Week 4 (Anatomy of A Software House)

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Practices
CS 625
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Page 1
Week 4 Topic: Anatomy of S oftware
Hous e
 Introduction
 The Company (S oftware Hous e)
 Structure of Company
 Management of Sta ff
 Producing the budget
 Monitoring Financial Performance
 Long term Planning
 Conclus ions
Page 2
Introduction (The Company)
 A Hypothetical company
 S yniad Software Ltd was founded some ten years ago by

four friends .
 All four are members of the Board of Directors, along with

two others who were recruited later.
 The company specializes in the production of bespoke

software for clients who demand work of high quality.
 S yniad’s head office is in London. Other offices are in

Man-chester, Delft, Netherland.
Page 3
Company Structure

Page 4
Operations Director
 The Operations Director is re sponsible for all the
revenue earning operations of the company.
 It is his job to ensure that all projects are completed

s atis factorily
 And resource s are available to carry out the projects that

the company wins ;
 The personnel reports to him.

Page 5
Technical Director
The Technical Director is res pons ible for:
 Quality management;
 Res earch and development;
 Marketing at a technical level (e.g. arranging for staff to

give papers at conferences )
 Technical training (as opposed to training in, say, project

management or pres entational skills, which are the
res pons ibility of the personnel function).

Page 6
S yniad’s Organizational S tructure Type
 s hows elements of all three of the types of organizational

structure.
1. Functional divis ion of res pons ibilities
2. Geographical element (repres ented by the director

res pons ible for overs eas operations )
3. Centralization and decentralization has little meaning

(Centralized policies and procedures are widely used but
they have usually been developed within one part of the
company and have been adopted by general cons ent.
Page 7
Centralized vs . Decentralized
 In theory, staff have a sense of belonging to a group and
regard their group manager as the manager who is
permanently res pons ible for their career in the company.
 In practice, because projects often require expertise from

more than one group, staff often find themselves working on
projects for groups other than the one to which they belong.
 In a company of the size of Syniad, the distinction between

centralization and decentralization has little meaning.
Centralized policies and procedure s are widely used but they
have usually been developed within one part of the company
Page 8
and have been adopted by general cons ent.
Management of s taff
 New employees vs . Old employees …. OUTS IDER
Sta ff Apprais als :
 Employees ’ achievements and contributions to the

company were properly recorded;
 Staff knew what was expected of them and what they

needed to achieve in order to gain promotion;
 Proper plans for training and career development were

made and regularly reviewed;
 Employees were aware of the company’s opinion of their

Page 9
performance.
Producing the Budget
 Sta ff in the company are broadly divided into
1. Technical or Revenue earning staff and
2. Nonrevenue earning staff
 Both require different capital to work.

Page 10
Monitoring Financial Performance
 Monitoring S yniad’s performance against the budget
s hould, in principle, be straightforward.
 Each month, the income and expenditure under the

various heads are compared and, if significant
deviations are obs erved, corrective action is taken.
 In practice, this s imple procedure pres ents many

difficulties .
 To monitor financial performance, company focus es on;

1. Cost & Revenue
2. Project Costing Free Powerpoint Templates
Page 11
1. Cos ts and revenue
 A major problem is caus ed by random fluctuations ,

thems elves the product of many individual factors , for
example:
1. Annual Budget n S taff hiring

2. Large projects cause deviation in Budget
3. Fixed Price Project Estimation

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2. Project cos ting
 Because of these difficulties in monitoring the overall
performance of the company, Syniad also tries to
monitor the financial performance of individual projects,
through a project costing s ystem.
 The costs and revenue of each project are calculated

each month and the cumulative gros s margin (i.e. the
difference between total costs and total revenue to date
on the project) calculated as a percentage of the total
revenue.
 In practice, this s ystem does not work well. Page 13
3. S ales
 The budgeted increas e in revenue derives partly from
increa sed charge rates, partly from better staff utilization
and partly from an increas ed number of staff.
 All these factors are influenced by the forward sale s

position, that is by the staff required and the rate s
earned on the work to which the company is committed
in the coming months .
 Two reports are used for as se s sing and monitoring the

s ales pos ition.
Page 14
3. S ales (Continued…)
1. The confirmed sales report shows, for each grade, the

number of staff in that grade who are committed to
contracts in each of the following twelve months and the
total expected revenue from that grade in each month.
2. The sales prospects report shows, for each sale s

prospect, the potential value of the sale, its likelihood
and the likely start date.

Page 15
Long Term Planning
 Strategic Planning for future
 The ability to plan strategically and to achieve strategic

objectives is the hallmark of well run, s ucces s ful
companies .
 Strategic planning in S yniad has two related as pects .
1. The first is to identify appropriate long-term goals
2. S econd is to identify and formulate plans to

overcome thos e problems which are inhibiting it
from attaining thes e goals .
Page 16
Long Term Planning involves
 Expans ion Plans
 Company Image
 Product mix (Fee bas ed revenue vs . Package S oftware)
 Finance (under-capitalization)

Page 17
Conclus ions
 S yniad, despite its problems, is a succe s s ful and well-

managed company, however, they need to go
multinational.
 Do directors have the expertise to manage this transition

or to run the resulting company?(agreements for
collaboration with comparable companies )
 S yniad has now reached a point where it can no longer

thrive as a private company and its future must,
inevitably, be very Free
different fromTemplates
Powerpoint its past.
Page 18
Thank you!

Page 19

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 The Company (S oftware Hous e)

 Producing the budget

 Monitoring Financial Performance

 Long term Planning

 S yniad Software Ltd was founded some ten years ago by

 All four are members of the Board of Directors, along with

 The company specializes in the production of bespoke

 S yniad’s head office is in London. Other offices are in

Free Powerpoint Templates

 It is his job to ensure that all projects are completed

 And resource s are available to carry out the projects that

 The personnel reports to him.

Free Powerpoint Templates

The Technical Director is res pons ible for:

 Res earch and development;

 Marketing at a technical level (e.g. arranging for staff to

 Technical training (as opposed to training in, say, project

Free Powerpoint Templates

 s hows elements of all three of the types of organizational

1. Functional divis ion of res pons ibilities

2. Geographical element (repres ented by the director

3. Centralization and decentralization has little meaning

 In practice, because projects often require expertise from

 In a company of the size of Syniad, the distinction between

Sta ff Apprais als :

 Employees ’ achievements and contributions to the

 Staff knew what was expected of them and what they

 Proper plans for training and career development were

 Employees were aware of the company’s opinion of their

 Sta ff in the company are broadly divided into

1. Technical or Revenue earning staff and

2. Nonrevenue earning staff

 Both require different capital to work.

Free Powerpoint Templates

 Each month, the income and expenditure under the

 In practice, this s imple procedure pres ents many

 To monitor financial performance, company focus es on;

 A major problem is caus ed by random fluctuations ,

1. Annual Budget n S taff hiring

Free Powerpoint Templates

 The costs and revenue of each project are calculated

 All these factors are influenced by the forward sale s

 Two reports are used for as se s sing and monitoring the

1. The confirmed sales report shows, for each grade, the

2. The sales prospects report shows, for each sale s

Free Powerpoint Templates

 The ability to plan strategically and to achieve strategic

 Strategic planning in S yniad has two related as pects .

1. The first is to identify appropriate long-term goals

2. S econd is to identify and formulate plans to

 Expans ion Plans

 Product mix (Fee bas ed revenue vs . Package S oftware)

Free Powerpoint Templates

 S yniad, despite its problems, is a succe s s ful and well-

 Do directors have the expertise to manage this transition

 S yniad has now reached a point where it can no longer

Free Powerpoint Templates

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