All projects face challenges when it comes to staying on budget. Here are 10 ways to avoid extra costs.
May 17, 2018
By Alison DeNisco Rayome
Nearly all IT projects face a similar major challenge: Budgets. Only about half of all projects end up completed under budget, according to the Project Management Institute.
This is largely because often, budgets are estimates based on what is known when the project is started, said Alan Zucker, founding principal of Project Management Essentials. “We expect project teams to deliver definitive estimates at a time where there is still a high-level of uncertainty,” Zucker said. “More accurate estimates and budgets can be calculated after the scope and requirements are better understood. By that point, most project budgets have already been established.”
While Agile project and software development methodologies have exploded across the enterprise in recent years as ways to help projects operate more efficiently in terms of time and costs, many companies still face challenges when it comes to delivering IT projects under budget. Here are 10 tips and best practices for doing so.
1. Let the team doing the work set the budget
The team doing the work, not just managing the work, should be the author and owner of the project budget, said Meghan Glasgow, a senior manager at Deloitte Digital. “You want to be sure budgets are done by the workers, not to the workers,” Glasgow said.
You can ask the team to come up with a range of budgets that are low, medium, and high cost, to learn more about what is actually driving the costs. “This not only gives you the proper range for planning purposes but it provides insight as to when senior management or additional oversight is necessary,” Glasgow said.
2. Take a smaller approach
“Business and IT leaders often have trouble keeping projects under budget because their focus is generally on massive overhauls requiring huge amounts of resources, time and manpower to complete,” said Jay Jamison, senior vice president of strategy and product management at Quick Base. “Digital transformation projects don’t always have to be Big Rocks—multi-year, million dollar efforts. We see many CIOs supplementing the Big Rocks approach with a Small Rocks approach, that enables the boots on the ground to take action on their own in real time, reducing backlogs to better serve customers, prospects and employees.”
Massive projects with multi-million dollar spend are often destined for slippage, both in terms of time and money, said Rema Deo, managing director of 24By7 Security, Inc.
“If it is inevitable to have a project of a large size, attempt to break it down into manageable smaller projects which have shorter life cycles and where results can be seen at the end of each project,” Deo said. “Monitor not only project and activity progress on a periodic basis, but also the spend vs. budget.”
3. Start with a realistic figure
All projects should have a realistic budget for expected development time that builds in the understanding that projects may take longer than anticipated, said David Selden-Treiman, a project manager and director of operations at Potent Pages.
“Planning is very important to any project, but realistic budgeting requires understanding that projects are never perfect, and that every endeavor has some amount of risk,” Selden-Treiman said. “The risk in this case is the maximum that a project might go over within a certain level of certainty. The final project budget needs to incorporate this into the project.”
Unrealistic expectations are often at the core of IT budget overages, said Justin Bingham, co-founder and CTO of Janeiro Digital. “Whether it’s not having a clear alignment across the team on the business goals and success criteria of a given initiative, to the limitations of your existing infrastructure, communication silos can leave stakeholders and developers with competing mental pictures of the finish line, leading to unrealistic expectations that derail projects, extend timelines, and obliterate budgets,” Bingham said.
Successful projects often have a process for getting all stakeholders on the same page, identifying the true scope, and setting up a realistic timeline, Bingham said.
4. Use the right tools for time tracking and project management
To make sure that projects stay within budget, it’s essential to know where the money is going, Selden-Treiman said. “Having an accurate and comprehensive time tracking system will allow you to know whether you’re staying within your budget or not, and whether you need to adjust your end budget requirements (e.g. if you’ve made a planning mistake),” he said.
Integrating a project management tool to act as a central communication hub is also vital to make sure that teams can collaborate and communicate throughout the lifecycle of the project, said Paul Jardine, technical lead at English Blinds. “Having all the project information managed and centralized will provide visibility into what is happening and allow project managers to identify any problems, risks or bottlenecks early on, thereby reducing costs,” Jardine said.
5. Develop a communication strategy
A strong communication strategy will ensure that all team members quickly become aware of potential project pitfalls, said Charles Grau, CIO of UDT. This should involve a communication plan with regular reporting on the project’s performance.
It’s key to keep everyone associated with the project in the loop on its development, Selden-Treiman said. “Ideally, you have experts on each part of the project development,” he added. “This means that they will hopefully be able to help on the planning when development inevitably deviates from the initial plan. They can help you with understanding how project changes will
impact their component, and what will need to be adjusted to keep everything on-budget.”
6. Build in hidden costs from the start
No matter how clear the vision or simple the end goal, there are hidden costs in every project that need to be resolved before the work begins, said Jonathan Bingham, co-founder and CEO of Janeiro Digital. “Project managers should be asking questions like ‘What are all the inputs of your application?’ and ‘Do you control them or rely upon third parties to provide them?’ in order to identify those dependencies,” Bingham said. “Sizing the work based on these assumptions and clearly communicating them to stakeholders will help create more accurate time and cost estimates and help in managing scope later on in the project lifecycle.”
7. Define scope
“It’s all about scope,” said Ajeet Dhaliwal, founder of Tesults. “If there is clarity on scope and agreement by all stakeholders on scope, you have a chance. Without this, it will not end well.”
Understanding the scope involves creating a project charter, and clearly defining the roles and responsibilities of the team members and stakeholders involved, Grau said. It’s also important to stick to these original requirements and prevent “scope creep,” he added. “It’s like baking a cake: stick to your ingredients and you’ll get the best results,” Grau said.
8. Include time for testing, training, and updating
“The best way to keep IT projects under budget is to include the appropriate amount of time for testing, training and updating processes and procedures,” said Eric Hobbs, CEO of Technology Associates. “It is so easy to think of IT projects in purely technical terms; setting up a server or cloud service, installing an application, etc. But it is it the necessary time to train the staff, address unforeseen issues in deployment and setup the IT staff to properly support the new project that is overlooked the majority of the time and often accounts for huge budget overruns.”
9. Use art or demos to iterate on the user interface
When building custom software, you can iterate on the user interface/user experience by using concept art or interactive demos, rather than actually building it, said Frank Coppersmith, CEO of Smarter Reality. “Most complaints around new software aren’t core functionality (which are set out in the spec) but rather how hard it is to use,” Coppersmith said. “Before you start spending a lot of money on engineers, spend a little on artists and designers to get the feedback you need.”
10. Create a contingency plan
With any project, you need to plan to fail, Grau said. When mistakes inevitably happen, take a “fail forward” approach and be agile—adapt and keep moving forward.