4. Programme management
4
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’
5. Programmes may be
5
Strategic
Business cycle programmes
Infrastructure programmes
Research and development
programmes
Innovative partnerships
6. Strategic Programmes
6
Several projects together can implement a single
strategy.
For example :
Two organizations are merging
So we have create unified pay roll and accounting
application.
Physical reorganization of offices
Training, new org. procedures, re-creating corporate image
using media
All of these project can be treated as separate
project
But would be coordinated as a program
7. Business cycle programmes
7
Portfolio????
The collection of projects that an organization
undertakes within a particular planning cycle is
sometimes refers to as a portfolio.
Planners needs to assess the comparative
value and urgency of projects within a
portfolio.
8. Infrastructure programmes
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Some organization have integrated
infrastructure.
And some organization have departments.
So it is required to have a uniform
infrastructure to share the information among
different departments.
In this situation infrastructure program setup
and maintain infrastructure, include the
networks, workstation and server.
9. Research and development
programmes
9
A search for knowledge
R&D programs are carried out by the
innovative companies.
These company develops new products for
market.
There is always a greater amount of risk with
these type programmes.
Companies doing R&D IBM, APPLE ,MS,
Google, Yahoo
10. Innovative partnerships
10
Some technological developments benefits
whole industries.
In this type of programs companies comes
together to develop new technologies
Example World wide web, GSM
11. Programme managers versus
project managers
Programme manager
Many simultaneous
projects
Personal
relationship with
skilled resources
Optimization of
resource use
Projects tend to be
seen as similar
Project manager
One project at a
time
Impersonal
relationship with
resources
Minimization of
demand for
resources
Projects tend to be
seen as unique
11
13. Allocation of Resource
What is a project?
Planned Activity
What is Resource?
support that may be drawn upon when needed
Each project needs Resources to achieve there
objective.
Resources may be:
Programmers
Skilled resources
Infrastructure (PC, Network, Server, Work stations
etc)
Mangers
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14. Managing the allocation of
resources within programmes
In company there are many project running
concurrently at same time
But resources are limited in company so they
need to be managed within the organization.
So we need to manage these resource.
ICT department has pools of:
Expertise
Software Developer
Database designer
Network Support Staff
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15. These experts may be needed in number of
projects running in company.
So it is the responsibility of program manager
to use these resources in optimum way.
And program manager have personal
relationship with these skilled resources. i.e.
he/she has the knowledge about these
resources
On the other hand, project manager need not
to have personal relations with resources
15
16. One resource may be needed by different
project
So we need to identify the priority of the
project
We can delay the start of activity of a project
with least priority.
16
18. Creating Programme
18
Based on OGC approach
OGC is a UK govt. Agency responsible for
introduction of PRINCE and PRINCE2 tools for
programme management
Programme triggered by the creation of
programme mandate
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
19. Creating Programme(cont.)
A programme director appointed a champion
for the scheme
Programme director is responsible for success
of the programme
19
20. Next stages/documents
20
The programme brief
equivalent of a feasibility study:
It will have sections:
Vision Statement
Benefits
Risks and Issues
Estimation cost, timescale and effort
21. The vision statement
The vision statement – explains the new
capability that the organization will have
Provides information to sponsoring that it is worth
moving to more detailed definitions.
Next Step is team forming
A small team is formed with a programme manager
This team will now take the outline vision and prepare
a detailed vision
21
22. The blueprint
The blueprint – explains the changes to be
made to obtain the new capability
It contains:
Business model outline
Organizational structure (staff & new system
needed )
The other non-staff resource needed
Data and information requirements
Cost, performance and service level requirements
22
23. Aid to Programme management
Dependency Diagram
Shows the dependency between projects
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1. System
Design/Study
2. Corporate
Image Design
3. Build
common
system
4. Relocate
office
5. Training
7. Implement
corporate
interface
6. Data
Migration
24. Example
1. System Design/study
This project will examine existing systems of two
companies and make recommendation about how
to combine two system
2. Corporate Image Design:
This project is independent of Project 1
This project will design the new image of the
company
E.g new tag line, logo, new name
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25. 3. Build Common System
After project 1 we will develop a new common
system
4. Relocate office
Carried out after project 1?
