Information Technology Cost In-Credibility
November 26, 2008
As the financial gloom deepens, cost controls become more important. But what about a financial manager who needs cost estimates from information technology professionals. In my experience, the financial manager may want to read tea leaves, not the spreadsheet pages information technology professionals create. Data about the imprecision–notice I did not use the word ineptitude–of information technology cost estimates are difficult to obtain. I was issuing happy quacks when I read “HMRC Estimates Its IT Costs” on Kablenet.com’s Web site here. Sadly this link is to the url that can disappear in a nonce. Click quick. For me the most important parts of the articles were the actual numbers submitted by the Revenues and Commons department in the UK. HMRC is sort of an IRS and GSA type outfit, so the estimates may shed light on the black arts practiced in these US agencies. Now the good parts of the article:
“Many of our IT projects are at an early stage in their development lifecycle, and detailed technical solutions and IT supplier costs are yet to be established,” said Timms, explaining the vagueness of the numbers. “The figures shown below are therefore estimates and remain subject to revision, finalisation and formal investment approval.”
What this means is that HMRC has allocated about 200 million pounds or about US$360 million but has zero notion of what these projects will end up costing. The 20 projects cost about 10 million pounds each, er, sort of, maybe. Now that’s how to create cost in-credibility for information technology. The assumptions are usually understated and then overruns allocated in another budget year. Pretty nifty cost estimating, and the approach surfaces in many types of organizations. Trouble is that a soft economy is going to surface these incredible estimates with not too surprising consequences.
Stephen Arnold, November 26, 2008
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