SPM 2.

Dr.Sushruta Mishra
Dr.Sushruta Mishra
 Its objective is to provide a rationale for the project by showing
A Business Case that the benefits of the project outcomes will exceed the costs
of development, implementation and operation (or
production).

A business case document might contain:

1. Introduction and background to the proposal
2. The proposed project
3. The market
4. Organizational and operational infrastructure
5. The benefits
6. Outline implementation plan
7. Costs
8. The financial case
9. Risks
10. Management plan

Dr.Sushruta Mishra
Introduction and background: This is a description of the current environment of the proposed project. A problem to be
solved is identified.

The proposed project: A brief outline of the proposed project is provided.

The market: This is needed when the project is to create new product or a new service capability.

Organizational and operational infrastructure: This describes how the structure of the organization will be affected by
the implementation of the project.

Benefits: Where possible, a financial value should be put on the benefits of the implemented project.

Outline implementation plan: In addition to the ICT aspects of the project, activities such as marketing, promotion and
operational and maintenance infrastructures need to be considered.

Costs: Having outlined the steps needed to set up the operations needed by the proposal, a schedule of expected costs
associated with the planned approach can now be presented.

The financial case: There are a number of ways in which the information on income and costs can be analysed.

Risks: Many estimates of costs and, more particularly, benefits of the project will be speculative at this stage and the
section on risk should take account of this.
Dr.Sushruta Mishra
 Project Portfolio Management (PPM)
 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.

 Portfolio project management provides an overview of all the projects that an organization is undertaking or is
considering. It prioritizes the allocation of resources to projects and decides which new projects should be accepted
and which existing ones should be dropped.

Objectives:::::
 Identifying which project proposals are worth implementation
 Assessing the amount of risk of failure that a potential project has
 Deciding how to share limited resources, including staff time and finance, between projects
 Being aware of the dependencies between projects, especially where several projects need to be
completed for an organization to reap benefi ts;
 Ensuring that projects do not duplicate work;
 Ensuring that necessary developments have not been inadvertently been missed.

Dr.Sushruta Mishra
 ---Create a central record of all projects within an organization
Project ---Must decide whether to have ALL projects in the repository
portfolio or, say, only ICT projects
definition
=========================================

---Actual costing and performance of projects can be recorded

Project and assessed.
---The value that managers hope will be generated by each
Three portfolio
project can also be recorded. Actual performance of projects
management on these performance indicators can then be tracked.
elements
==========================================
to PPM
---A better balance of projects may be achieved. Some projects
Project could potentially be very profitable but could also be risky.
portfolio ---In the case of an e-commerce site, for example, sales may
not be as great as hoped because established competitors
optimization reduce prices.
---Other projects could have modest benefits, such as those
cutting costs by automating processes, but have fewer risks.
The portfolio ought to have a carefully thought-out balance
between
Dr.Sushruta Mishra the two types of project.
 Some problems with project portfolio management

 An important role of project portfolio management is sharing resources between projects.

There can be problems because while apparently full-time staff are allocated to a project,
they may effectively be part-time because they still have routine work to do.

 The official project portfolio may not accurately reflect organizational activity if some
projects are excluded. A decision may be made that only projects over a certain level of
cost will be recorded in the portfolio.

 The ‘below the line’ projects could in fact consume substantial staff effort and bleed away
effort from the official projects.

Dr.Sushruta Mishra
Evaluation of Individual Projects:::

 It is important to look at how the feasibility of an individual project can be evaluated.

 Technical assessment of a proposed system consists of evaluating whether the required functionality can
be achieved with current affordable technologies.

 The costs of the technology adopted must be taken into account in the cost–benefit analysis.

Dr.Sushruta Mishra
 Cost benefit analysis (CBA)

 A process of comparing the projected or estimated costs and benefits associated with a project decision to
determine whether it makes sense from a business perspective.

 Even where the estimated benefits will exceed the estimated costs, it is often necessary to decide if the proposed
project is the best of several options.

 Not all projects can be undertaken at any one time and, in any case, the most valuable projects should get most
resources.

Dr.Sushruta Mishra
2-Steps of Cost–benefit analysis:::::
#1. Identifying all of the costs and benefits of carrying out the project and operating the delivered application -
These include the development costs, the operating costs and the benefits expected from the new
system. A new sales order processing system, for example, could only claim to benefit an
organization by the increase in sales due to the use of the new system.