Training
After merger of two staff we will give training to
whole staff about new system
Data Migration
Implement corporate interface
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26. 2. Delivery planning
Delivery dependency diagram
It is precursor to the detailed programme
planning
26
27. A Tranche is a group of project that will deliver
their product as one step in the programming
27
30. Benefits management
30
In Benefit management, we identify, optimise
and track the benefits from a business
change
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
31. Benefits
31
These might include:
Mandatory requirement
Government changes rules
Improved quality of service
Claims more customer
Increased productivity
Less cost of production
More motivated workforce
Reward system
32. Benefits - continued
Internal management benefits
Insurance
Risk Reduction
By reducing risks
Economy
Reduction in cost in terms of staff salary etc.
Revenue enhancement/acceleration
Sooner bill reaches sooner they can pay
32
33. Benefits - continued
Strategic fit
A change that will not give direct benefits but can
give at later stages
33
34. Quantifying benefits
34
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
35. Cost benefit analysis (CBA)
35
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
36. Cash Flow Forecasting
It is as important as the cost and benefit
estimation of a project
It tells the flow of cash thought the project. See
figure:
36
38. Cash Flow Forecasting(cont.)
But
It is usual that we ignore the effect of inflation
If we include the inflation the forecasting is
uncertain.
So accurate cash flow forecast is not easy.
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40. Net profit
‘Year 0’ represents all
the costs before
system is operation
‘Cash-flow’ is value of
income outgoing
Net profit value of all the
cash-flows for the
lifetime of the
application
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
40
41. 41
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
42. Return on investment (ROI)
aka. Accounting rate of return
Compares net profit with investment
42
43. Return on investment (ROI)
ROI =
43
Average annual profit
Total investment
X 100
In the previous example
• average annual profit
= 50,000/5
= 10,000
• ROI = 10,000/100,000 X 100
= 10%
44. Return on investment (ROI)
Disadvantages
No account of timing of cash flow
It has no relationship with the interest charged by
the bank.
44
45. Net present value
45
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
46. Net present value
NPV is a project evolution technique that takes
into account the profitability and timing of the
cash flows.
46
47. Discount factor
47
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
50. Internal rate of return
50
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
51. Example: Let us say you can get 10% interest
on your money of $1,000
So now could earn $1,000 x 10% = $100 in a
year.
Your $1,000 now would become $1,100 in a
year's time
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52. Present Value
PV = FV / (1+r)n
PV is Present Value
FV is Future Value
r is the interest rate (as a decimal, so 0.10, not
10%)
n is the number of years
52
53. Example:
Alex promises you $900 in 3 years, what is
the Present Value (using a 10% interest rate)?
The Future Value (FV) is $900,
The interest rate (r) is 10%, which is 0.10 as a
decimal, and The number of years (n) is 3.
Use the formula to calculate Present Value
of $900 in 3 years:
PV = FV / (1+r)n
PV = $900 / (1 + 0.10)3
= $900 / 1.103 = $676.18 (to nearest cent).
53
54. Example: try that again, but use an interest
rate of 6%
The interest rate (r) is now 6%, which
is 0.06 as a decimal:
PV = FV / (1+r)n
PV = $900 / (1 + 0.06)3 = $900
/ 1.063 = $755.66 (to nearest cent).
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55. Example: You invest $500 now, and get back
$570 next year. Use an interest Rate of 10%.
Money Out: $500 now
You invest $500 now, so PV = -$500.00
Money In: $570 next year
PV = $570 / (1+0.10)1 = $570 / 1.10 = $518.18 (to
nearest cent)
And the Net Amount is:
Net Present Value = $518.18 - $500.00
= $18.18
So, at 10% interest, that investment has NPV
55
56. But your choice of interest rate can change things!
Example: Same investment, but the interest Rate is 15%
Money Out: $500 now
You invest $500 now, so PV = -$500.00
Money In: $570 next year:
PV = $570 / (1+0.15)1 = $570 / 1.15 = = $495.65 (to
nearest cent)
Work out the Net Amount:
Net Present Value = $495.65 - $500.00 = -$4.35
So, at 15% interest, that investment has NPV = -$4.35
It has gone negative!
56
57. Now it gets interesting ... what Interest Rate would make the NPV
exactly zero? Let's try 14%:
Example: Try again, but the interest Rate is 14%
Money Out: $500 now
You invest $500 now, so PV = -$500.00
Money In: $570 next year:
PV = $570 / (1+0.14)1 = $570 / 1.14 = $500 (exactly)
Work out the Net Amount:
Net Present Value = $500 - $500.00 = $0
Exactly zero!
