Project Management Budget/Cost Plans (1)

1. Project Management Budget/Cost Plans (1) Planning the cost and time expenditure on a software project is generally considered to be a weak-point in the software development cycle . Various studies have shown that 3 out of 4 projects are not finished on time or within budget or both. Therefore – estimating costs and controlling costs are important in the overall project lifecycle

2. Project Management Budget/Cost Plans (2) Estimate project costs Estimate economic benefits over product life-span Proceed if cost-benefit ratio is favourable Basically, there are two general kinds of costing exercises involved: cost-benefit analysis software cost and effort estimation High-level estimates Calculate time & effort in project Arrange a budget to fund this. Monitor and control the spend Detailed costings

3. Consumables Project Management Budget/Cost Plans (3) Hardware Personnel External costs Overheads • Profit = Revenue – Cost • development costs • operating costs • benefits Benefits may be tangible or intangible Benefits may flow for all or part of the system’s life Tangible benefit:- a measurable benefit such as reduced labour cost, increase in seat booking rate for an airline Intangible benefit:- difficult to measure, e.g. improved service to customer, a web-based site to promote health awareness, etc

4. Project Management Budget/Cost Plans (4) Development cost: 50,000 A simple example: A web-based system is planned to help to market and sell online a line of health food supplements within Europe. The user and SE team working together have estimated that the proposed system could generate €25,000 per year by targetting new customers . Assume development cost as a once-off spend of €50,000 Benefits: Year Amount 1 €25,000 2 25,000 3 25,000 4 25,000 5 25,000 The costs and benefits can be shown as a table

5. Project Management Budget/Cost Plans (5) The future value of money: F = P(1+i)n where F is the future value of an investment P is the present value of the investment i is the interest rate per compounding period n is the number of compounding periods (usually years) The benefits occur in the future but the investment has to be made “this year” – now! How much would you be willing to invest right now, at present interest rates, to get €25,000 at the end of 5 years? P = F/(1+i)n The answer is in the present value of the benefit which can be compared to the present value of the investment:

6. Project Management Budget/Cost Plans (6) Since P = F/(1+i)n then if assume a 10% interest rate (for purposes of example) then we can compute the present value of a €25,000 benefit 5 years from now as: P = 25000/(1+0.10)5 = 15523.03 In other words, if we are going to get a benefit of €25,000 in 5 years time for our new system then it is worth a present investment of €15523

7. Project Management Budget/Cost Plans (7) The computation can be repeated for each year’s benefit: Year Future value (1+i)n Present value Cumulative Present value 1 25000 1.10 22727.27 22727.27 2 25000 1.21 20661.16 43388.43 3 25000 1.33 18782.87 62171.30 4 25000 1.46 17075.34 79246.64 5 25000 1.61 15523.03 94769.67

8. Project Management Budget/Cost Plans (8) Other measures such as payback period, net present value, and internal rate of return can also be used. Payback period? How long after our initial investment does it take to break even? (In other words to have paid back the investment) Look at the last slide. The investment is €50,000. You can see that payback comes somewhere towards the middle of the 3rd year. It is useful to know how long one has to wait before the initial investment is paid for. Net present value and internal rate or return are beyond the scope of this course.

9. Project Management Software cost & effort estimation (1) Boehm (Software Engineering Economics, 1981) identified several ways of deriving estimates of software development effort: • Algorithmic methods which use parameters associated with the • project/product to measure the effort/cost. Useful ! • Expert judgement where the opinion of knowledgeable staff is used • Analogy, where a similar completed project is identified and the actual • effort used is the basis for estimating effort/cost on the new project Useless & Dangerous ! • Price-to-win, where the “estimate” is a figure that appears to be • sufficiently low to win a contract.

10. Project Management Software cost & effort estimation (2) Algorithmic Methods of Cost Estimation: Adding up the calculated effort/cost for each single activity to get an overall estimate effort = (system size) x (productivity rate) provides the basis for several useful formulae for measurement. Two ways of estimating of system size are: • KLOC thousands of lines of source code no. of interfaces to other apps no. of input data element types Computes a measure of system size by measuring factors such as • Function point analysis no. of entity types referenced special security features no. of output data element types documentation requirements

11. Project Management Software cost & effort estimation (3) Algorithmic Methods of Cost Estimation: Software cost estimation is one of the most actively researched areas in SE Be aware of the existence of detailed metrical ways of measuring costs such as : COSMIC FP Both incorporated into ISO standards Common Software Measurement Consortium FP = function point NESMA FP Netherlands Software Measurement Association COCOMO COnstructiveCOstMOdel Developed by Barry Boehm

12. Project Management Risk Management(1) Risk – the chance of an event happening which will effect a project’s objectives Key elements of a risk: - - it relates to the future - it involves cause and effect

13. Project Management Risk Management(2) Planning for risk involves these steps: risk identification risk analysis & prioritisation risk planning risk monitoring

14. Project Management Risk Management(3) Categories of Risk Availability & quality of tools How big? Product size Development environment Constraints imposed by mgmt or market place Complexity of system &“newness” of technology being built Business impact Technology to be built Customer characteristics Staff size/experience Customer’s ability to communicate Process definition Technical skill & project experience of staff SE methods defined & followed?

15. Project Management Risk Management(4) Risk Analysis & Prioritisation What will be the impact of each risk identified? What will be the consequences on the project if a risk occurs?

16. Project Management Risk Management(5) Pointer to ref in Risk Mititgation, Monitoring & Management plan Risks can be identified and assigned probabilities and impact ratings Risks can be identified and assigned probabilities and effects

17. Project Management Risk Management(6) Risk Exposure Exposure to a risk is determined by RE = P x C where P is the probability of occurrence of a risk and C is the cost to the project if the risk occurs

18. Project Management Risk Management(7) Risk Mitigation and Monitoring Project manager must interact with team members and other stakeholders to mitigate the impact of risks. Plan to avoid risks Risk mitigation Plan to minimise risk impact

19. Project Management Test Planning (1) Testing should be planned. Each statement in the specification document should be connectable to a part of the system design and … …each part of the design reflected explicitly in the code Plan a testing strategy ….. Read difference between these • Top-down or bottom-up? • Black-box and/or white-box? • Try to relate each test to a requirement • Who tests what? • What test metrics to use? • How much testing?

20. Project Management Quality Plan (1) Planning for quality involves: • Identifying which McCall factors are relevant to the particular project/product • Selecting the right metrics for each factor • Deciding on acceptable quality standards for each metric • Collecting the data for each metric as project proceeds • Adjusting effort/resources to achieve conformance with desired quality standards Other kinds of plans include: • Data conversion plan • Documentation plan • Installation plan • Staff training plan