How to stay within your IT-budget?

Posted November 10, 2011 at 10:30 am by Marijke Kasius in General, Infrastructure.

Accountancy figures are as plain as day: over 70% of all ICT projects exceed the set budget substantially. 60% of the overspending lies with government, health and social service sectors. In May of this year Computable brought a headline which claims the government faced budget overruns in 2010 of a whopping 178 million Euro. Mainly overspending government projects make the news, but that doesn’t mean these problems don’t also occur in business.

Often-heard remarks such as, ‘it’s impossible to compare’, ‘a different language is spoken’ and ‘you know in advance budgets will be overrun the moment you start’, indicate exactly what frustrates decision makers of ICT projects.

Many papers have been written on how budget overruns can be prevented from this perspective – meaning the perspective of decision makers. For that reason, we will here discuss the other side, seen from our years of experience as provider and therefore initiator of these budget proposals. Because sticking to your budget is definitely possible.

1. Map the project

Start internally. What does the project need to comply with, what wishes and demands apply, what does it need to do? Who needs to be involved? What is the budget?

2. Let the provider think along

The provider knows exactly what is possible and what isn’t, provided that correct information is available. Collaboration is key. The strength of a project’s success is collaboration: the better the collaboration, the clearer the expectation, the less chance things will show up later on. It sounds so obvious, but it is the main reason of overspending.

3. Don’t concede to quality

Another cause of budget overruns is that during the bidding phase, a choice is made for lower costs instead of best quality. As the project develops, it becomes apparent a certain quality is necessary, and then measures are still required to guarantee this quality. This always involves higher costs.

4. Divide in sub-projects

Most overrun happens because track of the situation gets lost. Make sure to differentiate between the application and the infrastructure, as these are two separate projects. Make sure the project is divided in sub-projects; this way milestones remain manageable. If you want to shorten lead time, ask yourself whether all functionalities are needed now or could be added later.

5. Prepare yourself for changes

ICT is the most changing part of your organization. Don’t fear modernization during the project. Always have room for cost-reducing activities; during the project things may already change.

6. Ask for business cases

Using a business case can clearly exemplify that a little bit of additional spending can effect cost-reduction afterwards. Internally, business cases provide the necessary clarification, plus providers gladly work with business cases.

7. Ask ask ask

Ask for more information and explanation on anything that is not clear. IT is technical language, that’s just the way it is. The first surgeon to speak an understandable language hasn’t been born yet either. But there are always people who can make the connection, and graphs clarify a lot. So, ask questions!

Jitscale’s business processes are based on these seven practices. From experience, Jitscale has learned detailed specifications in the preliminary stage provide excellent insight into possible indistinctnesses. You could compare it to the purchase of a car. If you go to a car dealership and ask for a vehicle with four wheels and a roof to navigate the A12, your dealer can come up with anything from a new Ferrari to an old battered Peugeot. The more specific requirements you name, the closer the proposal will be to what you are looking for.

It’s definitely not the case that ICT companies benefit if project budgets overrun: a successful project that allows good management and therefore satisfied customers, is worth a lot more.

The strength lies in customization: if the proposal fits the wishes perfectly, and all indistinctnesses are made clear, budget overruns are a thing of the past. Unless suddenly the car requires a baby seat on the back seat, to stick to the car metaphor. After all, nobody knows what the future holds.