Software project management is an art and discipline of planning and supervising software projects

Software project management is an art and discipline of planning and supervising software projects

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  •1 Learning Resource On Software ProjectManagement Unit-1: Part-2 School of Computer Engineering
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  Talkflow • Costing andPricing of projects in SPM • The Business Case • Project Evaluation – Cost Benefit Analysis – Cash Flow Forecasting • Training and Development • Project Management Techniques •2 School of Computer Engineering
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  Costing and Pricingof Projects • Costing and pricing in projects in SPM involve estimating the expenses required to complete a project and determining the appropriate price to charge the client. • Proper management of these aspects ensures profitability, competitiveness, and successful project execution. • Costing involves calculating all the expenses incurred in delivering the project. These include direct, indirect, fixed, and variable costs. • Pricing is the process of determining how much to charge the client. It includes not only the costs but also profit margins and market considerations. 12/20/2024 School of Computer Engineering •3
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  contd.. • Components ofCosting – Direct Costs: Salaries and wages for developers, testers, designers, and project managers, Software licenses, tools, and hardware, Cloud services or hosting fees. – Indirect Costs: Overhead expenses such as office rent, utilities, and administrative support, Training and team- building activities. – Variable Costs: Costs that change based on project requirements, like third-party integrations or additional infrastructure. – Fixed Costs: Costs that remain constant irrespective of project scope, such as long-term subscriptions. – Contingency Costs: Buffer amount to handle unforeseen circumstances like scope changes or resource unavailability. 12/20/2024 School of Computer Engineering •4
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  contd.. • Pricing Models –Fixed Price Model: A predetermined price for the entire project. • Advantages: Predictability for clients, clear scope. • Challenges: Risk of underestimating costs or scope creep. – Time and Material (T&M) Model: Charges based on the time spent and materials used. • Advantages: Flexibility for changes in scope. • Challenges: Less predictability for clients. – Cost-Plus Pricing: Adding a fixed profit margin to the total cost. • Advantages: Guarantees profit. • Challenges: May not be competitive. 12/20/2024 School of Computer Engineering •5
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  contd.. • Value-Based Pricing:Pricing based on the value the software delivers to the client. – Advantages: High profit potential if value is significant. – Challenges: Requires deep understanding of client needs and outcomes. • Subscription Model: Regular, recurring payments for ongoing access to software or services. – Advantages: Steady revenue stream. – Challenges: Initial costs may not be covered immediately. • Freemium Model: Offering a basic version for free with premium features at a cost. – Advantages: Attracts a large user base initially. – Challenges: Conversion to paid users may be low. 12/20/2024 School of Computer Engineering •6
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  contd.. • Factors InfluencingPricing – Market Competition: Price competitively based on what competitors are offering. – Client Budget: Align pricing with the client's budgetary constraints. – Complexity of the Project: Higher complexity warrants higher prices due to increased effort. – Technology Stack: Costs vary based on the technology and tools required. – Risk Factors: High-risk projects may require premium pricing to account for contingencies. 12/20/2024 School of Computer Engineering •7
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  The Business Case •A typical business case may include: – Introduction/ background – The proposed project and its market – Organizational and operational infrastructure – The benefits – Outline implementation plan – Costs – Financial analysis – Risks – Management plan •8 School of Computer Engineering
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  Content of theBusiness case • Introduction/background describes a problem to be solved or an opportunity to be exploited. • The proposed project: – A brief outline of the project scope. – The market: The likely demand for the product would need to be assessed. • Organizational and operational infrastructure: – How the organization would need to change. – This would be important where a new information system application was being introduced. •9 School of Computer Engineering
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  Content of thebusiness case (cont’d) • Benefits These should be express in financial terms where possible. In the end it is up to the client to assess these – as they are going to pay for the project. • Outline implementation plan: how the project is going to be implemented. This should consider the disruption to an organization that a project might cause. • Costs: the implementation plan will supply information to establish these. • Financial analysis: combines costs and benefit data to establish value of project •10 School of Computer Engineering
