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Projects running over budget is a very common problem in project management. Especially for IT projects that have larger budgets. According to the Project Management Institute, the average IT project with a large budget (over $350,000) runs over its budget by 200% and delivers 56% less value than expected.
This is something to keep in mind but to not overthink it, instead just be prepared ahead of time
What are some of the reasons for projects to run over budget?
Every single project is unique in its own way. With that said, most of them still have certain similarities when it comes to management. And relying on that fact, we can pinpoint the biggest reasons why even the most well planned and detailed IT projects have the potential to run over budget.
Here are some of the reasons why IT projects go over budget:
1. Scope creep
The Project Management Institute has listed scope creep as one of the top reasons for IT projects to run over budget.
Unknown and poorly planned objectives in a project are going to backfire along the way. Scope creep happens when there are no clear and set in place boundaries and focus points for your project.
Taking the time and being thorough with setting your project’s scope is an important first step. You want all the team members and project stakeholders to be on the same page and understanding. It is vital for a successful project to have defined project deliverables and set steps to take. Based on that you will be able to come up with a budget, while at the same time also preparing for unexpected changes and setbacks in the scope.
2. No assigned budget owner
Every project has a budget. So it sounds very logical that someone is in charge of that budget. But it’s more common than you would think to fail to assign a specific budget manager.
The budget owner is someone who is directly responsible for driving accountability as far as how the money is spent. Very often everyone in the project team has their own specific role and there is nobody left to make sure that the project as a whole remains within a budget. Leaving the budget without management is a fast route to a disastrous outcome.
That’s where the budget owner plays a very important role. They update expenses and schedule necessary payments. They then regularly report back to the team with a budget status update so problems can be caught early.
3. Poor time management
Prolonging a project is costly. The longer the project takes, the more resources are being used. And resources cost money. Time management is another vital part of successful project management. Dragging a project along for too long can make the whole thing go over budget and completely lose its momentum.
Being proactive when it comes to project management is the key to ensuring success and keeping unwanted issues out of the way. Once you realize that the project is starting to get out of hand, it’s important to react immediately.
How to get your project back on track
1. Stop and reflect
As statistics show that IT projects tend to go over budget, it’s important to be prepared for such eventualities. When that has happened, take a moment and track down the steps that could’ve gotten you in this place. Knowing where you went wrong will let you fix the errors and learn from those mistakes.
2. Make the necessary changes
This is the moment where you will have to evaluate which changes will benefit the project to get back on track while keeping the budget under control. Will you have to change out more expensive human resources to lower-cost ones? Go over every detail where money is being spent and analyze the efficiency of that within the project. Look at it as a pros and cons list, what stays and what has to go.
3. Watch out for project scope changes
This can’t be stressed enough - guaranteeing that the scope doesn’t change is the solution for an over-budget situation.
Many budgets start to go over their limits as the scope changes, more work is added to the project and the costs get higher. This is the result of poor scope planning and management. This is a vital remedy for any project that is going over budget or over deadline. The project team should adapt to a mindset of zero tolerance for changes in the scope. Even if it is a minor addition, if the budget is at risk of going over budget, the focus needs to be on the core work that was set out in the scope from the beginning.
4. Change the scope
As a last result, if nothing else works, you can try changing the scope by cutting back the work that was set in the core of it. Unfortunately, this may allow you to complete your project with less than 100% functionality. Don’t worry! Once that is done, a follow-up project can be set in place to take care of the damage.
The most important thing is to remind yourself not to panic but act according to the issues arising in the most efficient way possible.
Pause, take the time to identify the steps that caused this mess and decide with your team which would be the best solutions to fix the problem. Don’t forget, this is all part of project management!
Ensuring successful Project delivery, within the scope and on a budget is a high Priority AT Transdata
At TransData, we do things differently. We offer free project consultancy and a thorough investigation of your project’s requirements to ensure your project doesn't go off budget or become another statistic. Before a project starts, we sense-check and validate the project requirements thoroughly to ensure even greater success. With a full understanding of the scope and requirements, we assign a team with the best technical skillset to work on your project.
Need a project scope sense check? Tell us your requirements and book a call today.