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Advice Line | Bob Lewis » The magic formula for IT budgeting

November 14, 2007 | Comments: (0)

The magic formula for IT budgeting



Dear Bob ...

This is "Budgeting" with a follow-up question (from "Penetrating the mysteries of IT budgeting," Advice Line, 11/7/2007).

All of what you say makes sense – especially in a large organization where duties and responsibilities are separate and clear-cut.

We are small, with multiple-hats, and our IS Governance = Administration. Unfortunately, and in keeping with the industry – too often the Project is not based on business case –but "Dr. Squeaky Wheel."

We have done most, if not all, of what you suggest – formally and informally. I guess I was hoping for a magic way to quantify; a "number" that says, "see – we have a Project Complexity score of 4.29 so we have justified the need for 1.5 Analysts and .5 Help desk staff ..."

Have any magic?

- (Still) Budgeting

Dear Budgeting ...

Ah … you're looking for Function Point Analysis. Not for the faint of heart. I can't endorse it myself - every time I get close to it I find myself wondering, "Would the end-users recognize a function point when it comes up on the screen?"

I know practitioners who claim it allows them to estimate projects with high levels of precision.

My personal opinion: The best way to estimate projects is to break them into small chunks with go/no-go gates in between. That allows you to avoid estimating how long it will take to build a system before you've decided what has to go into it.

The waterfall version looks like this:

1. High and mid-level business process redesign that includes the role the system plays in the new process (this substitutes for "Requirements") and is more valuable. One of the deliverables is the Statement of Work and estimate for the next phase, which is …

2. Either product selection (if you're going to buy and integrate) or system specifications, along with a more detailed business process design. One of the deliverables is the Statement of Work and estimate for the next phase, which is …

3. Either construction or installation and integration. This very well might be a multi-phased effort depending on the scope of the redesign. One of the deliverables is the Statement of Work and estimate for the roll-out phase.

An alternative, which I increasingly like as I grow older and less energetic, is to assign one programmer/analyst to a business change effort. The P/A sits with the end-users, learns their job, helps them think about the next logical and easy-to-implement process improvement, and makes whatever system changes are necessary to make it possible. Then they do the next one.

It's business improvement through the removal of small annoyances. It can be surprisingly effective, and makes resource planning easy. What it doesn't let you do easily is predict when you'll reach the point of diminishing returns on the improvement effort so you can redeploy your P/A to the next one.

- Bob

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Posted by Bob Lewis on November 14, 2007 06:13 AM


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Wow! As someone with a foot in the IT world and a foot in the user world, your alternative method is the most logical, common sense strategy I have heard in a long time. I have lost count of the times I have had to try to translate a programmer's question so that the user had even the vaguest idea of what the question was asking.

Posted by: Muti-Hats at November 14, 2007 11:40 AM

You missed the user's question - sort of. He wanted to know how many people he needed to do a project of a given complexity. You appeared to answer the follow-up question - how long it will take those people. Does Function Point Analysis give you both - along with the assumptions about technical skill? If not, it doesn't do much good because people required is related to time allocated and knowledge base. I can do a project of almost any magnitude myself - if you can wait for me to learn the requisite technology and do it. (And I live long enough to see it through to the end ;-).

Posted by: Anonymous at November 14, 2007 12:52 PM

Here's what I don't understand. The client hasn't made their business case, and yet a project exists anyway! Justification, budgeting, approvals, all have been bypassed. Business theory says this shouldn't even be possible.

My point is, why doesn't the client get tagged with the Function Point Analysis? It consistently falls to the IT folks to do the hard work, and when the answer is "no--that's too expensive/too difficult/outside our mandate/the payback isn't there/fails strategic analysis", then IT is painted as the bad guy.

This is all said when I've lived through this stuff too. Of course the answer is politics, but that doesn't give you a plan of action.

So here's what I suggest: use a political comeback. Say, "IT supports the business. We'll sign on when you have made your business case, received budget approval, and completed a Function Point Analysis."

That last point alone will have them running to Wikipedia to figure out what an FPA is!

Posted by: Brian at November 15, 2007 07:33 AM

That still doesn't answer the question! The user has already bypassed the normal procedures and in a small company, that's SOP (standard operating procedure).

Here's what I would suggest. Take a look at Steve McConnell's books, especially Rapid Development and Code Complete. There's a section on project estimation in one of them (I don't remember which one, so go down to the bookstore to browse through them). He has a few rules of thumb for how to go about estimating project length and manpower. You might also want to take a look at Agile Software Development. They have some fairly good estimation practices that are very similar to what was used in a group that I used to work in at Honeywell. Scott Ambler's web site is a good starting point: http://www.ambysoft.com/

In a small company, politics is everything. Telling someone that they have to do A, B and C before you will talk to them will not make friends or get the work done. Also, most users do not understand IT well enough to do the analysis. Do the work with them and you will make a new friend/ally and teach them how to work with IT. Sit down with the user and explain that you need several hours of his time to go over the requirements before you do anything. Once you have enough detail, go back to the user with a project breakdown that shows estimated completion dates. Make sure the user identifies which are requirements are essential and which are nice-to-have.

There are no shortcuts in project estimation. Experience is usually the best guide, so if you have no experience in the area, talk to someone who has handled something similar. That's one good way to get started. That way you can go to the user and say "I talked to a friend of mine who did a project just like this and it took X weeks/months with Y programmers and they had these problems."

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