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  Project Evaluation: CostBenefit Analysis (CBA) • This relates to an individual project. 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 • if yes then the project is evaluated as a profitable one else it will tagged as a loss making project. •11 School of Computer Engineering
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  Product life cyclecash flows The timing of costs and income for a product of system needs to be estimated. The development of the project will incur costs. When the system or product is released it will generate income that gradually pays off costs Some costs may relate to decommissioning – think of demolishing a nuclear power station. •12 School of Computer Engineering
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  Net Profit • Year0’ represents all the costs before system is operational. • ‘Cash-flow’ is value of income less outgoing • Net profit value of all the cash-flows for the lifetime of the application. • Net profit = Income - Investment Year Cash-flow 0 -100,000 1 10,000 2 10,000 3 10,000 4 20,000 5 100,000 Net profit 50,000 •13 School of Computer Engineering
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  Table: A •14 Year Project1 Project 2 Project 3 Project 4 0 -100,000 -1,000,000 -100,000 -120,000 1 10,000 200,000 30,000 30,000 2 10,000 200,000 30,000 30,000 3 10,000 200,000 30,000 30,000 4 20,000 200,000 30,000 30,000 5 100,000 300,000 30,000 75,000 Net Profit 50,000 100,000 50,000 75,000 School of Computer Engineering
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  •15 Pay Back period PayBack period the time the project 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 School of Computer Engineering
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  Exercise • Consider thefour projects’ cash flow given in TABLE: A and calculate the payback period for each of them. Ans: Project 1 ------- 5yrs; Project 3 ------- 4yrs. Project 2 ------- 5yrs; Project 4 ------- 4yrs. • Advantages: – Simple to calculate – Not sensitive to small forecasting errors • Disadvantages: – Ignores the overall profitability – Totally ignores any income after breakeven. (For ex: project 2 and 4 are better than project 3) School of Computer Engineering •16
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  Return on Investment(ROI) ROI= = School of Computer Engineering •17 Average annual profit Total investment X 100 In the previous example of project 1 • average annual profit = 50,000/5 = 10,000 • ROI = (10,000/100,000) X 100 = 10% • It provides a way of comparing the net profitability to the investment required.
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  • Calculate theROI for each of the other projects shown in TABLE: A and decide which, based on criterion, is the most worthwhile. Ans. Project 1 ….. 10%; Project 3 ….. 10% Project 2 ….. 2%; Project 4 …..12.5% Advantage The return on investment provides a simple, easy-to-calculate measure of return on capital. Disadvantage It takes no account of timing of the cash flow. The rate of return bears no relationship to the interest rates charged by banks. It is potentially very misleading. •18 School of Computer Engineering Exercise
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  Net Present Value •Would you rather take if I give you Rs. 1,000 today or in 12 months time? • If I gave you Rs. 1,000 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 Rs. 1,000 in a year’s time? • This figure is the net present value of Rs. 1,000 in one year’s time •19 The annual rate by which we discount future earnings is known as discount rate 10%. School of Computer Engineering
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  The present valueof Rs. 1,000 in a year’s time is Rs. 910 i.e., Rs. 1000 in a year’s time is the equivalent of Rs. 910 now. Rs. 1,000 received in two year’s time would have a present value of approximately Rs. 830 i.e., Rs. 830 invested at the annual interest rate of 10% would yield approximately Rs. 1,000 in two years time. • For any future cash flow Present value = Present value = •20 t r t year in value ) 1 ( _ _ _ + School of Computer Engineering
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  Discount Factor • Discountfactor = 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 1 year – Discount factor = 1/(1+0.10) = 0.9091 ~ 0.91 • In the case of 10% rate and 2 years – Discount factor = 1/(1.10 x 1.10) =0.8294 ~ 0.83 •21 School of Computer Engineering
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  Applying discount factors(10%) Year Cash-flow (Project-1) 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 Net profit 50,000 NPV 618 •22 TABLE: C School of Computer Engineering
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  • Assuming 10%discount rate, the NPV for project (TABLE: A) would be calculated as in TABLE: C. • The net present value (NPV) for project 1 (TABLE:C), using 10% discount rate, is therefore Rs. 618. • Using a 10% discount rate, calculate the NPV for project 2, 3 and 4 and decide which, based on this, is the most beneficial to pursue. Note: Refer to TABLE: A (slide no. 14) School of Computer Engineering •23 Exercise-1