#2. Expressing these costs and benefits in common units -

We must express each cost and benefit and the net benefit which is the difference between the two – in money.

Most direct costs are easy to quantify in monetary terms and can be categorized as:

● Development costs, including development staff costs;

● Setup costs, consisting of the costs of putting the system into place, mainly of any new hardware
but also including the costs of file conversion, recruitment and staff training;
● Operational costs relating to operating the system after installation

Dr.Sushruta Mishra
Unity College is considering the replacement of the existing payroll setvice, operated by a third party, with a tailored, off-
the-shelf computer-based system.
List some of the costs it might consider under the headings of:
 Development costs
 Setup costs
 Operational costs

Dr.Sushruta Mishra
As important as estimating the overall costs and benefits of a project is producing a cash
flow forecast which indicates when expenditure and income will take place.

Accurate cash flow forecasting is difficult, as it is done early in the project’s life cycle (at
least before any significant expenditure is committed) and many items to be estimated
(particularly the benefits of using software) might be some years in the future.

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 Cost–benefit Evaluation
Techniques

We now take a look at some methods

for comparing projects on the basis of
their cash flow forecasts

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Table illustrates cash flow forecasts for four projects. In each case it is assumed that the cash flows take place at
the end of each year. Negative values represent expenditure and positive values income.

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 The net profit of a project is the difference between the total costs and the total income over
Net profit the life of the project.

Dr.Sushruta Mishra
 The net profit of a project is the difference between the total costs and the total income over
Net profit the life of the project.

 Project 2 in Table shows the greatest net profit but this is at the expense of a large investment.

 Moreover, the simple net profit takes no account of the timing of the cash flows. Projects 1 and 3 each
have a net profit of £50,000 and therefore, according to this selection criterion, would be equally
preferable.

 The bulk of the income occurs late in the life of project 1, whereas project 3 returns a steady income
throughout its life.

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Payback period The payback period is the time taken to break even or pay back the initial investment.
Normally, the project with the shortest payback period will be chosen

Dr.Sushruta Mishra
Payback period The payback period is the time taken to break even or pay back the initial investment.
Normally, the project with the shortest payback period will be chosen

 Its disadvantage as a selection technique is that it ignores the overall profitability of the
project – in fact, it totally ignores any income (or expenditure) once the project has
broken even.

 Thus the fact that projects 2 and 4 are, overall, more profitable than project 3 is ignored.

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 Determine the Project with:

 Optimal Net Profit.

 Least Payback Period

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 The return on investment (ROI), also known as the accounting rate of return (ARR),
Return on investment provides a way of comparing the net profitability to the investment required

 The return on investment provides a simple, easy-to-calculate measure of return

on capital.

 It suffers from two severe disadvantages. Like the net profitability, it takes no
account of the timing of the cash flows. More importantly, this rate of return bears
no relationship to the interest rates offered or charged by banks since it takes no
account of the timing of the cash flows.

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Dr.Sushruta Mishra
 Net present value is a project evaluation technique that takes into account the profitability
Net present value of a project and the timing of the cash flows that are produced.

 The present value of any future cash flow may be obtained by applying the following formula:

where r is the discount rate, expressed as a decimal value, and t

is the number of years into the future that the cash flow occurs

 The annual rate by which we discount future earnings is known as the discount rate.

Dr.Sushruta Mishra
Dr.Sushruta Mishra
It is interesting to note that the net present values for projects 1 and 3 are significantly different – even
though they both yield the same net profit and both have the same return on investment. The
difference in NPV reflects the fact that, with project 1, we must wait longer for the bulk of the income.

Dr.Sushruta Mishra
Calculate the net present value for each of
the projects A, B and C shown in Table
using each of the discount rates 8%, 10%
and 12%.

For each of the discount rates, decide

which is the best project.

