How to spot profitability leaks and cost overruns in IT projects before your peers – and then fix them.

Part 3 of a 3-part series

In the second article in this series [See the August 3, 2005, issue of The Business Edge], I discussed how to improve estimates through the technique of using time tracking data. In addition to improving estimation capability, time tracking data can make your company more nimble – and more profitable. How does it do this?

If you have real-time, accurate, per-project cost data available to your entire management team at all times, it provides a built-in alert system that tells you if your project is broken. What is a broken project?

Consider Example #2 in my last article. If you’ve concluded using the equation that the project you are working on will take 1,000 person-hours to complete, and you’ve spent 500 of those hours so far, how far along should you be? You should be 50 percent done, right? But what if your timesheet system shows that you’re actually only 17 percent done? You have a problem.

Now that you’ve detected the problem much earlier than you otherwise would have, you can take corrective action. You’ve discovered a hidden problem earlier than your peer managers who are not tracking time could have. Now, you can fix the problem more quickly and cheaply.

But, are out-of-control projects really common problems in IT shops?

Survey Says: You Have Out-of-Control Projects
You have probably heard the statistic that 70 percent of IT projects are out of control, over budget or broken. Our surveys disagree. Now, I know I’ve seen this statistic show up in several articles. Intuitively, that number doesn’t sound unrealistic to me, even though it is a frustratingly bad number.

If you have 1,000 people doing hundreds of projects with a $100 million budget, and 12 percent of their work is a waste of time, that’s $12 million a year wasted, right? That’s bad. It’s not nearly as bad, however, as the 70 percent failure rate other companies are experiencing based on the above statistic. Somewhere between 12 and 70 percent of IT workers are wasting money, time – even their life’s work. Life is short enough. Let’s not waste it, right?

Sometimes, when you find out a project is broken, you can do something about it – like cancel it, put different resources on it, or change the scope. But sometimes you can’t. In our customers’ cases, they could fix the problem 55 percent of the time. Fortunately, 55 percent of our customers’ projects were rescued, primarily because they had accurate cost data – accurate time data - which allowed them to find the problem early.

It is worth a lot to have this capability. You are in a position to deal with cultural issues that inevitably follow; you can be more confident you are tracking the right things; and that time sheets to track people’s time are not onerous to complete.

The Times: They Are a Changin’
About 100 years ago, 98 percent of the U.S. population was made up of people who farmed for a living. About 50 years ago, the country advanced, and most people worked in a factory. Today, products are made by robots or work is shipped out to workers overseas.

What have we become? What do we produce here? We’ve become knowledge workers. Even the Americans in factories today are knowledge workers. They don’t twist bolts; they teach robots how to twist the bolts.

However, with all this advancement, we’ve forgotten how to maintain knowledge of our costs. Farmers knew their costs. Factory owners know their costs; at least the cost of the materials. The desk you’re sitting at has a materials cost that’s known to the penny by an MRP system somewhere. Before technology, costs were calculated quite accurately on paper by bookkeepers.

Is it okay for companies who work on hundreds of projects simultaneously to have incomplete calculations? Is it okay for knowledge workers to be endlessly banging away at projects that they shouldn’t be working on, due only to ignorance of the costs and profitability of those projects? Of course it’s not okay. The highly paid experts in your company shouldn’t be wasting their time. And there are more of those “experts” than you think.

So web-based timesheets solutions, either hosted on the Internet, or installed on your site, can provide you with an early warning system to detect out of control projects early, and take action. And, as a bonus, you’ll find out who your most valuable people are.

Finding Hidden Experts in Your Company
In my company, we find experts via a project code to which people bill their time called helping development and another called helping professional services.

This lets us figure out if certain projects in certain departments, such as in our development or professional services are more costly than we might initially think. If these “helping” numbers get really large, we drill down to see what’s going on; and there is no question about how profitable we are.

It may turn out that we have an expert in another department who we should be aware of – so we can reward him or her and reduce the need to build up expertise in the target department.

Follow the Feet
Finding the experts is similar to studies of office foot traffic. The management consultancy group McKinsey once did a study of foot paths. In a company’s office, they watched how many times each person was visited every day. By doing this, they could see who is a hub in the company, and who is not. Who is the person everyone goes to with a question?

If the company was downsizing, they’d never fire the people who were hubs in the company. Those are the people who are most important to the company’s success. But these days, people never get out of their chairs. They use e-mail and the phone, so footpath analysis no longer works.

The good news is that time tracking, when properly configured, implemented and rolled out, can provide footpath-like data for you, too. Time tracking uncovers hidden experts just like footpaths research did long ago.

About the Author
Curt Finch is the CEO of Journyx, a provider of web-based software located in Austin, Texas, that automates billing, payroll and project management by tracking time, expenses and mileage. Curt can be reached at curt@journyx.com.