A CIO recently told us:”the project would never have been accepted if we hadn't lied about the budget!” Whether we agree or not, it is interesting to explore the “unsaid” around money in project management!
Let's recognize it first of all, the team.”Project manager/PMO/DSI "is facing a paradoxical injunction. The impossible challenge of conjugate, on the one hand, the pressure of the market and professions forever more innovation, of speed and of agility. And on the other hand, requests for budget estimates details of a general management who needs to validate the company's financial equations!
Of course, to make matters worse, all of this comes truee in a context of a war for IT talent and an increasingly VUCA environment (”Volatile, Uncertain, Complex, Ambiguous“).
So how do you get out of a situation “from the top” or 53% of projects exceed their budgetary forecasts by 189%! ? (Source: Chaos Report).
In this article we propose to get (a bit) out of the general subjectivity when it comes to budgeting in project management, by highlighting simple and pragmatic practices! Discover the feedback from the Adéo CIO and also a brief reminder of the basics to allow you to budget for your next project without (too) making mistakes.
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When a project manager has never done a type of project, it's complicated to establish an estimate! One of the tips is to rely on data from almost similar projects so that your estimate is as close as possible to future expenses and revenues.
Asking someone who has already done this type of project is still the most pragmatic way to do it.. Get the experience where it is... Website, traditional and/or digital professional networks. Think of specialized networks such as Linkedin groups such as that of Alliancy - DSI & Transformation of Organizations and/or (autopromo), the “Pro de la Transfo” club from AirSaaS. If you have more time and money to devote to it, the opportunity to join one of the existing traditional networks will allow you to interact within circles such as ANDSI, CIGREF, or even the DSI Decision Club, the DSI and CIO agora, the DSI and CIO agora, the circle of CIOs of ADN Ouest. The offer is vast.
If you still can't find your answer after a few attempts in the French-speaking world... try the support networks between English-speaking DSI/PMO and CDIO. For example The CIO Forum Linkedin group, or the IDG (TECH) talk online community powered by CIO magazine.
The aim is to Don't reinvent hot water, of stay focused on innovation! On this point, like many others, the culture of free computing and open source has paved the way. No complexes to have!
You are aware of it, the most major budget estimates are most of the time the most beautiful “fakexcel” news!
Paradoxically, experience tells us that The bigger and longer the project, the less useful it is to budget for it. Indeed, the higher the error rate will be.
It is more prudent to estimate the budget by phase or on the basis of a project that has already been done, redone and redone several times (industrialized).
And yes, building an estimate “that goes down to the 12" bolt takes time!
If it's too big a project : in terms of time, number of people or with high technical risks then, it must be admitted, it is almost impossible to budget a project well as a whole. It will be necessary to break down the project and budget phase after phase.
Otherwise, it's a macro budget and that may be quite enough!
“You have to stop doing project estimates! ... They're all screwed up.” according to the French specialist and agile coach Frédéric.
The philosophy of”No estimate“is interesting and is getting more and more attention at agile community conferences in particular. A true “load-bearing wall” in the software development industry, an estimate is in fact the cornerstone of many project management activities: budget construction, roadmap prioritization, decision-making, contracting...
This then involves find alternatives to all these project activities... So to reinvent project management, how to prioritize, how to communicate, how to make decisions... A whole program!
The use of reference frames, such as costing charts, to establish budgetary estimates is a method. which, on the basis of work units that are supposed to be comparable, helps to estimate a project budget.
Focused on “pure” productive tasks. It bypasses tasks related to time spent (meetings, team points) and tasks related to work that is called peripheral to production (commercial, study phase, test...).
The aim here is not to deconstruct this approach, but to revalue experience and common sense in the face of certain excesses of rationality.
Rather than continuing to estimate excessively long budgets around the concept of project, Mathieu explains to us thatit maintains its ability to project into a global economic equation... While organizing budgets around the central concept of product and agile cycle. So each budget is an OPEX that accumulates.
Technological innovation as a corporate culture. Definitely “product-oriented” companies drive methodological innovation to the top!
Underestimate your deadlines Will return to Make your resources work longer than expected, and therefore to “explode” your budget!
Numerous studies have shown that it was Common for a project manager to be too optimistic when he estimates the duration of completion of a task. So, Ask your employees about the time frame they think they need to accomplish their missions, and add a safety margin as a precaution (often between 20 and 30% depending on employees).
If you want to effectively forecast your expenses and revenues, it is essential to involve the people who are primarily affected by them: your partners. It will be much easier to manage to anticipate the right amounts by calculating them with those who will work on a daily basis on the project.
Everyone will be able to give you a clear idea of the importance of expenses and revenues related to the tasks for which they are responsible at “cost by cost”.
