The Internet has brought many things to IT, but it hasn't helped managers get project costs under control.
Despite the growth of Web-based connectivity and a resulting onslaught of data (much of which may in fact be unmanageable), IT pros continue to see a majority of their projects end in cost overruns.
According to Jim Johnson, chairman of the Standish Group consultancy, a whopping 54 percent of IT projects worldwide came in over budget in 2008, with large enterprise projects a bit more likely to spin out of cost control.
The headlines are full of examples: Early this year, the U.K. government took it on the chin for enormous cost overruns related to newly installed systems. And we've all heard about cost overflow factoring in a disastrous data management scheme in Texas last year.
Unexpected and unplanned costs are widely expected for some projects. Last week, the ICT department of the Rwanda Development Board announced plans for a National Data Center (NDC). (Rwanda, you'll recall, has a particularly ambitious technology rollout plan.) According to one reporter, "The initial cost of building the NDC is projected at US $5.2 million, but the overall costs might total somewhere around US $17.2 billion because of overriding costs such as buying equipment and migrating data to the NDC." [Emphasis added.]
Uh-oh.
It's probably no accident that big government projects are such visible examples, since they involve lots of participants and high-profile funding. Corporate projects may, on their own scale, be just as unwieldy, if not as well publicized.
Not only are IT projects costing too much, they're exceeding budgets by sizeable margins.
"Broadly, about 20 percent of IT projects run over budget by at least 25 percent, and about two-thirds run over budget to some degree," says Tom Nolle, CEO of the CIMI Corp. consultancy, citing his own 2007-2008 research numbers.
Why is this happening, and how can it be avoided? According to Marc Staimer, founder and president of the Dragon Slayer consultancy, one reason so many enterprise IT projects have cost overruns is that requirements are too fluid. "Typically, the person or group that makes the changes is not held accountable for those changed requirements... The IT group is then blamed for not delivering on time or within budget," Staimer says.
The solution is to have an agreed upon plan or contract established up front with signoff by all concerned parties, he says. This "internal contract" must then be renegotiated if there are any changes that affect timeframes or costs.
"It is the renegotiations that most IT managers forget to do or do not have the skills or intestinal fortitude to keep doing," Staimer maintains.
Another IT blind spot, Staimer warns, has to do with quality assurance. Many organizations grossly underestimate the time it will take to test out anything new. "Hardware and software is continually getting more complex, making quality assurance more complex, time consuming, and difficult. Bugs and errors require a restart of the QA process after they're fixed. This is a key cause of overruns."
Hopefully, ongoing progress in Internet-related technologies will help alleviate some of the complexity of today's IT projects. Consolidation of servers, unified communications, smaller systems, and simpler networks could go a long way toward making it easier for managers to innovate without breaking the bank.
On the other hand, no amount of technology can help projects that are poorly planned and executed.
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Great comments, all. One thing I've heard is that keeping a project's focus small can improve its chances of success. It might be more cost-efficient to have several smaller projects that are interrelated than to have one enormous and ungainly one.
Having some time off allows everyone in the chain to look at their investment and involvement in the process of things. One bit of probably not so new enlightenment I've had is that when we budget something in December, bid it in May following, and start with deliverables in late June/early July, why do we STILL find ourselves amazed that we may be/are over budget? As recent current events show, often much can happen in a short timeframe that dramatically affects a lot in the course of a project.
To expect that what we farecast months ago in terms of spending or delivery time is called to question simply due to increased cost that were unforseen - not the least of which may be a department being (a) eliminated or (b) dramatically downsized without the facility to economically perform the same duties thought possible months ago.
Perhaps we need to re-address the scope of things when re-visiting a project, or we may continue to set ourselves up for overruns and frustration - from a buyer and supply side.
I think this brings out the reality of how ineffectively we are planning, designing, and using technology. I believe the cost overruns, as you say, begin with a lack of planning of all of the true costs, i.e., systems support, data entry, data integration, user training, etc.
Then there is the fact that the discrepancies in what is delivered is a result of lack of coordinated planning and understanding of deliverables. I like the approach of a contract with all parties signing off.
Then clearly the user literacy and skills, let alone proficiency, is an often neglected cost; which is also why the value is not always realized.
This is an excellent example of why the ROI on IT is often a dream!
Many more projects go over budget but are never reported as such. Many organzations budget for hardware and software - the hard costs. However for a system to succeed you need planning time, training for the IT staff, training for the end-users/customers and so much more.
So maybe the hardware/software budget was on track - but that does not mean the project was really "delivered on budget."
"The initial cost of building the NDC is projected at US $5.2 million, but the overall costs might total somewhere around US $17.2 billion because of overriding costs such as buying equipment and migrating data to the NDC."
I cannot understand the reason of this huge difference between the projected cost of US $5.2 million and the actual "overrall cost" of US $17.2 billion.
It hardly surprises me. In a company that I know well -- a big company of 15,000 employees -- there are about 250 people in IT. Most of those people are "analysts" and perform project management of some sort. Out of that pool, there are maybe 5 "server engineers" who actually install and configure servers and do server maintainence. There are another perhaps 5 people with programming skills. There are maybe 20 dedicated admins for various systems (e.g. peoplesoft, bea weblogic, wss, etc). There is 1 dedicated DBA for SQL Server with 2 part-time DBAs, and 3 dedicated DBAs for Oracle. Account management and phone support is outsourced. There are maybe 25 "desktop support" employees.
So... you're looking at around 200 project managers competing for possibly 30 technical resources. Most of those technical resources already have "their own projects" and can't commit much time to assisting their colleagues. And worse yet, most of those technical resources are grossly under-trained.
Try and figure out why those projects are over budget and behind schedule (often to the point of never completing). If you have what it takes to be "senior managment" in this company you have probably concluded that the company's biggest problem is a lack of "talent" in the project management area.
It's a problem we see over and over again, more than any other reason, too many of these projects are committee ruled. It's rare when overruns of any consequence occur in a project specified and overseen by one person. However, when a committee, or several of them, has input into the process, and has the ability to make changes during the implimentation of the project, things quickly get out of hand.
Unfortunately, in many cases, there's no way to combat this behavior when working with government, simply due to the fact that the project too often spans multiple terms. When the people that stated the project leave office and new ones take over, everything changes. New people, new visions, new requirements equal new money.
Its a shame that after many years of a burgeoning IT industry. The fact of IT projects over-running their budgets is still a very significant issue and that ways of streamlining the planning and implementation of IT projects have not been mastered.
From my experience in the IT industry, it is true that changes that are requested during implementation of the project are one cause, but clearly this is an issue that is easily resolved by following the contract and ensuring that more time in bought for any additional requirement tht is not in the previous agreement.
It also doesn't help that the industry live cycle of technology offerings as well as the rate of new introductions make it difficult to keep to initially planned designs. I however think that discipline can help resolve that. Any non-essential new requirements must be put off until the initial plan is completed.
Of course there are many other reasons. And it is hard time that we put ourheads together to streamline IT projects and let the issue of running over-budget be a thing of the past (of course to the level humanly possible).
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