AGA Presentation 05212015 Final

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AGA Conference 2015 May 21, 2015 Oh No, Not Another Over-Budget IT Project! Building Better IT Project Cost Models

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Kathryn Douglass delivered this presentation on IT Project Budgeting to the Association of Government Accountants (AGA) May 21, 2015.

Transcript of AGA Presentation 05212015 Final

  • AGA Conference 2015 May 21, 2015

    Oh No, Not Another Over-Budget IT Project!

    Building Better IT Project Cost Models

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    s

    Catch 22 IT Project Costing

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    Technology Demand

    Technology

    Increased Demand

    Changes in Strategy

    New Leadership

    New Services Modernization,

    Operational Improvement

    Regulatory

    Changes

    Technology Obsolescence

    Technology Advances

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    What Could Possibly Go Wrong?

    SOURCES: ZDNET , 2009; McKinsey and Company, 2012

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    Warning: Results may vary based on project type, system complexity, level of integration, and availability and skill of resources. Not for the faint of heart. Approach with caution. Do

    not try this at home.

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    What are the key issues with IT project business cases ?

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    Risks and Red Flags

    Allowing the vendor to drive the process

    Letting the vendor write the requirements for the RFP

    Letting the vendor estimate internal costs and other third party costs

    Assuming the vendor has your best interests at heart ( trust but verify )

    Getting enamored with a particular vendors world view

    Assuming the vendor will manage itself Forgetting that vendors understand

    the game and will do most anything to win

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    Risks and Red Flags

    Being overly optimistic Allowing inadequate time for planning,

    requirements, testing and transition

    Assuming no contingencies are needed

    Ignoring risks Assuming the internal team can

    handle this alongside their day jobs

    Unjustified faith in new technologies or internal capabilities

    Ignoring complexity

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    Risks and Red Flags

    Getting Ahead of the Game Trying to get a firm price too early in

    the process

    Eliminating competition too soon Rushing to conclusion, crunching the

    timeline, assuming costs wont change

    Skipping steps: business input, testing, approvals; vendor due diligence

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    Risks and Red Flags

    Dismissing or Minimizing Critical Activities and Costs

    Training: End User, Technical, and User Support / Help Desk

    Communications and Change Management with Operational Units

    Business process re-engineering, optimization and synchronization to the new technology

    Technology Adoption Oversight Vendor Governance and

    Communications

    Project Management and Reporting

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    Final Thoughts

    Build your models to represent total cost of ownership with internal IT, business operations, third-party consultants, and hardware and software costs for both pre-project, project and post-project/steady state time frames.

    Be sure to consider inflation in your model, different for hardware, software and professional services

    Develop standard, fully loaded rates for all cost models during a budget year, e.g.

    for internal FTE resources for end user hardware, software

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    Final Thoughts

    Establish standard contingencies/ rules of thumb for your projects, based on your own experience if possible, or based on industry experience

    Use multiple contingencies to build up overall contingency (i.e, dont just use 10% overall)

    Hardware contingencies may be much lower than professional services contingencies

    Base your contingencies on the level of experience of the internal group, the external vendor staffing, and the quality of the requirements.

    Contingencies should reduce as phases of the project are completed.

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    Final Thoughts

    Make sure your Current and Future State Models are in synch. For example, if you are including disaster recovery costs in the future model, you should include those costs in the current model if you have them.

    The Total Cost of Ownership should sum both the project costs (e.g. preparation, planning and both internal and external project cost), as well as ongoing operating costs. These can be compared to the Current State Model to create a cost delta.

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    I can answer all your questions, as long as we agree

    that I dont know is an answer.

    Isaac Asimov

  • 3773 Cherry Creek North Drive Suite 575 Denver, Colorado 80209

    888.998.0008

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    What are the key cost considerations in IT projects?

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    Costs to Consider for Packaged Software Implementation Internal IT

    Administrative and Project RFP Development, Review, Vendor

    Demos, and Vendor Selection

    Contract Negotiations Contract Administration Program and Project Management Implementation Management Communications with Business Users

    Requirements Development and Prioritization Review and Finalization Socialization with Business

    Technical Development Interfaces to Existing Tools and

    Systems

    Data Mapping, Conversion

    Testing and Quality Assurance Functional Testing Integration Testing End-to-End Testing Interface Testing Security Testing Performance Testing (e.g. load, stress,

    volume and configuration )

    User Acceptance Testing

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    Costs to Consider for Packaged Software Implementation Internal Business Operations

    Administrative and Project Review and Approval of Deliverables

    Requirements Development and Prioritization Review and Finalization Socialization with Users

    Organization Process Review and Optimization

    Process Review and Mapping Process Optimization Synching of Business Processes with

    System Processes

    Organizational Addressing organization impacts Training time for staff

    Testing and Quality Assurance User Acceptance Testing

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    Costs to Consider for Packaged Software Implementation External

    Packaged Software License Maintenance

    Legacy Systems Changes to Legacy SW required for

    Package SW compatibility

    Hardware and Infrastructure Infrastructure Upgrades,

    Replacements, and Additions

    Compute Platform Upgrades Network HDW and SW Upgrades Storage, Backup and Disaster

    Recovery

    Professional Services Installation of Base Software Configuration of Software Development/Testing Customizations Testing

    System Testing, Configuration Testing, API Testing, Compatibility Testing, etc

    Training and Documentation End User Technical Support Help Desk Support

    Support for Business Requirements, Acquisition

    Implementation / Integration Management

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    Costs to Consider for Packaged Software Implementation Ongoing Costs

    Ongoing Internal or Vendor Support and Maintenance costs

    Costs of User Support Technical Support

    Costs of Legacy System (s) during development test, and transition

    Duplicate costs during transition until the old system is decommissioned

    Duplicate storage, backup and DR costs until data is converted and archived

    Duplicate licensing, maintenance costs

    Costs for Software Updates, Versions, and Patches etc.

    Internal or external charges for installation if software has been customized

    Some software updates will be included in maintenance, others will be charged.

    Technology Refresh Will include both hardware and software New package upgrades may force

    upgrades in other components

    Vendor Governance/Contract Management

    Level of effort will depend on involvement of vendor post-implementation

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    Contingencies

    Software Implementation Risks and Costs increase

    if customizations are included If requirements are not defined and

    frozen prior to software selection and configuration activities

    If the new application will be highly integrated with other legacy systems

    If the business users are not agreed on the software, the requirements, or the delivery model

    If multiple departments, stakeholders and users are impacted

    Contingencies in your model should decrease as the phases are completed, for example, in traditional projects, contingencies change when:

    Business and Technical Requirements Complete and Frozen

    Business and Technical Design Complete and Frozen

    Note: Agile Projects employ a different estimation methodology.