At 14% interest NPV = $0
And we have discovered the Internal Rate of Return ... it is 14% for
that investment.
Because 14% made the NPV zero.
57
58. Let's try a bigger example:
Example: Invest $4000 now, receive 2 yearly
payments of $110 each, plus $1500 in the 2rd
year with 14% interest:
58
60. I will take a better guess now, and try a 12%
interest rate:
Example: (continued) at 12% interest rate
Now: PV = -$2,000
Year 1: PV = $100 / 1.12 = $89.29
Year 2: PV = $100 / 1.122 = $79.72
Year 3: PV = $100 / 1.123 = $71.18
Year 3 (final payment): PV = $2,500 / 1.123 = $1,779.45
Adding those up gets: NPV = -$2,000 + $89.29 + $79.72
+ $71.18 + $1,779.45 =$19.64
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61. Ooh .. so close. Maybe 12.4% ?
Example: (continued) at 12.4% interest rate
Now: PV = -$2,000
Year 1: PV = $100 / 1.124 = $88.97
Year 2: PV = $100 / 1.1242 = $79.15
Year 3: PV = $100 / 1.1243 = $70.42
Year 3 (final payment): PV = $2,500
/ 1.1243 = $1,760.52
Adding those up gets: NPV = -$2,000 + $88.97 + $79.15
+ $70.42 + $1,760.52 = -$0.94
That is good enough! Let us stop there and say
the Internal Rate of Return is 12.4%
In a way it is saying "this investment would earn 12.4%"
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66. Dealing with uncertainty: Risk
Evaluation
66
Every project involves risk of some form.
Project A might appear to give a better return
than B but could be riskier
How to choose ?????
67. Risk Evaluation
1.Risk Identification and Ranking
We need to identify the risk and quantify it.
One technique is draw risk matrix.
Could draw up draw a project risk matrix for each
project to assess risks
Classify risk into two categories :
Important
Likelihood
Matrix may be used for project evolution
67
68. Risk Evaluation(Cont.)
2. NPV and Risk
For riskier projects could use higher discount
rates.
This is known as risk premium.
We can increase Discount rate for risky project
by 5 to10%.
68
69. Risk Evaluation(Cont.)
3. Cost-benefit Analysis:
It is more sophisticated approach to evaluate risk
In this approach we consider each possible
outcome and estimate the probability of its
occurrence.
So instead of single cash flow we will have set of
cash flow and its occurrence.
69
70. Risk Evaluation(Cont.)
Example: one company wants to create a
software for open market.
1. They release the product and there will be no
such product in market and they earn Rs.8lakh
probability is 1/10.
2. Their competitor launch similar application
before them and they might earn Rs.1lakh and
probability is 30%
3. They launch the product before the competitor
and they earn Rs. 6.5Lakh and probability is 60%
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71. Risk Evaluation(Cont.)
Sales Annual Sales
Income
Probability Expected value
High 8,00,000 0.1 80,000
Medium 6,50,000 0.6 390,000
Low 100,000 0.3 30,000
Expected Income 5,00,000
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72. Risk Evaluation(Cont.)
4. Risk Profile Analysis
We can analysis the risk with project by varying
the parameters of project that affects the cost or
benefits of the project.
First we do the estimation then we vary it and
check its sensitivity.
For example we are varying the original
estimation by + or – 5% and then recalculate
the cost and benefits. If the project cost and
benefits changes drastically then we called
that parameter as sensitive
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73. Risk Evaluation(Cont.)
Decision trees: This is also a risk evaluation
technique
Example:
Some company is providing payroll service to
their customers.
Their system is old and number of customer is
increasing. There is a probability that market will
expand more.
They have two option
Expand the existing system
Replace the old with new
73
74. They have calculated that extending existing
system will have NPV of 75000(80%
probability)
If market expands more the loss will be –
100000(20% probability)
If market does expand after replacing the
system the profit will be 250000 (20%
probability)and if reverse happens then the
loss will be -50000(80% probability)
74
75. If it is decided to extend the system the
sum of the values of the outcomes is
Rs40,000 (75,000 x 0.8 – 100,000 x 0.2)
while for replacement it would be
Rs.10,000 (250,000 x 0.2 – 50,000 x
0.80).
Extending the system therefore seems to
be the best bet (but it is still a bet!).
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