One of the biggest fears for any transformation executive is blowing the IT project budget your Board already approved. There are few things harder than having to go back to them again (and again), asking for more money and with very little information to explain why.

I began my career doing procurement for the US Air Force. A few years beforehand, the Department of Defense was in the news for their $1000 toilet seats and other costly decisions that seemed to throw commonsense out the door. The formal review process afterwards determined that the military was over-specifying their requirements to vendors. As a result, suppliers were required to developed “customised” solutions for even the most generic product that could be bought off the shelf for significantly less.

When I moved into the IT profession later, I quickly saw this same scenario (and a few more) that destroyed budgets quickly. Here are a few to be aware of to avoid doing the same thing:

7 Ways to Blow your IT Project Budget

  1. Require the system to be heavily customised to mimic your current business processes – most commercially available systems have been designed with best-practice processes and workflows for the majority of their customers. So, adopting their built-in processes instead will often be beneficial to more than your bottom line. Customisations, on the other hand, are costly both during the build phase and for ongoing maintenance.
  2. Select an implementation partner that mainly works with businesses rather than Not for Profits. While back-off functions may be the same, the language and workflows are often different. As a result, you’ll spend more time and money educating them to design and build your system than if you had chosen a partner that has worked with organisations like you in the past.
  3. Pay consultants by the hour rather than by the project. There’s no incentive for a consultant or implementation partner to finish their work faster if they get paid to stretch it out.
  4. Be unclear about the project scope of work and fail to make critical business decisions that may impact processes. Some implementation partners purposely win work via RFTs by just “breaking-even.” Instead, they make all their profit through change orders they anticipate from the client later.
  5. Ignore the Schedule. I know of project schedule blow-outs that run years. Part of this is because the key stakeholder keeps changing and no one can make decisions as a result. However, the fundamental discipline of managing a project schedule is clearly missing here too. In the meantime, the implementation partner continues to charge them a monthly fee with no complaints.
  6. Fail to include a contingency bucket in your budget. I always do a risk assessment with my clients to manage the unknowns of any implementation including for integrations between systems. This percentage will range depending on the risk assessment and the confidence we have with the chosen implementation partner.
  7. Fail to recognise variable licensing costs. Most applications have some level of variable cost for their licenses. It may be for something very visible like the number of users. However, others have additional costs such as for data storage size, the number of emails sent and the number of logins. I’ve seen the variable costs potentially double and triple quoted license fees without the client or even the implementation partner recognising the risk.

Bottom line – there’s a good reason why an IT project budget may experience blowouts. However, you can manage this by considering the seven issues above and by working with an experienced consultant who understands these risks intimately.

Tammy Ven Dange is a former charity CEO, Not for Profit Board Member and IT Executive. Today she helps NFPs with IT decisions.

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