Dr.Sushruta Mishra
Dr.Sushruta Mishra
Dealing with uncertainty:
Risk evaluation

Dr.Sushruta Mishra
 Every project involves risk of some Managers can plan their strategy based on four steps of risk management which
form. When assessing and planning a prevails in an organization. Following are the steps to manage risks effectively in an
project, we are concerned with the organization:
risk of the project's not meeting its Project risks prevent the project from
objectives.  Risk Identification being completed successfully, while
 Risk Quantification Business risks denotes that the delivered
A project risk assessment is a process  Risk Response products are not profitable.
that aims to gain a deeper  Risk Monitoring and Control
understanding of which project tasks,
deliverables, or events could Step 1 - Risk Identification
influence its success. Through the
assessment process, you identify • Managers face many difficulties when it comes to identifying and naming
potential threats to your project and the risks that occur when undertaking projects.
analyze consequences in case they
occur. • Risks that often impact a project are supplier risk, resource risk and budget
risk.
Once the risk has been identified,
project managers need to come up • Supplier risk would refer to risks that can occur in case the supplier is not
with a mitigation plan or any other meeting the timeline to supply the resources required. Resource risk occurs
solution to counter attack the risk. 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.
Dr.Sushruta Mishra
Step 2 - Risk Quantification
Step 3 - Risk Response
• Risks can be evaluated based on quantity. Project
• When it comes to risk management, it depends on the
managers need to analyze the likely chances of a
project manager to choose strategies that will reduce
risk occurring with the help of a ‘project risk matrix’.
the risk to minimal. Project managers can choose
between the four risk response strategies, which are
• Using the matrix, the project manager can
outlined below.
categorize the risk into four categories as Low,
Medium, High and Critical. The probability of  Risks can be avoided
occurrence and the impact on the project are the  Pass on the risk
two parameters used for placing the risk in the  Take corrective measures to reduce the impact of risks
matrix categories.  Acknowledge the risk
• 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'. Step 4 - 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.

Dr.Sushruta Mishra
 The project risk matrix may be used as a way of evaluating projects (those with high risks being less
favoured) or as a means of identifying and ranking the risks for a specific project.

Dr.Sushruta Mishra
 Programme vs Project Management
Program management is the
process of managing
programs mapped to
business objectives that
improve organizational
performance. Program
managers oversee and
coordinate the various
projects and other strategic
initiatives throughout an
organization.

Dr.Sushruta Mishra
Projects have:
 A set of tasks with a clear deliverable & a deadline for
completion.
 Relates to creating, updating, or reviewing a particular
document, process, outcome, or another single unit of
work.
 A predefined scope that is limited to a specific output.
 Improves quality, efficiency, cost management, or
customer satisfaction in a specific and predetermined
way.

Programs have:
 Unknown deadlines due to the large scope and impact of the work
that must be done continuously over a long period of time.
 Multiple deliverables with inter-related dependencies that may
continue to evolve based on changing business needs.
 A series of deliverables completed together to increase efficiency,
accuracy, reliability, or other business needs.
 The work enables the company to achieve a long-term business
goal or initiative that will run in perpetuity.
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Dr.Sushruta Mishra
Project managers lead individual projects to completion, while program managers
are in charge of ensuring groups of projects are carried out effectively.

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 Dependency diagrams

 There will often be physical and

technical dependencies between
projects. For example, a project
to relocate staff from one
building to another cannot start
until the project to construct the
new building has been
completed.

 Dependency diagrams at project

level, can show these
dependencies. However, where
projects run concurrently in a
programme and products
interchange, the dependency
diagrams could become quite
complicated. Dependency diagram for a programme to merge two organizations
Dr.Sushruta Mishra
A. Systems study/design - A project is carried out which examines the various existing IT applications in the two old
organizations, analyses their functionality, and makes recommendations about how they are to be combined.

B. Corporate image design - Independently of Project A, this project is designing the corporate image for the new
organization. This would include design of the new logo to be put on company documents.

C. Build common systems - Once Project A has been completed, work can be triggered on the construction of the new
common ICT applications.

D. Relocate offices - This is the project that plans and carries out the physical co-location of the staff in the two former
organizations.

E. Training - Once staff have been brought together, perhaps with some staff being made redundant, training in the use of
the new systems can begin.

F. Data migration - When the new, joint, applications have been developed and staff have been trained in their use, data
can be migrated from existing databases to the new consolidated database.

G. Implement corporate interface - Before the new applications can ‘go live’, the interfaces, including the documentation
generated for external customers, must be modified to conform to the new company image.

Dr.Sushruta Mishra
 Delivery planning

The creation of a delivery dependency

diagram would typically lead to the
definition of tranches of projects.

