IT Project Budget & Cost Management

This lecture presents an overview of the sample project that we will be working with.  We'll understand the scope of our IT implementation project where a new PMO Management tool is being implemented at your organization by a vendor software development company.  During the course of the project overview, we'll identify the areas where we will need a budget that will form the basis for developing our Budget model.  The development of the budget model will be discussed during the course of Section 2.

In this lecture, we'll discuss the capital accounts relating to the Budget Model.  We'll discuss how the budget for each of these accounts are derived and how the budget model is required for the eventual project approval. 

When the Budget Model is approved, it will become the basis for your project's budget.

This lecture will focus on the Operating components of the Budget Model.  We'll go over how each account was derived based on what is needed for the project.  We'll put together the entire Budget Model so that it is in a ready state to be reviewed by executive management.

The Business Case is the formal document that justifies why a project should be undertaken.  In this lecture, we'll discuss each component of the Business Case and how the Budget Model integrates into the Business Case.

Ultimately, the Business Case will be leveraged as one of the critical documents to present to executive management to get your project approved.

Here, we'll go over project methodologies such as agile and waterfall and discuss how milestones are arranged for each type of project.  In addition, we'll see how each milestone has a dollar value associated with it based on the SOW agreement with the vendor.  Also, we'll take a look as to how these milestones form the high-level timeline for each type of project whether it's agile or waterfall.

In this lecture, we will go over the project approval process.  This is the process that needs to be executed in order for a project to be reviewed by executive management and then approved.  Once the project has been approved, it is ready for execution and for a project manager to be formally assigned.  Please keep in mind that this process may differ depending on your organization's procedures.  This lecture covers the components typically covered in a project approval process.

In this Resources area, please add to your learning experience by leveraging the tools available on this page.

First, there is a bonus video that goes over the vendor selection process for when you are selecting the vendor you are wanting to work with.

Also, there are artifacts relating to:

• Project Overview

• The Business Case

• Project Approval Process

• Discussion on Depreciation and Write-Offs

• Discussion on Net Present Value and Internal Rate of Return

• Excel sheets relating to the Budget Plan and Financial Model

In this lecture, we will discuss how resources are allocated to projects and how to estimate the costs of those resources.  Hourly Rates (based on international location), allocations, and translated costs will be considered.  It is necessary to ensure your project budget has enough funds to cover for resource costs and estimating those resource costs is the first step.

In this lecture.  we'll go over the Statement of Work document (SOW) in detail and I'll explain each of the components of this critical document for vendor contracts.  We'll see how each one of the deliverables the vendor is promising will have a dollar value associated with it and how this will integrate with our overall Budget Plan.  I'll also go over with you other pertinent information in this document that will be required for eventual review with the executive steering committee, Finance, and Procurement.

In this lecture, we'll go over the Budget Plan Template in detail and introduce its components.  This budget plan will be the basis for you to manage the project's finances as we continue along with the project.  From this point forward, we will start to see how the variables we'll deal with on the project will fit into this budget plan template.

In this lecture, we will discuss each account that is associated with the Budget Plan and how those dollar amounts were derived.  We will also take a look at how Operating and Capital portions of the budget are broken out and see how the overall budget feeds from the Operating and Capital numbers.  In addition, we will discuss certain limitations when attempting to move funds between the Capital and Operating accounts. 

In this lecture, we will discuss each account that is associated with the Budget Plan and how those dollar amounts were derived.  We will also take a look at how Operating and Capital portions of the budget are broken out and see how the overall budget feeds from the Operating and Capital numbers.  In addition, we will discuss certain limitations when attempting to move funds between the Capital and Operating accounts. 

In this lecture, we will discuss how we acquire internal labor resources.  Then, we'll go over the hourly rate of these resources depending on where they are internationally.  From here, we will calculate how much this resource will cost based on the hourly allocation for them on this project.  If we do this for all resources, we'll have a good picture of how much we need to budget for internal labor for a specific month. 

We will analyze the costs we will realize from our software vendor.  The Statement of Work (SOW) will be leveraged to determine when milestones will be completed as well as their associated costs.  We'll discuss the importance of budgeting appropriately for the specific month where we're expecting costs from the vendor.

There are vendors working off a specific SOW for this project.  Once this project is done, that vendor will only offer operational support.  However, there are other vendors who work off a Master SOW that have signed lengthy contracts with your organization to do generalized software development work.  An example is a software vendor that has signed a 5-year contract with your organization to do development work.  During the course of these 5 years, the vendor will work on various projects for the organization.  These are "Master SOW resources" and it will be discussed in this lecture on how to handle them.

Time and Expense charges are for resources that will book hours to your project as necessary.  Another component of Time and Expense is travel-related costs.  For our sample project, the team will realize travel expenses that they must be reimbursed for and our project budget must account for this.

In this lecture, we will take a time out from our regular syllabus to discuss the earned value and how projects can realize it.  Earned Value is critical for executive management to understand how the project is performing financially.  EV is also one of the leading indicators of whether the project is ahead or behind schedule.

This lecture focuses on Cost Performance Index (CPI) and Schedule Performance Index (SPI).  These are the two leading indicators of how the project is performing.  We will discuss how to proactively leverage these statistics to ensure that your project is staying on track.

In this lecture, we will discuss how you can analyze all of the actuals that hit your project for a particular month.  From there, you will analyze your budget and reestimate for future months based on the costs you incurred during the current month.  Finally, we'll go into detail regarding the monthly re-forecasting process so that your budget is re-aligned for future months.

In this lecture, we will discuss how you can analyze all of the actuals that hit your project for a particular quarter.  From there, you will analyze your budget and reestimate for future months based on the costs you incurred during the previous quarter.  Finally, we'll go into detail regarding the quarterly re-forecasting process so that your budget is re-aligned for future months.

This lecture goes into detail about how to make changes to your project budget based on your analysis.  We will learn how to leverage the change control process to request more funding for your project or to give back money to the organization.

Once your change control request is approved, you need to update your budget with the changes.  In this lecture, we will discuss the re-forecasting process once you update your project's budget.

In some instances, your project may have extra funding that you need to give back to the organization.  This is done so that the organization can leverage these monies to fund other critical projects.  In this lecture, we will discuss a special change control situation where you are giving back extra funding to the organization rather than holding it as an extra contingency for your project.  We will also discuss the effects on your project budget once this process is completed.

In this lecture, we will discuss the process to financially close out your project.  This must be done so that no more charges will be realized by your project and executive management will realize that your project is complete.

This video summarizes what you've learned in the course and is an invitation to visit my website to attain resources and updates.