach
Step 3.6 : Review overall resource estimates

Step 4 : Identify project products and

activities
Step 4.1 : Identify and describe project products
Step 4.2 : Document generic product flows
Step 4.3 : Recognize product instances
Step 4.4 : Produce ideal activity network
Step 4.5 : Modify the ideal to take into account
need for stages and checkpoints

Step 5 : Estimate effort for each activity

Step 5.1 : Carry out bottom-up estimates
- distinguish carefully between effort and
elapsed time
Step 5.2 : Revise plan to create ontrollable
activities
Step 6 : Identify activity risks
Step 6.1 : Identify and quantify activity based
risks
- damage if risk occurs
- likelihood if risk occuring
Step 6.2 : Plan risk reduction and contingency
measures
- risk reduction : activity to stop risk
occuring
- contingency : action if risk does occurs
Step 6.3 : Adjust overall plans and estimates to
take account of risks

Step 7 : Allocate resources

Step 7.1 : Identify and allocate resources
Step 7.2 : Revise plans and estimates to take into
account resource constraints

Step 8 : Review/ Publicize plans

Step 8.1 : Review quality aspects of the project
plan
Step 8.2 : Documentr plans and obtain
agreement
Step 9 and 10 : Execute plan. Lower levels of
planning