Introduction:

It’s been proven that most of the IT projects fails due to the wrong cost estimations
and control over the project. The project cost management processes ensures that every cost
within the project are accurately estimated, recorded and tracked. So to achieve greater ROI
from IT projects, cost cutting is done in their projects. But it should be noted that it also has a
negative impact on the project which may lead to project failure. For example the most
important and largest projects in the companies was a new customer care system which is
been implemented on a commercial CRM platform. The project has been out sourced to a
consulting company for implementation as a process of cost cutting and the management
believes the green status reports they received from the consulting company on
implementation. The system broke when it went on line. It leads to a biggest failure and had
law suits because of the reason that the customers cannot also shift to competitors because of
the regulatory violations. It shows that how to not cut costs in a down turn.
It’s been made mandate to allocate resources only to the projects which are most
critical because of the current economic downturn which has resulted in IT project budget
contractions. This paper outlines common reactions and describes problems generated by
tactical reactions to falling budgets which are not uncommon. As an alternative to cost
cutting this paper also gives some suggestion sand recommendations on techniques such as
Agile and Lean framework. These techniques helps in achieving maximized ROI of the
undertaken projects, avoids costly project failures and also to have portfolio of adaptable and
flexible projects.
Mistaken cost cutting tactics in an economic downturn:
Usual response to an economic downturn commonly includes outsourcing and off shoring, IT
functions centralization into an IT service bureau and budget cuts across the board. These
budget savings can be seen initially by doing all the above tactics mentioned above. But later
each of the tactics proves to be short sighted and actually highly damaging.
Ship it offshore:
“Ship it offshore” will help in huge labour savings which is initially so attractive and it’s been
found that utility projects and non core activities can eventually achieve cost reduction
through outsourcing. However in the development of core application projects and in
customer facing system projects the total cost is not reduced at all with off shoring. Because
Higher levels of waste and rework will happen due to the offshore decision. It happens due to
the wrongly implemented features and defects which were not usable. Anyways it requires
extra more supervision, feedbacks and communications to mitigate all these issues which
again costs the project. More detailed information communication is needed for the offshore
team to proceed than were needed previously. The project ROI and delivery time are hurt
further by the erected impediments to quickly responding to our feedback and market
changes by the outsourcing contracts. These factors combining affect the total value delivered
and increase costs and most of them are “soft” costs. Having more trust on the success of off
shore initiatives it is also to be aware of the hard way that it is expensive and limited to only
noncore project activities which don’t affect the market share. It will help to avoid shut
downs of projects with high expectations.
Bottom 10 or Across the Board:
As a part of the company’s response to the economic crisis CFO might asks for 10% or
greater cut in the IT budget. There are stake holders passionate about the project preservation
once it is approved and in process. So it is difficult to cut and avoid these confrontations with
the customers. In this situations IT management are left with two choices. Layoff the bottom
10 % of staff or cut all the budgets and initiatives equally across all divisions and projects.
Some projects might have alternates of both. As the result the remaining employees are asked
implicitly or explicitly to work for longer hours to address the workload. Over the time the
outcome of the project goes plummet and eventually it gives a wrong perception to the
customers that IT delivers projects more irregularly and leisurely. So it can be avoided by
clarifying customer’s priorities among their projects to have good venture tradeoffs. They
claim that apt quality and a sustainable tempo are non-negotiable constants.
As a part of the company’s response to the economic crisis CFO might asks for 10% or
greater cut in the IT budget. There are stake holders passionate about the project preservation
once it is approved and in process. So it is difficult to cut and avoid these confrontations with
the customers. In this situations IT management are left with two choices. Layoff the bottom
10 % of staff or cut all the budgets and initiatives equally across all divisions and projects.
Some projects might have alternates of both. As the result the remaining employees are asked
implicitly or explicitly to work for longer hours to address the workload. Over the time the
outcome of the project goes plummet and eventually it gives a wrong perception to the
customers that IT delivers projects more irregularly and leisurely. So it can be avoided by
clarifying customer’s priorities among their projects to have good venture tradeoffs. They
claim that apt quality and a sustainable tempo are non-negotiable constants.
Centralize to IT into a “Service Bureau” model:
This service bureau model is another tactic approach to tackle the shrinking budgets and
excess demand. Control policies are changes in rigid and burdensome projects. This
operational way is used to use change requests to generate extra project budget. It is also used
conveniently to bale for more delays and costs on the customers who is changes constantly.
This restricts and limits customer’s feedback and makes projects less responsive and
adaptable to market forces. Separation between customers and IT personnel increases due to
IT centralization. It impacts in the loss of alignment with customer goals and loss of
knowledge of the customer’s domain and requirements.
It’s been made mandate to allocate resources only to the projects which are most
critical because of the current economic downturn which has resulted in IT project budget
contractions. This paper outlines common reactions and describes problems generated by
tactical reactions to falling budgets which are not uncommon. As an alternative to cost
cutting this paper also gives some suggestion sand recommendations on techniques such as
Agile and Lean framework. These techniques helps in achieving maximized ROI of the
undertaken projects, avoids costly project failures and also to have portfolio of adaptable and
flexible projects.
However in the development of core application projects and in customer facing system
projects the total cost is not reduced at all with off shoring. Because
Higher levels of waste and rework will happen due to the offshore decision. It happens due to
the wrongly implemented features and defects which were not usable. Anyways it requires
extra more supervision, feedbacks and communications to mitigate all these issues which
again costs the project. More detailed information communication is needed for the offshore
team to proceed than were needed previously. The project ROI and delivery time are hurt
further by the erected impediments to quickly responding to our feedback and market
changes by the outsourcing contracts. These factors combining affect the total value delivered
and increase costs and most of them are “soft” costs. Having more trust on the success of off
shore initiatives it is also to be aware of the hard way that it is expensive and limited to only
noncore project activities which don’t affect the market share. It will help to avoid shut
downs of projects with high expectations.

Conclusion:
CIO’s are under more pressure to cut the budget costs than ever when the budgets are been
slashed everywhere. So the project managers uses some tactics to cut the costs down the
project which don’t work and also proven to cause more damage to the organization. In
contrast, the uses and effectiveness of agile and lean principles have also been discussed to
increase the value delivery paralleled with cost cutting in a way building strength and
innovation. Information technology can help business respond and adapt to the market speed,
innovation and gives competitiveness amongst competitors with the help of Agile and Lean
techniques. Some of the recommendations may beyond CIO’s control and be hard to
implement but the company in strategic value delivered per dollar consumed by establishing
agile portfolio management process. So cost cutting in the IT project cost management should
take these factors in mind during budget allocation and implementation. Information
technology can help business respond and adapt to the market speed, innovation and gives
competitiveness amongst competitors with the help of Agile and Lean techniques. Some of
the recommendations may beyond CIO’s control and be hard to implement but the company
in strategic value delivered per dollar consumed by establishing agile portfolio management
process. So cost cutting in the IT project cost management should take these factors in mind
during budget allocation and implementation.