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Question: Why Do Projects Cost More Than Expected?

There are a lot of possible reasons for this.  I’ll enumerate the reasons why I think projects cost more than expected, and then discuss the most probable ones.  Let me know what you think!  Got a few more reasons?

  1. Forgotten tasks
  2. Unknown tasks
  3. Customer expectations change
  4. Feature creep

My biggest issue is always ‘forgotten tasks’.  In my experience, forgotten tasks results in project cost overruns more often than any other reason.  People tend to throw out a cost before they have listed all the work involved.  Halfway down the road, they remember 25 – 50% more tasks.  That adds up!

Sometimes, one thing leads to another.  Tasks that you didn’t know about pop up.  What are you going to do when that happens?  You can’t just abandon the project.  You have to eat the extra work and absorb the cost overrun.

Once your customer gets a look at the product, he may have a few new ideas of his own.  He may see something he likes, and feel free suggest some additions.  Those add up too.  Just make sure he knows that he must absorb the additional project costs.  Otherwise, you’ll end up eating that too.

Feature creep happens when customers and developers like what they see and want a little more, and little more, and a little more.  Before you know it, there’s an extra 10% cost in the project.  Yikes!

–ray

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Computer Jobs Hit Record High

Last week CIO Insight reported that IT jobs had reached a record high (four million IT workers), and IT unemployment had fallen (2.3 percent).  That’s phenomenal!  See the link below.

 

http://www.cioinsight.com/c/a/Workplace/Computer-Jobs-Hit-Record-High/

 

Okay, great news, but why is IT spending down?  While I have no hard facts, I have my theories.  Bear with my madness while I explain.  Post a comment if you don’t agree!

1. It’s summertime.  IT spending falls when the temperature rises, and rises when it falls.  November, December, and January are traditionally big months.  June and July…  Well, they are another story.  🙁  People are out and about, and they don’t want to worry about buying stuff.  They’re too busy checking out the next vacation spot on the web.  Yikes.

 

2. Gas prices.  People bring their personal woes to work.  Got trouble filling your tank?  Then you won’t spend money at work either.  What, you say?  There’s no hard connection between the two.  No, but there is an indirect one.  If you’re worried about finances at home, you’ll worry at work as well.

 

3. Too many salaries.  Or, perhaps spending is down because there are too many mouths to feed.  That’s always a possibility, but I suspect it’s the other two reasons.  We’ve had other times with low unemployment, and high spending.

 

–ray

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Green is Just Plain Dumb

The ‘Green Fad’ really bothers me, especially in the IT biz.  CIO Insight had a big article in eWeek on ‘How to estimate energy efficiency.”  The upshot was that a single Intel server consumes 29 KWhs  (that’s 29 kilowatt hours of electricity) per week.  Yikes!  29,000 watts!  That’s a lot, right!!!  That’s what the article wants you to believe.  Until you think about it…

One kilowatt of electricity costs about 7 cents.  29 x .07 = $2.03 per week.  Huh?  Two dollars a week?  That’s all?  So what’s all the fuss about?

Check this out:  http://answers.yahoo.com/question/index?qid=20080624182135AAmXpHF

The article left out this little bit of information.  But it did say that all the data centers in the world consume $2.5 billion per year.  That big number is supposed to scare you.  As if you had to pay the full bill yourself.  You can handle $105 per year, but not $2.5 billion.  What are we going to do???

I say, focus on things that matter.  $2 per week doesn’t matter compared with the thousands of dollars per week we pay for salaries, advertising, operations, shrinkage, etc.  But we like to talk about the ‘cool’ things like ‘Green Initiatives.”  Bunk.

 

–ray

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Growth During Downturns

One of the toughest challenges any business faces is cash flow.  That’s why capital ventures exist, as do loans from banks for solid business plans.

Many business owners will tell you when the chips are down its time to expand!  Ask anyone in real estate from the person just starting out to Donald Trump and they will tell you “when there’s blood in the streets, buy real estate.”

What if you don’t have cash on hand? Have you ever heard of “Gorilla Marketing?”   Remember a few years ago in Boston?  This very type of marketing caused a bad stir, closed down Boston Harbor half a day, all for a little cartoon show.  This happened for the wrong reasons, but it incidentally gave millions of dollars of airtime for what I imagine was a few thousand dollars.

I don’t agree with the scare that campaign inadvertently caused.  However, the point is get creative!  What can you do to expand your company’s profile in a seemingly falling market?  If it’s slow maybe you could streamline processes while you have the time?  Network and make new contacts?  Cold call more people, work older leads?

These are a few suggestions that may not all apply.  But the important idea is to do something to improve your business during slow periods.  Even if it’s a tiny thing that doesn’t cost physical money, it may give you that one percent edge you need on the competition.  We should never stop growing as people in life and business, even in downturns.

 

–Warren

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Define: Project Milestone

Project Milestone: A marker in time, usually indicating a the completion of a project task.

 

Project milestones offer a place in time to stop and analyze your progress.  Have you completed the tasks you had planned?  Is your project on track?

Project milestones are normally project tasks with zero-duration work.  That is to say, no work is expected for such a task, except to stop and monitor your current progress.  They often display in a Gantt chart with a diamond shape to indicate that stopping point.

