Cost Management in IT Projects: A Mobile App Development Example
Suppose a software development project is undertaken to develop a new mobile app. The project has a budget of $500,000 and an estimated duration of six months. The project is divided into several phases, including requirements gathering, design, development, testing, and deployment. Each phase has its own estimated cost, which needs to be included in the overall project budget.
Here is a breakdown of the estimated costs for each phase:
- Requirements gathering: $50,000
- Design: $100,000
- Development: $250,000
- Testing: $75,000
- Deployment: $25,000
The total estimated cost of the project is $500,000, which matches the allocated budget. However, as the project progresses, the actual cost of each phase may vary from the estimated cost. For example, if the design phase takes longer than expected due to changes in requirements, the project’s overall cost will increase.
To monitor the project’s cost, a project manager needs to track the actual costs incurred during each phase and compare them with the estimated costs. This can be done using tools like a cost tracking spreadsheet or a project management software that provides cost management functionality.
If the actual costs exceed the estimated costs, the project manager needs to take corrective actions to bring the project back on track, such as reducing scope, renegotiating contracts, or increasing the project budget. The project manager also needs to manage the project’s cash flow to ensure that the project has sufficient financial resources to complete each phase on time. This may involve negotiating payment terms with vendors, managing accounts payable and receivable, and forecasting cash flow for each period.
In conclusion, costing is a critical component of project management in the IT industry that involves estimating, budgeting, and controlling the financial resources needed to complete a project. By monitoring the project’s costs and cash flow, project managers can ensure that the project is completed within the allocated budget and timeframe.