It’s a common view that IT projects are never on time or on budget.
There’s a good reason for this, as it’s too often the case. In fact, headlines constantly talk about cost blowouts on major IT projects.
So, a recent conversation about this topic with a prospective client made me think about this issue further.
He was referred to me by a client who has worked with me on IT transformation programs at two different organisations. Apparently, she told him,
“All of Tammy’s IT projects are always on time and on budget.”
It was a lovely but interesting compliment, given that I did NOT help her with the implementations or project management of these projects. I only helped her put together the IT Roadmap and related investment plans for the Board.
So, why would she give me kudos for her on-time, on-budget projects?
Upon further thought, I believe it goes back to those IT investment plans I created for her organisations.
The problem with your IT business case
I believe that the reason why most Not for Profit IT projects are late and overbudget is because you take the information a vendor gives you and use that (and only that) as the basis for your business case.
If the vendor says it will cost $50,000 and take 3 months, that’s what you put in your business case.
The problem is…
Has it ever occurred to you that those numbers are based on the most perfect project where your actual requirements perfectly fit the native functions of the solution?
I’ve been involved in too many IT projects to mention, and I can tell you that, “There is no such thing as a perfect project!”
Given that no project is perfect, the investment plans I give to my clients anticipate that issues will happen.
So, here are other budget and schedule considerations you should consider.
Investment requirements for an on time and on budget IT project
Schedule and budget-related risks to the project should be stated upfront and mitigated in the investment plan.
Here are some of the additional costs that I include in the Board Paper:
- CPI adjustments to licensing costs – if it is likely that the licensing cost will be incurred in the next FY, I’ll add a CPI contingency adjustment to whatever price the vendor gave us.
- Quantity contingency to licensing costs—I never ask for pricing for exactly the number of current users. Instead, I round up to the nearest number that makes sense, especially if the user numbers are expected to grow.
- Allowance for integrations – Vendors rarely quote for integrations. If you need to build some, it’s good to get quotes ahead of time from developers familiar with the two solutions that will be integrated and add estimates to your business case.
- Implementation cost contingency – Before the design or scoping phase of a solution implementation, vendors can usually only give indicative costs. That means the cost is not fixed, it’s an estimate. How crazy that estimate is depends on the amount of customisation their solution requires to meet your needs. I generally put a 30% to 50% contingency on a vendor’s implementation costs depending on how close I think the solution meets a client’s needs.
Project management costs
Do you have internal IT project management skills? If you say yes, you’re one of the few Not for Profits that do.
So, why do you think that your staff member, who normally has a very different BAU job, will be able to manage this IT project for software they know nothing about?
It’s for this reason why I also recommend that any project over 3 months long should also include the cost for a contractor project manager. And ideally, this PM should be familiar with the software you are trying to implement.
Your internal resource costs
Not for Profits seldom budget to backfill staff for IT projects. Instead they expect their key resources to support the project while already doing their busy BAU roles.
For longer projects, this doesn’t work!
Instead, it results in bad design decisions, schedule delays and burn-out. In fact, this alone is the number one reason why IT projects are delayed. It’s not the vendor’s fault!
Time contingency
The vendor told you that it will take 6 months to implement the project. So, you go ahead and schedule it to start at the beginning of the new financial year.
The problem is that you haven’t hired a project manager yet, nor backfilled your BAU staff. You’re already late and the project hasn’t started yet.
Then, the project has issues, which further delay the schedule and are compounded by key staff taking time off for leave and holidays.
Once the project finally goes live, you’ll likely have some issues that you need to work through, especially if there was data migration. Do you want your backfills and PM to disappear right now?
All of these things happen on projects. So, rather than scheduling the 6 month project the vendor suggested, why not make it longer to anticipate these problems?
Just make sure that your project budget reflects this, too.
Why you won’t want to follow my advice
I’ve just given you my magic formula for how the project investment plans I give to clients are on time and budget.
Still… you won’t want to follow my advice.
Once you add in contingency, project management costs and backfill for internal resources, you’re going to hate me…the number the vendor gave you will often double or more!
This is why organisations do not like adding these numbers to the original business case when they want to get it approved by the Board.
And I don’t blame you.
When budgets are tight, it’s hard to get Boards to approve a smaller number, much less something significantly larger.
However, failing to add these costs to your business case is just setting yourself up for another meeting with the Board later, where you ask for more funding and have to explain why the project is late.
Would you rather look like a good manager who plans ahead for contingencies and asks for the resources you actually need at the beginning of the process?
Or would you prefer to ask for forgiveness for bad project management later?
Summary
Things go wrong in every IT project. Your requirements don’t align with the native product design. You forgot something. Your key resource quits halfway through the project.
You can’t anticipate every possible scenario, but you can plan to be both on time and on budget with the help of contingencies.
I regularly help Not for Profits with decisions about their IT investments. Let me know if you need some help.
P.S. If you found this article helpful, you might want to read these too:
- When you asked for a Rolls Royce CRM on a Kia budget
- What is the business case for IT investments in Not for Profits
Tammy Ven Dange is a former charity CEO, Association President, Not for Profit Board Member and IT Executive. Today, she helps NFPs with strategic IT decisions, especially around investments.