This document discusses key concepts related to project management including resource allocation, software risks, differences between products and projects, discount factors, net present value, and net profit. The main points are: 1) Resource allocation in project management is important for planning, scheduling, and controlling workload to improve team effectiveness. It involves identifying and tracking resources like budget, tools, and time. 2) The top five software risks are inherent schedule flaws, requirements inflation, employee turnover, specification breakdown, and poor productivity. Agile methods aim to mitigate these risks through practices like iterative planning and prioritization. 3) The key difference between a product and project is that a product is manufactured and sold while a project is built to

1. 1 Importance of resources allocation in formal method of software engineering
Project management is a very wide area of work, particularly in business. It covers many
different topics which can be broken into even smaller particles. Work of a project
manager is not only about giving people orders and telling them what to do. Many people
limit their work of a project manager to supervising their employees and making sure
everyone meets their deadline. But a good project manager knows it’s more than that.
Resource allocation in project management is one of those particles which make
work of a good PM effective and significant. And even though it may seem simple, it is
actually crucial in delivering a great project.
Resource allocation in project management is concerned with creating a plan which can
help achieve future goals. There are many resources which have to be allocated when
managing a project, beginning from budget to equipment and tools, to data and the
project’s plan.
How To Allocate Resources
Resource allocation in project management is so important because it gives a clear
picture on the amount of work that has to be done. It also helps to schedule ahead and
have an insight into the team’s progress, including allocating the right amount of time to
everyone on the team.
Resource allocation allows to plan and prepare for the project’s implementation or
achieving goals. It is also possible to analyze existing threats and risks to the project.
But above all, resource allocation in project management helps to control all the
workload. This, as a result, contributes to team’s effectiveness at work and what follows
later is a satisfying and exhaustive project.
Since resources refer to quite an extensive list of things and aspects of project
management, it may be confusing when trying to properly allocate them all. But it’s not
difficult and requires certain dedication and involvement. Here’s what you can do to
allocate resources in the right way when managing a project:
 know the scope – to know what is your project about, what you will need to achieve
it, and to be able to properly allocate resources;
 identify resources – to know which tools, equipment, etc. you will need it
completing the project;
 track time – to have a deep analysis of the progress and current situation as well as
be able to control it in the real-time;
 don’t look only at the big picture – the process of working on a project is not done
with task allocation. Once youallocate resourcesyouhaveto keeptrack ofall 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
productivity will significantly drop.

2. 2 What are the software risk issue?
SOFTWARE RIKS ISSUE
THE TOP FIVE SOFTWARE PROJECT RISKS
Risk management (or more precisely risk avoidance) is a critical topic, but one that is
often dull to read about and therefore neglected. One of the few useful and entertaining
books on the subject is Waltzing with Bears: Managing Risk on Software Projects by Tom
Demarco, Timothy Lister, authors of the ever popular Peopleware. This post provides a
useful summary of their top five software project risks.
While not an agile focused book, I find it interesting that of the top five software project
risks identified in Waltzing with Bears, all have suggested solutions rooted in agile
methods. Demarco and Lister rate the top five risks and their mitigation strategies as:
Risk 1: Inherent Schedule Flaws
Explanation: Software development, given the intangible nature and uniqueness of
software, is inherently difficult to estimate and schedule.
Waltzing…Solution: Get the team more involved in planning and estimating. Get
early feedback and address slips directly with stakeholders.
Agile Practice: On agile projects the team is heavily involved in planning and
estimating through activities such as XP's planning game and Wideband Delphi
workshops.Byworking in shortincrements, thetrue velocity ofthe team quickly emerges
and is visible to all stakeholders who are now more closely involved in the project. In
short, the true progress is hard to hide and quickly revealed, giving feedback to the
stakeholders.
Risk 2: Requirements Inflation
Explanation: As the project progresses more and more features that were not
identified at the beginning of the project emerge that threaten estimates and timelines.
Waltzing…Solution: Constant involvement of customers and
developers.
Agile Practice: Agile projects plan in the regular trade-off discussions about features
and estimates at every iteration boundary. Changes and requirements inflation are
accepted as a fact of software projects. Rather than utilizing change-suppression
mechanisms, prioritization sessions are scheduled that allow worthwhile changes to

