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    Program Management and Project Management

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    Adarsh Bhardwaj

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    © All Rights Reserved
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    Program Management and Project Management

    Uploaded by

    Adarsh Bhardwaj
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    Program Management and Project Management

    Uploaded by

    Adarsh Bhardwaj

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    © All Rights Reserved
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    Software Project

    Management
    Chapter 3
    4th Edition

    Programme
    management and
    project evaluation

    2
    ©The McGraw-Hill Companies, 2005
    Main topics to be covered
    • Programme management
    • Benefits management
    • Project evaluation
    – Cost benefit analysis
    – Cash flow forecasting
    • Project risk evaluation

    3
    ©The McGraw-Hill Companies, 2005
    Programme management
    • One definition:
    ‘a group of projects that are managed
    in a co-ordinated way to gain benefits
    that would not be possible were the
    projects to be managed independently’
    Ferns

    4
    ©The McGraw-Hill Companies, 2005
    Programmes may be
    • Strategic
    • Business cycle programmes
    • Infrastructure programmes
    • Research and development
    programmes
    • Innovative partnerships

    5
    ©The McGraw-Hill Companies, 2005
    Programme managers versus project
    managers
    Programme manager Project manager
    – Many simultaneous – One project at a time
    projects – Impersonal
    – Personal relationship relationship with
    with skilled resources resources
    – Optimization of – Minimization of
    resource use demand for
    – Projects tend to be resources
    seen as similar – Projects tend to be
    seen as unique
    6
    ©The McGraw-Hill Companies, 2005
    Projects sharing resources

    7
    ©The McGraw-Hill Companies, 2005
    Strategic programmes
    • Based on OGC approach
    • Initial planning document is the Programme
    Mandate describing
    – The new services/capabilities that the programme should
    deliver
    – How an organization will be improved
    – Fit with existing organizational goals
    • A programme director appointed a champion for
    the scheme
    8
    ©The McGraw-Hill Companies, 2005
    Next stages/documents
    • The programme brief – equivalent of a feasibility
    study: emphasis on costs and benefits
    • The vision statement – explains the new capability
    that the organization will have
    • The blueprint – explains the changes to be made to
    obtain the new capability

    9
    ©The McGraw-Hill Companies, 2005
    Benefits management
    developers users organization

    use for

    the
    benefits
    application
    build
    to
    deliver
    •Providing an organization with a capability does not guarantee
    that this will provide benefits envisaged – need for benefits
    management

    •This has to be outside the project – project will have been


    completed
    10
    ©The McGraw-Hill Companies, 2005
    •Therefore done at programme level
    Benefits management
    To carry this out, you must:
    • Define expected benefits
    • Analyse balance between costs and
    benefits
    • Plan how benefits will be achieved
    • Allocate responsibilities for their
    achievement
    • Monitor achievement of benefits
    11
    ©The McGraw-Hill Companies, 2005
    Benefits
    These might include:
    • Mandatory requirement
    • Improved quality of service
    • Increased productivity
    • More motivated workforce
    • Internal management benefits

    12
    ©The McGraw-Hill Companies, 2005
    Benefits - continued
    • Risk reduction
    • Economies
    • Revenue enhancement/acceleration
    • Strategic fit

    13
    ©The McGraw-Hill Companies, 2005
    Quantifying benefits
    Benefits can be:
    • Quantified and valued e.g. a reduction
    of x staff saving £y
    • Quantified but not valued e.g. a
    decrease in customer complaints by x%
    • Identified but not easily quantified –
    e.g. public approval for a organization
    in the locality where it is based
    14
    ©The McGraw-Hill Companies, 2005
    Cost benefit analysis (CBA)

    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
    15
    ©The McGraw-Hill Companies, 2005
    Net profit
    Year Cash-flow ‘Year 0’ represents all
    0 -100,000 the costs before
    system is operation
    1 10,000
    ‘Cash-flow’ is value of
    2 10,000
    income less outgoing
    3 10,000
    Net profit value of all
    4 20,000 the cash-flows for the
    5 100,000 lifetime of the
    application
    Net
    50,000
    profit
    16
    ©The McGraw-Hill Companies, 2005
    Pay back period
    This is the time it takes to start generating a surplus
    of income over outgoings. What would it be below?

    Year Cash-flow Accumulated


    0 -100,000 -100,000
    1 10,000 -90,000
    2 10,000 -80,000
    3 10,000 -70,000
    4 20,000 -50,000
    5 100,000 50,000
    17
    ©The McGraw-Hill Companies, 2005
    Return on investment (ROI)
    ROI = Average annual profit X 100
    Total investment

    In the previous example


    • average annual profit
    = 50,000/5
    = 10,000
    • ROI = 10,000/100,000 X 100
    = 10%
    18
    ©The McGraw-Hill Companies, 2005
    Net present value
    Would you rather I gave you £100 today or in
    12 months time?
    If I gave you £100 now you could put it in
    savings account and get interest on it.
    If the interest rate was 10% how much would
    I have to invest now to get £100 in a year’s
    time?
    This figure is the net present value of £100 in
    one year’s time
    19
    ©The McGraw-Hill Companies, 2005
    Discount factor
    Discount factor = 1/(1+r)t
    r is the interest rate (e.g. 10% is 0.10)
    t is the number of years
    In the case of 10% rate and one year
    Discount factor = 1/(1+0.10) = 0.9091
    In the case of 10% rate and two years
    Discount factor = 1/(1.10 x 1.10)
    =0.8294
    20
    ©The McGraw-Hill Companies, 2005
    Applying discount factors

    Year Cash-flow Discount factor Discounted cash


    flow
    0 -100,000 1.0000 -100,000
    1 10,000 0.9091 9,091
    2 10,000 0.8264 8,264
    3 10,000 0.7513 7,513
    4 20,000 0.6830 13,660
    5 100,000 0.6209 62,090
    NPV 618

    21
    ©The McGraw-Hill Companies, 2005
    Internal rate of return

    • Internal rate of return (IRR) is the


    discount rate that would produce an
    NPV of 0 for the project
    • Can be used to compare different
    investment opportunities
    • There is a Microsoft Excel function
    which can be used to calculate

    22
    ©The McGraw-Hill Companies, 2005
    Dealing with uncertainty: Risk
    evaluation
    • project A might appear to give a better return than B
    but could be riskier
    • Could draw up draw a project risk matrix for each
    project to assess risks – see next overhead
    • For riskier projects could use higher discount rates

    23
    ©The McGraw-Hill Companies, 2005
    Example of a project risk matrix

    24
    ©The McGraw-Hill Companies, 2005
    Decision trees

    25
    ©The McGraw-Hill Companies, 2005
    Remember!
    • A project may fail not through poor
    management but because it should never
    have been started
    • A project may make a profit, but it may be
    possible to do something else that makes
    even more profit
    • A real problem is that it is often not possible
    to express benefits in accurate financial terms
    • Projects with the highest potential returns are
    often the most risky
    26
    ©The McGraw-Hill Companies, 2005

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