As a technology company, clients have engaged us in their projects after they’ve left the ground. By this point, the forecasted costs had already exceeded the budget, and their project was at serious risk of cost overrun.
The harsh reality is that large IT projects tend to go over budget. Research by McKinsey and the University of Oxford found nearly half (45%) of large IT projects do just that.
“Our experience shows that the companies who keep their IT projects within their budgeted costs are the ones who align IT and business value.”
Keeping within budget is key to closing a successful project. A quality outcome delivered on time can be overshadowed if the project exceeds its budget.
10 Reasons Why IT Projects Go Over Budget
Our project management team has given ten common contributing factors to project cost overruns:
1. Poor Planning
For a project to be successful, it needs a thorough plan to back it. In our experience, poor planning is responsible for most cost overruns. When fewer funds than necessary are allocated for a project, or resources are poorly assigned, you will inevitably need to throw more money or resources at the project once it’s underway.
2. Scope Creep
Scope creep occurs when there is a change to the project requirements with little to no control procedure such as change requests. Naturally, a change in project requirements will cause the project to deviate off-track, resulting in more costs from increased workloads and additional resources.
Common causes of scope creep include poor requirements management, unclear project objectives, too many stakeholders and unrealistic project objectives.
3. Inadequate Risk Management
All projects face potential risks. Poor risk management is seen as a major aspect contributing to project failure. The Project Manager is responsible for identifying risks and taking the necessary steps to mitigate them: also known as a Risk Management Strategy.
Both internal and external risks can put the project’s success on the line, and lead to huge financial loss. Having to deal with these unexpected delays costs money and impacts project progress.
4. Vendor Issues
Bad customer service, slow or poor-quality service or bad communication from your supplier will all impact your project budget.
Use vendors who are known for their reliability, customer service and skills. Not meeting deadlines and low-quality work which has to be fixed will slow down your project's progress. Having to source a new supplier to fix their mistakes and take on the rest of the work will mean digging into your pockets again and taking money out of the budget.
5. Unrealistic Timetables
Setting unrealistic timetables can cause your project to exceed the budget in multiple ways. For a start, when timelines start to get tight, project managers and team members could make rushed decisions without proper planning. This could mean they go for a less cost-effective or more expensive solution.
The stresses of working to tighter, unrealistic deadlines could impact the quality of the work, which requires more costs later down the line to remedy.
6. Inaccurate Cost Estimates
28% of projects fail because of inaccurate cost estimates. Inaccurate cost estimates spiral the costs because it means there are unforeseen expenses, an underestimation of resources, insufficient resource allocation and scope creep.
7. Lack of IT Project Management Experience
While Project Managers are adept at managing budgets, timelines, people, procurement and everything else involved in a project, they lack the technical knowledge required for a large IT project.
They might find understanding project requirements complicated, leading to inadequate planning scope creep and unexpected costs. Also, lacking familiarity with IT vendors could result in poor vendor selection and cost inefficiencies.
8. Poor Communication
For a project to develop nicely and stay on schedule, it needs good communication from all participants at all times. The stakeholders must communicate the business goals clearly to the project manager, who must clearly express what is needed to their team, suppliers and contractors.
Misunderstandings from poor communication means work is not carried out promptly, repetition of work and avoidable spiralling costs.
9. Technical Failure
Technical failures – such as bad system performance, failed data migration and poor quality – require expensive troubleshooting and repairs, pushing the overall costs up. Fixing these issues may require investments in new technology or expertise, adding more unexpected expenses to the project.
10. Inadequate Testing
After months of analyzing data, writing code, managing spreadsheets, and overseeing every aspect of the project, there is one last crucial step. Even though it's the final step, its significance cannot be overlooked.
Inadequate testing could result in users finding bugs and errors after the project's deployment. As well as impacting your reputation, bugs typically cost more to fix after deployment.
Don't Let Your IT Project Overrun - Speak to PSP
If you're embarking on an IT project - large or small - are you confident you have the technical expertise in-house to deliver a cost-effective solution on time and within budget? Are you confident your suppliers can deliver what you need to the expected quality?
Our outsourced IT Project roles won't just keep your project on track, but ensure your project outcomes are aligned with your business goals.
We have successfully delivered multi-million pound IT projects for our clients, using our risk-based approach to manage risks and ensure all their deliverables were met on time.
IT Project Governance - Outsourced project governance takes a step back from the day-to-day management of an IT project to focus more on the strategy and outcomes of the project. Companies turn to us for external IT project oversight to reassure them that their team, suppliers and board have the confidence and strategy to deliver a successful project.
IT Project Manager - Our team of outsourced IT Project Managers will oversee all aspects of the project, from the planning to the consultation stages, to ensure a successful delivery that's on time and within budget. Our risk-based approach ensures your project avoids scope creep, overspending, a poor final solution and more. They also work with your IT vendors and suppliers and select the right third-party suppliers for the project.
To speak to a member of our award-winning customer service team, fill in this short contact form or phone: 01775 722377.