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Unit-3 Project Evaluation and Estimation
Cost-benefit analysis
It mainly comprise ...
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Fig: Typical product life cycle cash flow
Cost-benefit evaluation techniques
The f...
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Where r is the discount rate and t is the number of years into the future that the...
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By study the results of a sensitivity analysis we can identify those factors that ...
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Choosing technologies
An outcome of project analysis will be the selection of the ...
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 Take into account user requirement concerning implementation
 Select general li...
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Fig: The Process
 Process modeling
 Application generation
 Testing and turnove...
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 For large but scalable projects, RAD requires sufficient human resources to crea...
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Project Evaluation and Estimation in Software Development

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Cost-benefit analysis
It mainly comprise two steps
 Identify and estimating all of the costs and benefits of carrying out the project and operating the delivered application.
 Expressing these costs and benefits in common units
We need to evaluate the net benefit, that is, the difference between the total benefit and the total benefit and the total cost of creating and operating the system.
We can categorize cost according to where they originate in the life of the project.

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Project Evaluation and Estimation in Software Development

  1. 1. For more Https://www.ThesisScientist.co Unit-3 Project Evaluation and Estimation Cost-benefit analysis It mainly comprise two steps  Identify and estimating all of the costs and benefits of carrying out the project and operating the delivered application.  Expressing these costs and benefits in common units We need to evaluate the net benefit, that is, the difference between the total benefit and the total benefit and the total cost of creating and operating the system. We can categorize cost according to where they originate in the life of the project. These are:  Development costs  Setup costs  Operational costs Cash flow forecasting A cash flow forecast will indicate when expenditure and income will take place. It is as shown in the figure:
  2. 2. For more Https://www.ThesisScientist.co Fig: Typical product life cycle cash flow Cost-benefit evaluation techniques The following cost-benefit evaluation techniques are:  Net profit The net profit of a project is the difference between total costs and the total income over the life of the project.  Payback period The payback period is the time taken to break even or pay back the initial investment.  Return on investment The return on investment (ROI), also known as the accounting rate of return (ARR), provides a way of comparing the net profitability to the investment required. Average annual profit ROI = --------------------------- * 100 Total income  Net present value The calculation of net present value is a project evaluation technique that takes into account the profitability 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 Value in year t Present value = ----------------------- (1+r) t
  3. 3. For more Https://www.ThesisScientist.co Where r is the discount rate and t is the number of years into the future that the cash flow occurs.  Internal rate of return The internal rate of return (IRR) attempts to provide a profitability measures as a percentage return that is directly comparable with interest rates. Risk evaluation The following things are:  Risk identification and ranking In any project evaluation we should attempt to identify the risks and quantify their potential effects. One common approach to risk analysis is to construct a project risk matrix utilizing a checklist of possible risks and to classify each risk according to its relative importance and likelihood.  Risk and net present value Where a project is relatively risky it is common practice to use a higher discount rate to calculate net present value.  Cost-benefit analysis A more sophisticated approach to the evaluation of risk is to consider each possible outcome and estimate the probability of its occurring and the corresponding value of the outcome. The value of the project is then obtained by summing the cost or benefit for each category.  Risk profile analysis
  4. 4. For more Https://www.ThesisScientist.co By study the results of a sensitivity analysis we can identify those factors that are most important to the success of the project. There are a number of risk analysis applications available and produce the risk profiles of the type.  Using decision trees The analysis of a decision tree consists of evaluating the expected benefit of taking each path from a decision point (It is denoted by D). The expected value of each path is the sum of the value of each possible outcome multiplied by its probability of occurrence. This is shown as in the figure: Fig. A Decision Tree Selection of a an appropriate project approach The selection of a particular process model could add new products to the Project Breakdown Structure (PBS) or new activities to the activity network. This will generate inputs for identify the products and activities of the project. D Extend Replace Expansion No expansion Expansion No expansion 0.2 0.8 0.2 0.8
  5. 5. For more Https://www.ThesisScientist.co Choosing technologies An outcome of project analysis will be the selection of the most appropriate methodologies and technologies. Methodologies include approaches like Unified Software Development Process (USDP), Structure System Analysis and Design Method (SSADM), and Human-Centered Design, while technologies include appropriate application-building and automated testing environments. The some of the steps of the project analysis are:  Identify project as either objectives-driven or product-driven In objective-driven project, we define the general software solution that is to be implemented, while in product-driven project, the product to be created is defined before the start of the product.  Analysis other project characteristics The following point will arise:  Is a data-oriented or process-oriented system to be implemented?  Will the software that is too produced be a general tool or application specific?  Are there specific tools available for implementing the particular type of application?  Is the system to be created safety critical?  What is the nature of the hardware/software environment in which the system will operate?  Identify high-level project risks The following uncertainty will occur:  Product uncertainty  Process uncertainty  Resource uncertainty
  6. 6. For more Https://www.ThesisScientist.co  Take into account user requirement concerning implementation  Select general life-cycle approach Some approaches are:  Control systems  Information systems  General tools  Specialized techniques  Hardware environment  Safety-critical systems Choice of process models The word ‘process’ is used to emphasize the idea of a system in action. In order to achieve an outcome, the system will have to execute one or more activities. A major part of the planning will be choosing development methods and slotting them into an overall process model. Structure methods The principle behind structure method is ‘get it right first time’. The structure methods are made up of sets of steps and rules which generate system products such as use case diagrams. Some of them are rapid application development (RAD), waterfall model etc. The RAD Model Rapid application development (RAD) is an incremental software development process model that emphasizes an extremely short development cycle. The RAD model is a” high-speed” adaptation of the linear sequential model in which rapid development is achieved by using component-based construction. The RAD approach encompasses the following phases:  Business modeling  Data modeling
  7. 7. For more Https://www.ThesisScientist.co Fig: The Process  Process modeling  Application generation  Testing and turnover Like all process models, the RAD approach has drawbacks:
  8. 8. For more Https://www.ThesisScientist.co  For large but scalable projects, RAD requires sufficient human resources to create the right number of RAD teams.  RAD requires developers and customers who are committed to the rapid-fire activities necessary to get a system complete in a much abbreviated time frame. If commitment is lacking from either constituency, RAD projects will fail.  Not all types of applications are appropriate for RAD. If a system cannot be properly modularized, building the components necessary for RAD will be problematic. If high performance is an issue and performance is to be achieved through tuning the interfaces to system components, the RAD approach may not work.  RAD is not appropriate when technical risks are high. This occurs when a new application makes heavy use of new technology or when the new software requires a high degree of interoperability with existing computer programs. The Spiral Model The spiral model, originally proposed by Boehm, is an evolutionary software process model that couples the iterative nature of prototyping with the controlled and systematic aspects of the linear sequential model. A spiral model is divided into a number of framework activities, also called task regions. Typically, there are between three and six task regions. Figure 2.8 depicts a spiral model that contains six task regions:  Customer communication  Planning  Risk analysis  Engineering  Construction and release  Customer evaluation
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