Reducing the Fixed Costs in Project Management

Sudoku puzzles teach an important lesson in project management, that we almost forget- there are fixed costs associated with every project.  In Sudoku, there are different levels of complexity – from the very easy to the excruciatingly difficult ones.  While the time taken is correlated with difficulty, it is not linear.  No matter how easy the puzzle, it takes a finite amount of time to simply fill the puzzle.  This is also true for any project.  Initial project reviews, user-buy in, planning, resource allocation, project briefing, and de-briefing after the project is completed all have a “fixed cost” component to it. While it is impossible or even desirable to eliminate the fixed costs, it will be helpful to streamline the project management process to develop efficiencies. 

These guidelines help in reducing the fixed costs associated with projects:

1. Develop a simplified project management methodology (PM-Lite).

2.  Use simple workflows (automated workflows add more benefits) using a portal approach to oversee these “small projects”.

3.  If you outsource these projects, use a set of pre-screened and pre-credentialed vendors who are specifically suited for delivering small projects.  This is discussed in more detail in this blog.

4. Set limits on the number of deliverables (such as 5 to 7).

5.  Keep the distance between each deliverable small (time and technical relationship).

6.  Set simple success criteria such as 10% within each deliverable’s costs and schedule as green, between 10% and 25% as yellow, and more than 25% variance as red.

This simple guideline should not be construed as one shoe fits all.  For example, risk management, compatibility with enterprise architecture, adherence to standards, and other project management principles also apply, but they should not become onerous and increase the fixed costs of a project. 

A note on the Fixed Costs associated with Outsourcing

Following the ignominious collapse of several major outsourcing deals, IT services providers and customers alike have had to revise their approach to the entire outsourcing business.   The trend towards more small projects is gaining momentum, and it further reinforces the need for organizations to develop an IT governance methodology for small projects. SMB CIOs have an alternative solution in extending their resource capability using project-based sourcing.  Project-based sourcing is a convenient way to balance the need for reducing costs and maintaining core competence in-house.

While outsourcing makes good sense, organizations, particularly SMBs (Small to Mid-Sized Businesses), simply maintain status quo. Either they cite lack of expertise in managing off-shore engagements or perceived quality issues to not engage in off-shoring. To a large extent, their fears are justified. Tier-1 outsourcers seek outsourcing of entire functions – not the ideal method for SMBs which seek help for specific projects.

When outsourcing the projects, the overhead gets accented as procurement and sourcing decisions have their own components of fixed costs.   The lack of a well established Service Provider network who deliver project-based off-shore solutions adds to procurement costs, often negating the benefits of outsourcing. Fortunately, web-based brokerage solutions are emerging. These solutions are built on a solid pre-credentialed Service Provider network to ensure that lower cost is not negated by poor quality.  These web-based solutions benefit both the SMB as well as the Service Provider.  SMBs benefit from low administrative costs and accelerated contracting.  They also benefit from selecting a vendor from a pre-credentialed network.  Many Tier-2 and Tier-3 off-shore Service Providers have the ability to provide niche IT solutions that match SMB project needs.


3 Responses to Reducing the Fixed Costs in Project Management

  1. PM Hut says:

    This is an excellent Project Management article and I would love to republish it on PM Hut. Please either email me or contact me through the “Contact Us” form on the PM Hut site in case you’re OK with this.

    • Subbu says:

      My apologies for the delayed response. Please publish them. As a CIO I am committed to helping others with what little I know.

  2. […] a model component that … Read More RECOMMENDED BOOKS REVIEWS AND OPINIONS Reducing the Fixed Costs in Project Management Sudoku puzzles teach an important lesson in project management, that we almost forget- there […]

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