A tranche is a group of projects that will

deliver their products as one step in the
programme.

The projects in a tranche should combine to

provide a coherent new capability or set of
benefits for the client.

Figure shows how the programme’s

portfolio of projects can be organized into
tranches, each of which delivers some
tangible benefits to the user.

Dr.Sushruta Mishra
 Resource Allocation in Project Management
• There are many resources which
have to be allocated when
managing a project, beginning from How to Allocate Resources When Managing a
budget to equipment and tools, to
data and the project’s plan.
Project?

• Resource allocation helps project

 Know the scope – to know what is your project about, what you will need to
managers schedule the best team
achieve it, and to be able to properly allocate resources;
for the job, and optimize how work  Identify resources – to know which tools, equipment, etc. you will need it
is assigned. It allows to plan and
completing the project;
prepare for the project’s  Track time – to have a deep analysis of the progress and current situation as
implementation or achieving goals.
well as be able to control it in the real-time;
It is also possible to analyze  Don’t look only at the big picture – the process of working on a project is not
existing threats and risks to the
done with task allocation. Once you allocate resources you have to keep
project.
track of all of them. If you lose at least one tiny detail, your project may fail;
 Don’t over-allocate – because your team will experience burnout and their
• Effective resource allocation is the
productivity will significantly drop.
process of assigning tasks to the
right team members to deliver
projects on time and within
budget. Dr.Sushruta Mishra
Benefits Management
What does a benefits management plan include?
 Anytime someone mentions project
 A benefits management plan should explain, in detail, what the overall
management, we begin to think of
benefit of a project is, and what the benefits are at individual
budget development and scheduling
milestones. For each benefit, the plan should include the following:
development activities. These are
definitely important aspects of project • Summary: Clearly explain what the benefit is and why it’s considered
management.
good for your organization.
 However, more often than not, the
• Schedule: Include a timeline that the benefit can be measured against,
benefits management activities tied to
as well as an expected date it should be achieved by.
project management are often
overlooked but should be a critical aspect • Ownership: Add a simple statement explaining who benefits from
of successful project management.
achieving the goal, and why.
 This is when a project manager takes
• Metrics: Provide a clear explanation of how the benefit will be
time just to make sure that the final
measured, including its baseline and how it was developed.
project outcome will provide some value
to the organization. • Risk Analysis: Outline potential risks the project faces. Determine who
will assume said risks, and how they should be handled.

Dr.Sushruta Mishra
How to create a benefits Tangible benefits can be measured
management plan ??? using reliable metrics. These include
cost, sales, and other benefits that have
a direct impact on business success.
STEP 1 - Identify and list your project’s potential benefits. Include They result in an increase in revenue,
information about who benefits, specifically how they benefit, and decreased costs, or increased
why these benefits are good for your organization. productivity.

STEP 2 - Create SMART goals that are intertwined with the benefits
you’ve listed. For example, if a benefit is that your project will Intangible benefits are more
improve your company’s market share, include specific details about difficult to identify and measure.
how that’s going to happen, when it’s going to happen, and how you’ll These include benefits such as employee
measure it along the way. satisfaction, client satisfaction, and
awareness of your brand among the
STEP 3 - Create a list of potential risks that might deter your project general public.
team from realizing the benefits you’ve written out in step one.
Determine how these risks might affect progress, who is accountable
for monitoring them, and what to do if they occur.

STEP 4 - Use a templated benefits management plan to create

documentation for each benefit listed.
Dr.Sushruta Mishra
To carry out benefits management, you must:
Define expected benefits
Analyse balance between costs and benefits
Plan how benefits will be achieved
Allocate responsibilities for their achievement Quantifying benefits:::::
Monitor achievement of benefits
 Benefits can be Quantified and valued e.g. a
reduction of x staff saving Rs.y

These benefits might include:

 Benefits can be Quantified but not valued e.g.
a decrease in customer complaints by x%
Mandatory requirement
Improved quality of service
Increased productivity
More motivated workforce
Internal management benefits
Risk reduction
Economies
Revenue enhancement/acceleration
Strategic fit
Dr.Sushruta Mishra
Dr.Sushruta Mishra
Dr.Sushruta Mishra
END

Dr.Sushruta Mishra