3. proceed and initially envisioned features to be superseded if the business gives their
authorization. It has never been possible to squeeze a pint into a quart cup, but now at
least we anticipate the likely issue and have mechanisms in place to address the matter
as part of the project from its early stages.
Risk 3: Employee Turnover
Explanation: Key personnel leave the project taking critical information with them
that significantly delays or derails the project.
Waltzing…Solution: Increased collaboration and information sharing on the
team.
Agile Practice: Agile projects practice information sharing techniques such as pair
programming, common code ownership, and frequent reporting at daily stand-ups
specifically to reduce the "bus-factor". When this "bus factor" (the impact to the project
of a key member being hit by a bus) is reduced multiple team members share key
information and the risk due to employee turnover is small. Also, often overlooked, is the
fact that when working in an engaging, rewarding, empowered, collaborative
environment such as agile projects, people are far less likely to want to move elsewhere
so the risk is often avoided as well as reduced.
Risk 4: Specification Breakdown
Explanation: When coding and integration begin it becomes apparent that the
specification is incomplete or contains conflicting requirements.
Waltzing…Solution: Use a dedicated Product Manager to make critical trade off
decisions.
Agile Practice: Agile projects utilise the concept of an ambassador user, subject
matter expert, or customer proxy to play the product manager role. The idea is that
someone (or some group) need to be readily available to answer questions and make
decisions ontheproject. Traditional projectssufferspecification breakdownwhen no one
will own the role and conflicting assumptions or decisions are made. Agile projects have
some form of product owner role central to their core team composition to ensure
decisions are made in a timely fashion.
Risk 5: Poor Productivity
Explanation: Given long project timelines, the sense of urgency to work in earnest is
often absent resulting to time lost in early project stages that can never be regained.

4. Waltzing…Solution: Short iterations, right people on team, coaching and team
development.
Agile Practice: Agile methods recognise Parkinson's Law and the Student Syndrome
apply to software projects. Parkinson's Law says that: "Work expands to fill the time
available" and Student Syndrome: "Given a deadline, people tend to wait until the
deadline is nearly here before starting work." By having short iterations, work is time-
boxed into a manageable iteration (typically 1-4 weeks) and there is always a sense of
urgency. Agile methods do not specifically address getting the right people on team,
coaching and team development, but these are core leadership roles applicable to both
agile and traditional projects.
On Agile Solutions
It should really be no surprise that agile methods have techniques built right into them
to address each of the top software project risks. They were created out of the experience
ofwhat worked well forpractical software development.Given that these problemsoccur
time and time again on software projects it is natural that their solutions should become
baked into the DNA of agile methods.

5. 3 Product vs Project || Definition, Differences & Risks Involved
What is a Product?
The product is like ‘manufactured or ready to use’ which is developed by the company
and sold to different consumers (or) setup as open source.If a customer requires any
amendments to color, title, these changes, and some extra functionality to be added, then
customization is done to the product.
General Example:
Purchasing a flat after construction is completed – In this case, You can only do minor
changes like paints and interiors.
Industry Ex:
Google products like Gmail, and Oracle products like Databases etc, Finacle by Infosys,
Office 365 by Microsoft…
What is a Project:
The project is ‘taking a wish from customer to build a solution’. The
requirements are gathered from a particular client outside the company.
General e.g.: Purchasing a flat before construction. You can construct it as per
your need and wish.
Industry e.g: Indian Railways Project by TCS (including Broadvision and CRIS),
Crosscues Project by Navyug, etc.
Some difference b/w Product and Projects:
Product Risks:
The risk involved in software or system, the possibility that software or system may fail
to satisfy end user/consumers expectations is known as product risk. There may be the
possibility that the software or system does not have the functionality specified by the
customer or the stakeholders which leads to unsatisfactory software.
The low-quality software can have many problems like functionality, reliability, usability
or performance.
Examples of Product Risks are:
 Complex features affecting multiple areas of the existing product, like an upgrade/migration of the
system.
 New Technologies used in the product; for example, a new DB server, a new programming
language, a new integration, etc.
 New Developers or Development Teams, who may lack experience and thus pose a higher risk to
the existing product.