With this dialogue you are likely to get a Provisional budget much closer to reality by asking your employees about their areas of predilection, only by entrusting the implementation of the entire budget to a consultant.
Taking inventory of your resources is an essential prerequisite for creating a provisional budget. You need to know all the resources available to you. We are talking here about material and human resources, but also about the time (number of days) you have to carry out this project successfully.
One of The main causes of budget failure are due to poor planning of the availability of resources. Vacations, illness, layoffs, resource replacements, working on several projects at the same time always have an impact on the budget.
Project management costs are not set in stone! But will evolve with the scope throughout the life cycle of the project.
If in order to create it beforehand, you are forced to try to predict the real, there will come a time when your hypotheses will be verified or invalidated. When you get more information about the expenses and revenues you are going to face during your project, use it to rework your estimated project budget !
Therefore, it is advisable to Review your actual expenses and revenues every month, and compare them to your forecasts.
Important: when you are correcting your estimated budget, Remember to keep the previous version, this will avoid losing track, but will also be very interesting to review when you have made good progress on the project!
When you budget for something you replace There may be a period when both systems are paid and often this can cause the project to derail financially.
A buyer told us about having discovered a project budget where users asked and obtained to keep the old app for archiving purposes... for two years! And here it is the triple penalty: we keep the infrastructure costs, we keep the license costs, and those of maintenance!
With a better anticipated budget forecast, it is possible to build a local application that meets the need to consult archives.
Attention also When you budget something you replace that was in Capex with Opex and now it's worse. Because we are impacting the company's balance sheet!
In addition, it should be borne in mind that the cost of the project is not only a sum of internal expenses but that there are externalities.
Attention, these indirect costs will be shared with several projects, in particular thanks to a distribution key !
Support and the profession must help each other! Reading the cost structure of the project budget is a complex exercise. Whatever the size of your business, do not entrust this file to someone who is not in the business. Get help... don't outsource
If you don't want to find the analytical accounting codes in your project budget, always rework things on your tool.
It is a significant investment. But fundamental to budgeting a project effectively.
Common an image, A good budget is worth 1000 words, because it will demonstrate how a project team thought of everything.
So be careful not to forget the basics: a budget is a summary of anticipated expenses and revenues. It therefore presents an estimate of all resources needed to achieve goals over a fixed period of time.
To effectively manage a project budget, it is common to establish key performance indicators (KPIs). KPIs help you determine how much was spent on a project, how the actual project budget differs from what was planned, and so on.
Finally, traditionally, attention is paid to the difference between the purchase cost and the recurring costs (capex opex). Capital and operating IT expenses are separated.
The project budget represents a commitment between a project manager and his hierarchy and/or his investors, on the results to be achieved and the means to be implemented. A commitment to your business!
Make a Provisional budget is essential when you want to create a project : if it can be used to convince superiors or investors of the interest in financing your project, it will in any case allow all the parties involved in the project to have visibility on its entire implementation. Framing, execution, change management, communication, operation, etc.
If maintaining the current project budget is not possible, stakeholders need to know the root cause of any potential overruns in order to make informed decisions about continuing. Scope changes are likely to be needed. The important point here is that uncertainty in a broad sense, such as a pandemic, is unavoidable, leaving other budget decisions that need to be made in a timely manner. Stakeholders such as the customer may need to decide whether the time or circumstances are right to continue, postpone, or completely stop a project.
The main point of a provisional budget is to try toincrease your visibility on the future of your project, its resources, in other words, to anticipate!
Indeed, building the provisional budget for your project is one of best solutions for estimating its feasibility. You will be able to calculate the margin you hope to reach (or at least the balanced budget) and make adjustments to your strategy if you realize that your business plan doesn't hold up.
Tips : you can even carry out several forecast budgets that represent the different scenarios you are considering, and that take into account the unexpected events that you can imagine (supply problem, new competitors who are changing the market, etc.)
Beyond the exceeded project budget, the possible impact of costs of non-delivery on the business can have a significant financial impact. The emblematic example is that of the city of Denver where the failure of the baggage management software at the new airport would represent a cost of 1.1 million dollars/day.
If we take a Another very big project, for example, such as the endless EPR saga. A name that became synonymous repeated delays and of financial abyss. Let's just say yes it's a failed project budget: to date it is at 4 times the estimated budget and 11 years of overtime!
Well, it was the first project of this type, that's mission Impossible to budget for a construction site like that. Now that they have done it once the next iteration will be much more in line in the next project, more accurate for the construction of the six other reactors planned for a total cost estimated between 52 and 64 billion euros!
Is the estimated budget over? You can now integrate it into your project sheet.