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  Year Discount factor Discounted cashflow (Rs.) Project 2 Project 3 Project 4 0 1.00 -1,000,000 -100,000 -120,000 1 0.90 181,820 27,273 27,273 2 0.82 165,280 24,792 24,792 3 0.75 150,260 22,539 22,539 4 0.68 136,600 20,490 20,490 5 0.62 186,270 18,627 46,568 NPV -179,770 13,721 21,662 •24 Answer: School of Computer Engineering
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  • Calculate theNPV for each of the project's A, B and C shown in table below using each of the discount rate 8%, 10% and 12%. For each of the discount rate, decide which is the best project. What can you conclude from these results? School of Computer Engineering 25 Year Project A (Rs) Project B (Rs) Project C (Rs) 0 -8,000 -8,000 -10,000 1 4,000 1,000 2,000 2 4,000 2,000 2,000 3 2,000 4,000 6,000 4 1,000 3,000 2,000 5 800 9,000 2,000 6 500 -6,000 2,000 Net Profit 4,000 5,000 6,000 Exercise-2
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  School of ComputerEngineering 26 Year Discount rate (%) 8% 10% 12% 1 0.9256 0.9091 0.8929 2 0.8573 0.8264 0.7972 3 0.7938 0.7513 0.7118 4 0.7350 0.6830 0.6355 5 0.6808 0.6209 0.5674 6 0.6302 0.5645 0.5066 NPV Discount Factors Answer:
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  27 Year Cash flowvalues (Rs.) Project A Project B Project C 0 -8,000 -8,000 -10,000 1 4,000 1,000 2,000 2 4,000 2,000 2,000 3 2,000 4,000 6,000 4 1,000 3,000 2,000 5 500 9,000 2,000 6 500 -6,000 2,000 Net profit 4,000 5,000 6,000 NPV @ 8% 2,111 2,365 2,421 NPV @ 10% 1,720 1,818 1,716 NPV @ 12% 1,356 1,308 1,070 TABLE: B (Effect on NPV of varying the discount rate)
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  Internal Rate ofReturn • 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 net present value. Dealing with uncertainty: Risk evaluation • Project A might appear to give a better return than B but could be riskier • For riskier projects could use higher discount rates •28 School of Computer Engineering
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  Cost-Benefit Analysis: BuyRight’sincome forecast • Development costs are estimated = Rs. 750,000 • Sales levels are expected to be constant for 4 years • Annual marketing and product maintenance cost = Rs. 200,000 • Would you advise going ahead with the project??? •29 Sales Annual sales income (Rs.) i Probability p Expected value (Rs.) i X p High 800,000 0.1 80,000 Medium 650,000 0.6 390,000 Low 100,000 0.3 30,000 Expected income 500,000 School of Computer Engineering
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  • Expected salesper year = Rs. 500,000 • Annual costs per year = Rs. 200,000 • Expected net income / year = Rs. 300,000 -do- for 4 years = 300,000 X 4 = 1,200,000 • Investment (development cost) = Rs. 750,000 • Expected profit = Rs. 450,000 Risk involved: • If sales will drop what happens to the benefits and costs? • Then go for, Risk profile analysis – sensitivity analysis • How will a decision affect future profitability of the project? •30 School of Computer Engineering BuyRight’s income forecast: Solution
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  Decision Tree: SampleCase Study • Suppose Amanda is responsible for extending the invoicing system. An alternative would be to replace the whole of the system. The decision is influenced by the likelihood of IOE expanding their market. There is a strong rumor that they could benefit from their main competitor going out of business: in this case they could pick up a huge amount of new business, but the invoicing system could not cope. However, replacing the system immediately would mean other important projects would have to be delayed. • The NPV of extending the invoicing system is assessed as 75,000 INR if there is no sudden expansion. If there were a sudden expansion, then there would be a loss of 100,000 INR. • If the whole system were replaced and there was a large expansion there would be a NPV of 250,000 INR due to the benefits of being able to handle increased sales. If sales did not increase, then the NPV would be – 50,000 INR. School of Computer Engineering •31
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  •32 Decision trees Decision Point 40,000 10,000 75000X0.8-100000X0.2 250,000X0.2-50,000X0.8 BuyRight softwarehouse School of Computer Engineering
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  Contd.. • The decisiontree shows these possible outcomes and shows the estimated probability of each outcome. • The value of each outcome is the NPV multiplied by the probability of its occurring. • The value of a path that springs from a particular decision is the sum of the values of the possible outcomes from that decision. • If it is decided to extend the system, the sum of the values of the outcomes is 40,000 INR (75,000 x 0.8 – 100,000 x 0.2) while for replacement it would be 10,000 INR (250,000 x 0.2 – 50,000 x 0.80). • Final Decision: Extending the system therefore seems to be the best bet (but it is still a bet!). School of Computer Engineering •33