6.  Tight Schedules, that make people work in a rush and commit more mistakes.
Project Risks:
Risks associated with the testing activity which can endanger the test project
cycle is known as a project risk. In order to deal with project risks, we need to
apply concepts like identifying, prioritizing and managing the project risks.
Examples of Project risks are:
 Delay in the test build to test team.
 Unavailability of the test environment.
 Delay in fixing test environment due to lack of system admin.
 Delay in fixing defects by the development team.
 Organizational problems which can be like shortage of staff. Required skills etc.
 Major changes in the SRS which invalidate the test cases and requires changes in the test case.
As testers, one of our tasks is to manage Product Risks. We are paid (at least in part) to
be aware of all Product Risks, to make sure the rest of the project team is also aware of
them, and to coordinate this information with Project Management to make sure our
schedules are taking these risks into account. In addition, we are expected to plan our
testing strategy based on these risk, scheduling more tests (and earlier tests) on areas
with higher risks in order to find these issues faster.
Most of the task related to Risk Management is not complex but they require a good
understanding of the project and product as well as the strict discipline required to keep
following and managing these risks throughout the whole lifecycle of the project.
Discount Factor
he discount factor of a company is the rate of return that a capital expenditure project must meet
to be accepted. It is used to calculate the net present value of future cash flows from a project
and to compare this amount to the initial investment. The discount factor used in this calculation
is the company's weighted average cost of capital.
Calculation of Weighted Average Cost of Capital
A company's weighted average cost of capital is made up of the firm's interest cost of debt and
the shareholders' required return on equity capital. Consider the following data from the balance
sheet of the Hasty Rabbit Corporation:
 Total amount of long-term debt: $200,000
 Interest on long-term debt: 5 percent
 Total amount of equity capital: $300,000
 Stockholders' required return on capital: 11 percent
 Percentage of long-term debt: $200,000/($200,000 + $300,000) = 40 percent
 Percentage of equity capital: $300,000/($200,000 + $300,000) = 60 percent

7. Weighted average cost of capital = 40 percent x 5 percent + 60 percent x 11 percent = 8.6
percent
The company will use 8.6 percent as its discount factor in the net present value method to
evaluate projects.
NPV (Net Present Value)
The difference between the present value of the future cash flows from an investment and
the amount of investment. Present value of the expected cash flows is computed by
discounting them at the required rate of return.
For example, an investment of $1,000 today at 10 percent will yield $1,100 at the end of
the year; therefore, the present value of $1,100 at the desired rate of return (10 percent)
is $1,000. The amount of investment ($1,000 in this example) is deducted from this figure
to arrive at net present value which here is zero ($1,000-$1,000). A zero net present value
means the project repays original investment plus the required rate of return.
A positive net present value means a better return, and a negative net present value
means a worse return, than the return from zero net present value. It is one of the two
discounted cash flow techniques (the other is internal rate of return) used in comparative
appraisal of investment proposals where the flow of income varies over time.
Net Profit
Net profit, also called net earnings, net income and informally ‘the bottom line’, is
calculated by adding up a business’ total expenses, and subtracting that from its revenue
– this shows what the company has either earned or lost over a specific accounting period,
which could be one month, one quarter, six months, or one year.
The net profit of a company, organization or any individual or entity that does business, is
its profit after operating expenses and all other charges including depreciation, interest,
and taxes have been deducted from total revenue.
If total expenses and charges are greater than revenue,
the business incurs a net loss, if expenses and charges
are less than total revenue, it has made a net
profit. Expenses are what the company spends.