 


Milestone task from Standard Time

 

–ray

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Special Features for Special Customers

Our company develops a line of products.  We sell the same off-the-shelf design to many customers.  They all essentially get the same thing: a downloadable product with a certain set of features.  But there is always somebody that needs something a little different.  That’s when they become “special.”

Developing special features for a single customer can pose special challenges to an off-the-shelf product.  This post discusses three of those challenges.

My biggest concern is punishing 99% of the customers with a feature that only 1% will use.  Suppose you add a new feature to the product that 1% of your “special” customers will use.  The other 99% may not understand it.  That’s a bad thing.  They’ll think they need to understand it, and will spend time studying it, only to learn that it does not apply.  My advice: make sure that doesn’t happen.  Bury it where only the most adventurous will find it.

The next concern is maintenance.  If you create a new feature for one customer, guess what…  You’ll have to make sure it stays working forever.  It will cost you money as long as you maintain it.  Make sure you get that money up-front, or in maintenance payments along the way.

Have you given any thought to the effect your “special” features have on the rest of the product?  In other words, will these one-off features break something else.  The more complex a product is, the more likely collateral damage will occur.

The upshot is that special features cost more money than you might think.  But you have to do them to gain new customers and satify existing ones.  It’s all part of the game.  Just make sure you are profitable doing it.

 

–newshirt

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How To: Use Master Projects

This post will discuss the simplicity of using master projects in MS Project.  The image below shows a master project with two subprojects under it.  Three MS Project MPP files are required to create the project below.  The master project file is independant of the individual subproject files.  Follow the steps below to create a master project with subprojects.  Notice the green icons next to Sub1 and Sub2.  They indicate the sub-files included in the main master mpp file.

 


Master project and two subprojects

 

To create a master project in MS Project:

  1. Create a new MS Project file named Sub1.mpp (see the example above)
  2. Add some tasks
  3. Create another mpp file named Sub2.cpp
  4. Add some tasks to it
  5. Create a third mpp file to act as the master project
  6. Click in the first row of the master project
  7. Choose Insert, Project…
  8. Choose Sub1.mpp
  9. Repeat steps 6 – 8 for the second subproject (the results should be similar to the image above)

 

–ray

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Define: Resource Utilization

Resource Utilization: Percentage of hours actually worked, when compared with possible working hours.

 

Formulas:
    Utilization = ActualWork / TotalHours
    EffectiveRate = ActualAmount / TotalHours

 

Standard Time® contains a resource utilization report that looks similar the to image below.  Notice the ‘Scheduled Hours’ value, and the ‘Actual Hours’ under it.  These number are used in the formula above to arrive at the ‘Utilization Percentage’ of 103.8%.  This person obviously worked an extra 1.5 hours.

The effective billing rate is related to these numbers as well.  In this case, the person worked on some high-value projects at caused his effective billing rate to be higher than normal.  That’s a good thing!

 

 

–ray

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The Vendor is Always Wrong!

We’ve all heard the saying, “the customer is always right.”  So when a customer and vendor disagree, it implies the vendor is always wrong.  I realize this is a customer service driven idea meant to teach us to take care of our customers.

However, I have seen companies blame vendors all too often, without examining their own shortcomings.  This is an epidemic in our culture, it’s always someone else’s fault and no one wants to be accountable!

Just this week I had an opportunity to do business with a major U.S. company.  A company most everyone has heard of but will remain nameless.  To my surprise I lost their business at the last moment.  In fact, one of the VP’s had stated just days before, “I am ready to cut you a check tomorrow.”  The deal was done, right?  Well, not exactly…after a lot of meetings and numerous discussions met with many delays.  I was told that we (the vendor) were missing a key component.  What’s ironic is that I did countless demo’s and was assured that the deal was done.  The missing feature was never mentioned.  Then bam, it’s over!

We may have been able to accommodate this last minute need, but we’ll never know! We will continue to do business and press forward and I will examine what I could have done differently. 

How can a major company have a year and a half of meetings, discussions, and reach the end of a path only to find out that they didn’t really know what they wanted and then simply brush it off as a vendor problem?  It always hurts to lose business, but the vendor isn’t always be wrong.

–Warren

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Fortune Favors the Brave

Something in Bill Gate’s interview has been hanging with me (see quote below).  I suppose he always says this, whether they are making risky bets or not.  And I suppose Microsoft can make risky bets all the time.  They can afford to.

We’re making sure we take some risky bets.

 

What’s hanging with me is the effect that ricky moves have on small companies.  The first thing to understand is that risk produces reward, just like the Roman poet Virgil said in 19 BC.  “Fortune favors the brave.”  That’s nice to know.  Its a special promise, just for the brave.  Not for the weak and fearful.

But that fortune can take years to realize.  What do you do in the meantime?  After all, you don’t just get brave on isolated occasions, and magically watch the fortunes roll in.  You must stay brave all the time.  So that’s the second thing you should know.  Staying brave is harder than it looks – a lot less glamorous than one might imagine.  And it’s boring.

Yes, boring.  You slog along through thick and thin, excersing your braveness along the way.  Nobody is watching.  Nobody applauding.  You just fight for your vision, and hope you were right.  Only time will tell.

But how do you inject bravado into your project team?  How do you energize them to fight when everyone else says give up?  The answer is simple: be a bright light in a dark world.  People will naturally follow.  No coersion is necessary, just a strong, clear vision.

 

–ray