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  Training and Developmentin SPM • Training and development are essential components of software project management. • They ensure that team members are equipped with the necessary skills, knowledge, and tools to successfully complete projects and adapt to evolving technologies. • Importance of Training and Development – Skill enhancement – Project efficiency – Adaptability – Innovation – Employee satisfaction School of Computer Engineering •34
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  contd.. • Types ofTraining in SPM – Technical Training: Enhancing technical skills such as programming, database management, cloud computing, and software testing. • Examples: Training on specific tools like Git, Docker, Kubernetes; Learning programming languages such as Python, Java, or JavaScript. – Methodology Training: Familiarizing the team with software development methodologies. • Examples: Agile, Scrum, Kanban; Waterfall or hybrid models. School of Computer Engineering •35
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  contd.. • Project ManagementTraining: Equipping managers with leadership and organizational skills. – Examples: Courses on PMI, PRINCE2, or PMBOK; Training on project management tools like Jira or Microsoft Project. • Soft Skills Training: Developing interpersonal skills for effective teamwork and communication. – Examples: Leadership, conflict resolution, and time management workshops. • Domain-Specific Training: Understanding the industry or business domain relevant to the project. – Examples: Healthcare software compliance; Financial technology regulations. School of Computer Engineering •36
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  contd.. • Quality AssuranceTraining: Improving testing, debugging, and quality control skills. – Examples: Selenium or Postman for automated testing; Test-driven development (TDD) practices. • Security Training: Enhancing knowledge of cybersecurity principles. – Examples: Secure coding practices; Compliance with GDPR or ISO standards. • Continuous Learning: Encouraging ongoing skill development. – Examples: Online courses (Coursera, Udemy, Pluralsight); Certifications (AWS Certified Developer, Microsoft Azure Fundamentals). School of Computer Engineering •37
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  Methods of Trainingand Development • Workshops and Seminars: Short-term, intensive training sessions on specific topics. • On-the-Job Training: Learning while working on real project tasks. • Mentorship Programs: Pairing less experienced team members with senior staff for guidance. • Online Learning Platforms: Flexible and accessible learning through e-learning tools. • Bootcamps: Intensive training programs focused on specific skills or technologies. • Conferences and Hackathons: Opportunities to learn from industry experts and peers. • Self-Paced Learning: Access to resources like documentation, tutorials, and practice exercises. • Simulations and Case Studies: Using real-world scenarios to apply and practice skills. School of Computer Engineering •38
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  Challenges in Trainingand Development • Time Constraints: Balancing training schedules with project deadlines. • Budget Limitations: Allocating funds for high-quality training programs. • Employee Resistance: Some team members may be hesitant to adopt new skills or methods. • Rapid Technological Changes: Keeping training content updated with evolving industry trends. • Assessing Effectiveness: Measuring the impact of training on project outcomes and employee performance. School of Computer Engineering •39
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  Outcomes of EffectiveTraining and Development • Enhanced productivity and efficiency in project execution. • Reduced risks associated with skill gaps and errors. • Higher employee engagement and retention. • Competitive advantage through advanced technical expertise. • Improved project quality and client satisfaction. School of Computer Engineering •40
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  Project Management Techniques •Effective project management techniques in software projects help in planning, executing, and monitoring work to ensure that the project is completed on time, within budget, and with high quality. • Below are the widely used project management techniques tailored for software projects. – Traditional SDLC models like Waterfall model, Spiral model, Prototyping model, RAD model – Agile methodologies like Scrum Framework, Kanban, Lean Development, Extreme Programming (XP), Feature driven development (FDD) – Monitoring and Review techinques like CPM, PERT – Modern management techniques like DevOps, Hybrid methodology using Agile and waterfall, Six Sigma School of Computer Engineering •41
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  Best Practices forImplementing Techniques • Understand Project Needs: – Align the technique with the project's complexity, size, and requirements. • Involve Stakeholders: – Collaborate with all stakeholders to select the appropriate methodology. • Adapt Flexibly: – Be prepared to tweak methods based on project progress and feedback. • Leverage Tools: – Use project management tools like Jira, Trello, or Asana to support implementation. • Monitor Progress: – Regularly track and review project performance to ensure alignment with goals. School of Computer Engineering •42