Project Cost Management

Why many information technology professionals have a poor attitude toward project cost management and how this attitude might affect the poor track record for completing projects within budget.

By simply searching Google or Yahoo with strings like “IT Project failed” or “IT Project goes over-budget” one will immediately understand how often IT Projects fail due to failed cost management. One survey reported that “Projects that are considered 'challenged' – usually due to cost or schedule overruns – account for 51% of all projects.”(PM Today, n.d.) Cost management is one of the most critical aspects that fall under the responsibilities of the project manager. Cost estimation, budgeting, and cost control are usually the reasons for most of the project managers’ nightmares. IT project managers in particular, tend to have a poorer attitude toward project cost management. But why is that?

IT project managers have a poor track record for completing projects within budget due to the fact that they are more interested in closing the project on-time then within budget.

“According to KPMG, only 9% of organizations feel that delivering projects within budget is their most important measurement for success. Also, only 21% said that being on-time was their top driver.” (OUT-LAW News, Nov. 2002) Due to the fast evolution of technology, project managers tend to be more concerned about the timeliness of their projects.

Cutting short the time required to estimate costs is a common practice amongst IT project managers. Quick decisions, while evaluating the required costs for a project, opens the door for speculations and unsound decisions. In general, human beings are biased toward underestimation; specially programmers. The ego, overconfidence, and unawareness in tracking time, drive programmers to give lower estimates concerning the time needed to complete any particular task. Less time estimates implies lower estimated costs.

The real nightmare of the project manager in fact is due not during the estimation phase, but at a later stage during management and control of such. In fact most project managers have the hardest time completing this task: “For many project managers managing budgets along the critical path becomes both a challenge and a source of frustration.” (BCS, n.d.) Frustration, in this sense, is due to the poor estimations previously done. But what is done is done.

Finding solutions in order to cut down further costs adds to the frustration. In order to request more funds for a project from upper management, project managers need proper supporting reasons which most of the time don’t exist.

Since project initiation, stakeholders, and especially the financially related ones, require accurate and precise cost estimates in order to assess the feasibility of any project. However, this is not the case with IT PM. Knowing the amount of work and the huge number of different responsibilities that fall under an IT project manager’s job description, finishing within budget becomes of lower priority. In fact, he/she might even purposely underestimate a project’s budget in order to get approval the fastest possible and initiate a project.

Time is the main concern for IT project managers. Initiating projects faster, estimating cost faster, and pushing their teams to finish on-time is a priority. Producing output and visual proof of project progress are the only things that relieve both the project manager and the stakeholders.

However, coming back to cost control, IT project managers face their toughest challenges. Early budgetary estimations usually are accurate when it comes to tangible requirements like software and hardware requirements. The remaining costs are related to man-hours which are the hardest to minimize. Man-hours, eventhough related to the team’s morale which affects directly productivity, has however limitations. Some things are simply impossible to be done unless given a minimum timeframe.
Cutting down on costs, therefore leads project managers to think about ways to cut down on time required which in turn leads project managers to sometimes jeopardize the quality of the resulting project. Skipping on documentation, code comments, and frequent testing of modules are some of the strategies that are used in this context.

As a summary, IT project managers face a very challenging problem when it comes to cost management and therefore tend to have a rather poor attitude towards it. The problem comes as a tradeoff between cost, time, and quality; and IT professionals choose time.
Nowadays, however, in order to avoid having these problems, “Most other Fortune 1000 companies are in the process of setting up PMOs.” (Hertzberg, May 2007) Saving them money on experienced and skilled human resources required, management headaches, and getting better results makes PMOs most appropriate. “Effective project management can save organizations millions, if not billions of dollars in lost revenue, says J. LeRoy Ward, PMP, PgMP, executive vice president at ESI International”.(PM Today, n.d.)

References:

PM Today (n.d.) Troubled projects costing billions worldwide.[online] Available from: Project Manager Today: http://www.pmtoday.co.uk/content/en/news_details.aspx?guid=94ACA134-74CA-43C6-9AC3-F9C6A6318552

BCS (British Computer Society) (n.d.) Keeping projects under cost control [online] Available from: http://www.bcs.org/server.php?show=ConWebDoc.5912

OUT-LAW News (Nov. 2002) Failed IT projects cost businesses millions, says survey [Online] Available from: http://www.out-law.com/page-3149

Hertzberg, Robert (May 07, 2007) I.T. Cost Containment: 5 Best Practices. [online] available from: http://www.baselinemag.com/c/a/Projects-Management/IT-Cost-Containment-5-Best-Practices/