A major technology project — delivered on time to management specifications and on budget — can be a real feather in the cap of any information technology manager. Yet research shows that most big projects miss the mark in one way or another. More than half of IT projects miss deadlines or budgets, while another nearly one-fifth fail altogether, according to the Standish Group. In their study of why IT projects succeed or fail, only 29 percent of the 9,236 projects examined were delivered on time and on budget, and cost overruns averaged 56 percent of the original project budget.
The good news is that small companies can fare better than larger ones, in part because they tend to tackle smaller projects and move faster, notes Jim Johnson, chairman of the research firm based in West Yarmouth, Mass. “Small businesses have a much better track record,” he says. “They just tend to have smaller projects. They do things quicker, and I think speed has a lot to do with success.”
But speed doesn’t mean hasty decision making, slipshod project planning or rushed implementations. It means setting manageable goals and keeping timelines between measurable mileposts as short as possible. The key to a successful IT project — whether it’s deploying an Internet phone system or building an interactive Web application — is developing a project plan that includes a lean yet accurate budget and staying on track from inception through deployment.
Budgeting for major IT projects — particularly those involving custom software development — is no easy task. But for major projects, hours spent up front building a project plan and a lean budget can save days on the back end solving problems or worse — going back to management asking for additional funding to complete the project.
IT projects vary widely in scope and complexity, but the key steps in creating a solid project plan and accurate budget are the same for all types:
1) Involve all the stakeholders in specifying the scope and key objectives of the project. Like most IT initiatives, a major project needs buy-in from top management and participation from business-side users and other stakeholders to succeed. Developing a manageable list of the goals that both IT and business leaders understand and agree upon is the critical first step.
2) Do a risk assessment to identify all the opportunities for Murphy’s Law to strike. Understanding what can go wrong and how those possible stumbling blocks will affect timelines and costs is vital to budgeting for all the necessary contingencies. However, there’s a difference between budgeting for contingencies and padding a budget. An IT manager who consistently and significantly overestimates costs ties up company resources that could be used productively elsewhere and eventually loses credibility with top management.
3) Prioritize goals and contingencies so that all the stakeholders agree on the critical objectives and those that can be sacrificed if problems arise. The best way to eliminate fat from a project budget and keep just the lean muscle is to build consensus among top management, business-side users and the IT team on the priority ranking of key features and functions, and to agree on adjustments in project scope or timelines to maintain the integrity of the budget — before the project starts.
4) Build the budget using all the available information. Start with the known and predictable line items such as hardware purchases and software licenses, and consult suppliers and other businesses that have implemented similar projects to estimate softer costs such as IT staff time, consulting and programming costs.