Chapter 7 It Management

1. Discuss why many IT professionals may overlook project cost management and how this might affect the ability to complete projects within budget.

Information technology projects have a poor track record in meeting budget goals. There is an average cost overrun for unsuccessful IT projects ranging from 180 to 56%. There is room for improvement in meeting cost goals for IT projects

Cost management within an information technology project is probably one of the most difficult tasks an organization will encounter. Estimating the various costs that go into an IT project is extremely difficult to do from the start. This is an important factor to consider when analyzing the success of cost management practices on a particular project, because final costs are measured against the initial estimates. Unfortunately, it is likely that this estimation/budgeting difficulty is what causes many IT professionals to (as the book used) “smirk” at the idea of project cost management and/or cost overruns. In other words: effective IT project cost management is pretty much impossible, so why bother. One of the biggest reasons IT professionals have trouble with cost management is because many IT projects have very vague or undefined requirements initially.

2. Explain some of the basic principles of cost management, such as profits, life cycle costs, tangible and intangible costs and benefits, direct and indirect costs, and reserves.

Profits are revenues minus expenditures. To increase profits, a company can increase revenues, decrease expenses, or try to do both. Life cycle costing allows you to see a big-picture view of the cost of a project throughout its life cycle. This helps you develop an accurate projection of a project’s financial costs and benefits. Tangible costs or benefits are those costs or benefits that an organization can easily measure in dollars. Intangible costs or benefits are costs or benefits that are difficult to measure in monetary terms. Direct...