Chapter 7 Discussion Questions

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Discussion Questions 1-7 pg. 284

1. Discuss why many information technology professionals may overlook project cost management and how this might affect completing projects within budget.

Information technology projects have a poor track record in meeting budget goals. There is an average cost overrun for unsuccessful IT projects ranging from 180 to 56%. There is room for improvement in meeting cost goals for IT projects.

2. Explain some of the basic principles of cost management, such as profits, life cycle costs, tangible and intangible costs and benefits, direct and indirect costs, reserves, and so on.

Profits are revenues minus expenditures. To increase profits, a company can increase revenues, decrease expenses, or try to do both. Life cycle costing allows you to see a big-picture view of the cost of a project throughout its life cycle. This helps you develop an accurate projection of a project’s financial costs and benefits. Tangible costs or benefits are those costs or benefits that an organization can easily measure in dollars. Intangible costs or benefits are costs or benefits that are difficult to measure in monetary terms. Direct costs are costs that can be directly related to producing the products and services of the project. Indirect costs are costs that are not directly related to the products or services of the project, but are indirectly related to performing the project.

3. Give examples of when you would prepare rough order of magnitude (ROM), budgetary, and definitive cost estimates for an information technology project.

A ROM would be used very early in a project or even before a project is officially started. A budgetary estimated would be made at least two years into the future for a project. A definitive estimate would be used for making many purchasing decisions for which accurate estimates are required and for estimating final project costs.

4. Explain what happens during the process to determine the project budget....
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