Five Ways To Avoid Cost Overruns in IT Projects

Cost overruns are a common issue faced by IT project managers. In fact, a study by the Standish Group highlighted that only 16 percent of IT projects are completed within their budget. The remaining 71 percent experiences cost overruns, with an average increase in costs of 189 percent! So how can you prevent your IT projects from becoming a part of this statistic? In this blog, we discuss five ways to avoid cost overruns in IT projects.

What Is A Cost Overrun?

Before we dive into how to avoid cost overruns, let’s first define what it is. Cost overruns occur when the actual costs of a project exceed the original estimates. This can happen for various reasons, including underestimating project costs and unanticipated challenges.

How To Avoid Cost Overruns

Now that we know what cost overruns is, let’s discuss five ways to avoid it.

Tip #01: Define the Scope Early On

One of the main reasons for cost overruns is scope creep. This occurs when the project’s scope is beyond its original boundaries. To prevent this from happening, it’s important to define the scope early on and get a sign-off from all stakeholders. This will ensure that everyone is on the same page and there is no confusion about what needs to be delivered.

Tip #02: Use Historical Data To Estimate Costs Accurately

Another way to avoid cost overruns is by using historical data to accurately estimate costs. This data can be used to create a more accurate picture of what the project will cost. This will help avoid any surprises down the road. You can also use tools like cost estimation software to help with this process.

Tip #03: Manage Change Orders Effectively

Change orders are another common cause of cost overruns. A change order is a request from the client to change the project scope. This can be anything from adding a new feature to changing the delivery date. It’s important to manage change orders effectively to avoid any unexpected costs. One way to do this is to have a clear and concise process for handling change orders. This will ensure that all stakeholders are aware of the changes and that the changes are approved before implementation.

Tip #04: Manage Expectations From The Start

Set realistic goals and timelines for the project. This means setting realistic expectations in terms of scope, schedule, and budget. This will help avoid any surprises or disappointments later on. If the stakeholders have unrealistic expectations, it can lead to cost overruns.

Tip #05: Have A Contingency Plan In Place

It’s always a good idea to have a contingency plan in place. This way, if something does go wrong, you have a plan to fall back on. This contingency plan should include a budget for unexpected costs. Having this buffer will help avoid any cost overruns if something unexpected does happen.

Our Final Thoughts

The key takeaway here is that cost overruns are a common issue in IT projects. But there are ways to avoid them. By following the tips, we discussed, you can help ensure your project stays on track and budget.

About the author: Jeff Poirior

Jeff brings 25+ years of telecommunications and information technology management experience in voice and data networking, server support, and telephony and security; with a significant emphasis on customer service. Prior to joining Valicom, he was chief of the infrastructure support section for the Wisconsin Department of Transportation. Jeff was the vice president of operations for CC&N, overseeing telecommunications, help desk, data, and desk side support services. Prior to that, he served as the associate director of technical resources for Covance, responsible for managing systems and network operations supporting 1700 users in Wisconsin and Virginia. He has also led data center operations at Magnetek Electric, supporting mainframe systems, client/server applications, telephony systems, and computer-aided design. Jeff holds a bachelor’s degree in business administration from Cardinal Stritch University and a master’s degree in business administration from the University of Phoenix. In addition, Jeff is a past board member of the Wisconsin Telecommunication Association.