Budgeting for a Successful Software Project

Posted on: January 22nd, 2016 - Written by: Tom Metz

Thinking about pitching a new software development project? You’ve got an idea and the team to make it happen, and success is (in your mind) guaranteed. But wait—think again. A study done several years ago by AIG Consulting found that for 68% of companies, project success was not likely: “Projects might succeed – but not by design. Based on the competencies present, these companies are statistically unlikely to have a successful project.”

Sixty-eight percent likelihood of failure. That’s a sobering number. But it doesn’t have to be that way.

One way to define a failed project is one that comes in over budget. Your budget can make or break a new software development project (or any new project, for that matter). That’s what we want to tackle in this article—making a budget that doesn’t come back to bite you once your project is underway.

As you’re creating and tweaking your software development budget, here are some essential questions to ask:

1) What are our goals?

Seems simple, right? But really dig deep here when answering this question, and be specific. What functionality do you need to have? What features do you want? What is your competition doing in this area? What is nonessential? Putting your overall goals on paper for an enterprise-level software development project is exactly the right place to start.

2) Who can analyze our proposed project for us?

If you’re planning to use an outsourced team to develop mission-critical software, pay them to do an analysis of your project goals and provide you with a report on how much the project will cost and how long it will take. This is money well spent! If you’re planning to use an in-house team for the project, allow them time to thoroughly analyze and report on the resources needed for successful completion, and listen to their predictions with respect.

3) How much money will this cost?

It’s easy to drastically (and fatally) underestimate the cost of any new development project. Try to avoid this by doing your research (see #2) to find out how much money it will actually take to make your project dreams a reality—and don’t ignore the information you get. Once you’ve got a realistic number, you’re ready to ask the next question.

4) Are we willing to pay that?

We’ve all been surprised by the real price tag of something: Wow. I didn’t realize it would cost that much. The answer to Are we willing to pay that? might very well be a resounding no. It might be, though, that you feel this budget isn’t just a set of numbers and costs, but rather it’s an articulation of what needs to come next for your business: “The budget is not just a collection of numbers, but an expression of our values and aspiration.” (Jacob Lew, current United States Secretary of the Treasury) Sometimes the end goal isn’t worth the price—but sometimes it is. This is a business decision you must make with careful reflection and honesty.

5) How much margin do we need to add?

Things happen. Rarely (maybe never, in fact) does a project go from start to finish without a hitch or glitch along the way. You’ll need margin in your budget, both for hardware that might be needed to access your new software solution and for labor involved in creating, testing, and launching the application. Add margin, and then go back and add some more.

6) Who else needs to look at this?

Creating a budget for your software development project is ideally a team effort. Different people will bring different perspectives to the table, and all those perspectives need to be considered for a robust, realistic budget. Who else in your organization needs to provide input on the budget?

7) How old are the numbers we’re working with?

Avoid falling into the trap of using old, outdated information to develop your budget. Even if it takes extra time, spend it to ensure you have the most up-to-date numbers, especially if it’s been a few months since you started the budget development process. Just a few mistakes in this department can really cost you when you get into the actual development phase. Conversely, checking to verify the accuracy of your information will serve you well in the long run.

To close, remember these words written by Shelley Doll for TechRepublic: “Defining a budget for development projects is frequently referred to as an art form. As seems to be true with all business ventures, your cost projection can easily be the subject of ‘fuzzy math,’ with little bearing on reality.” Make sure your cost projections don’t succumb to the fuzzy math she describes—with some effort and planning, your budget can become a valuable tool used to move your project toward success.

** Some of the tips listed in this article are adapted from “Creating Your Project Budget: Where to Begin?”






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