Budgeting IT Projects

Budgets should be handled no differently on IT projects compared to any other project. The reason that funding direction is indeed challenging for job managers on such projects is that, typically the project manager of the project is not liable for the funding and often does not even have insight in to the way that budget is delegated or tracked. Money is typically delegated from operational budgets to perform the project and responsibility for the money and tracking of expenditures is done at the operational level. The consequence of the disconnect between financial oversight and the job manager is that budgeting for project activities and quantifying the project’s performance to funding aren’t completed in any formal way, and frequently aren’t done in any respect.

This doesn’t excuse the managers of IT jobs from taking responsibility for the Comment gĂ©rer son budget and using all of the finest practices established for cost management put forth in the PMI’s PMBOK, it only makes their job more difficult. Here are a couple hints about how to overcome a few of the challenges typically faced on IT jobs.

Budget Accountability and Responsibility

The project sponsor is the man who is accountable for the results of the project. Before I go any further, let me take a few of the puzzle from these terms: liability and responsibility. The difference between liability and responsibility is simply the degree of distress that the proprietor will have if things go wrong. The man who’s responsible is answerable for its results, or perhaps accountable for the results. Obligation includes a legal context so the person who bears the legal liability for the outcomes of a project would have to be an officer of the company. Responsibility has a broader context and doesn’t entail being liable, but means liable for the results. Getting back into the project, an officer of this business could possibly be the person who’s responsible for the project funding. Often the project is not large enough or expensive enough to justify oversight by an officer of the business in which the event the accountability for the job will be handed down to someone in a management position whose level of authority would allow them to have supervision over the project.

In the world of IT the relationship can be complex. Often projects in this field have two sponsors: the business sponsor and the IT sponsor. Their relationship is one of client and vendor. The company sponsor is accountable for the money spent on the project and the IT sponsor is in charge of the business sponsor in the same manner they would be if the business sponsor were to represent a business entirely external to the IT organization. The business sponsor still bears the total responsibility for the job and they assign that duty to the IT sponsor in precisely the same manner they would if they were to hire an external organization to carry out the work.

The sponsor (either company or IT), delegates the responsibility for the project to the project manager. The delegation will not be documented but it takes place as soon as you accept the task of handling the job. They place their faith in the project manager’s ability to deliver the business value for your job using only the sum of money budgeted for the project. They do this throughout the IT sponsor at the case where a person is identified. In either instance, you are not the one that will feel the wrath of this company should the job succeeds, or fail to deliver on the company value, the company sponsor is. You may feel the pain . You may not get that bonus, or you might even be fired, but nobody is likely to pursue one for the sum the job is over budget. You owe a duty of care to the sponsor which includes ensuring that the project delivers its promised benefits for the budget agreed upon, or to alert them as soon as possible to problems that would prevent that from occurring.

Planning the Budget

There are two types of approach to budget estimation: top down or bottom up. In training, the ideal approach is often a mix of those 2. Top down is chosen when there is a strict budgeted amount allocated to the project. Bottom up is preferred while the project is necessary to the business, or is mandated by laws. The very first step the project supervisor should take is to inform themselves of almost any budget limitations, either a specific sum, or a range. Remember that being provided with a range to get a budget does not necessarily mean that bringing the job in for the top end of this scope is acceptable.

Your business sponsor, or IT sponsor should be able to supply you with the funding amount or range to your project, where one exists. Your first sit down meeting with the host should include an exchange of this information. Your strategy to planning the job will be dependent on if you’re provided a hard limit to operate together with, a range, or no limit at all. Let’s tackle the case in which you’re given a tough cap .

Hard Cap: A tough cap requires that you scope the project to fall beneath the cap. In many IT jobs a good deal of the budget has to be spent on labour so understanding the expense of labour is critical to this exercise. Your accounting team ought to be in a position to give you the loaded labor rate used by your organization to cost labor. Knowing the loaded labour rate and the amount of work hours necessary for the job or deliverable under consideration allows you to estimate the price. Estimates for other expenses such as hardware and software permits should be available from your procurement collection, the vendors, or the world wide web. Remember that no-one can give you an accurate cost estimate without particulars, which you do not have at this time. You’ll be able to ball park a quote for the deliverable, or job, under consideration and also tell if that estimate is likely to fit within the budget.

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