Underestimation, Over Reliance on Modeling and Misunderstanding Risk in Cost Estimates in Software Development
Total Cost of Ownership (TCO) has been popularized by Gartner for estimating all of the costs, both direct and indirect, which go into a project. Managing a software development and implementation project is exceptionally difficult: estimating initial costs is hard enough, but how do you accurately estimate the cost of software maintenance or the burden placed upon IT infrastructure and support?
Many software projects result in total or partial project failure, indeed it can be said that many projects are planned to fail. Inaccurate initial cost assessments are compounded by increased uncertainty and misunderstanding over software maintenance and the true costs associated with support and operation. There is a serious risk of failing to understand the true project requirements combined with failing to adequately plan the project, which contributes to a loss of control once work commences.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
Galorath Keynote ISPA March 2011
Today my conference presentation involved understanding and estimating value in software and IT systems as well as total ownership costs. It still amazes me how so many software and IT leaders do not want to think in terms of Return on Investment but just want to build things that seem to be good ideas. If we would build what has the most value IT could become a profit center. Key points were:
- Estimation is a key portion of business decision making
- Value must be considered in addition to cost
- Data doesn’t have to be perfect to be useful
- Estimators taking some responsibility for business value analysis can make a major improvement in business
I have included entire PowerPoint presentation here.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
Eight Causes of Project Failures: UK Government IT Projects
From the POST report on UK Government IT projects, there are some insightful lessons on why projects fail. Now if we could only get the world to bring those into play early. We could avoid many project failures. Note number 6…. not taking the total ownership cost into account. That is why we stress total ownership costs (which many organizations don’t want to worry about until it is too late).
1. Lack of a clear link between the project and the organisation’s key strategic priorities, including agreed measures of success.
2 Lack of clear senior management and ministerial ownership and leadership.
3. Lack of effective engagement with Stakeholders.
4. Lack of skills and proven approach to project management and risk management.
5. Lack of understanding of and contact with the supply industry at senior levels within the organisation.
6. Evaluation of proposals driven by initial price rather than long-term value for money (especially securing the delivery of business benefits).
7. Too little attention to breaking development and implementation into manageable steps.
8. Inadequate resources and skill to deliver the total delivery portfolio.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
The Total Ownership Cost of IT Systems
It is interesting to see how the much of the industry speaks of IT system cost problems while ignoring a large part of the problem. Software maintenance costs can be 75+% of software total ownership costs but IT Infrastructure and the cost of IT systems and services can be 60% of the total ownership cost itself. Even if we use cloud computing most of those IT service costs don’t go away. Help desk, data conversion, etc. is still a problem, even in the cloud. Read more
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
Reducing Software Maintenance and Total Ownership Costs
Over 75% of the costs of software are in software maintenance. To address this I (Dan Galorath) participated in a best practices conference held by the IT Metrics & productivity Institute. I was fascinated by Herb Krasner’s presentation on software evolution versus software maintenance.
Herb defined software evolution as the set of activities, both technical and managerial, that ensures that software continues to meet organizational and business objectives in a cost effective way. He further defines evolutionary system types as either having an Imprecise statement of a real-world problem which generally changes over time or a system that becomes part of the world that it models/implement whose acceptance depends entirely on opinion and judgment. Evolutionary is in contrast with a maintenance system where the problem can be completely stated and where a change to the specification defines a new problem and a new system.
Herb Krasner , David Garmus, and Dan Galorath talks all illustrated how the use of metrics and management associated with measurement through both development and maintenance can reduce total ownership costs dramatically.
We then heard from Bob Lawhorn who spoke on how his company, Computer Aid Inc (CAI) actually saves organizations money and increases quality by taking over legacy system maintenance and support. It was one of the most inspiring illustrations on why we should do all this I ever saw. He spoke of taking over these systems with new hires, applying the CAI processes and measurement and reducing customer costs by around 30%. And they have been doing this for over 20 years.
Overall I came away inspired, seeing how software estimation, measurement, process, and real management of software like manufacturing is making a difference.
I will be presenting my talk on reducing total ownership costs several more times this year in partnership with CAI.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
Project Prediction Infographic
