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Table 7-5: Earned Value Formulas

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Rules of Thumb for Earned Value

Numbers

 Negative numbers for cost and schedule variance

indicate problems in those areas

 CPI and SPI less than 100% indicate problems

 Problems mean the project is costing more than

planned (over budget) or taking longer than

planned (behind schedule)

 The CPI can be used to calculate the estimate at

completion (EAC)—an estimate of what it will

cost to complete the project based on

performance to date; the budget at completion

(BAC) is the original total budget for the project

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Project Portfolio Management

 Many organizations collect and control an entire

suite of projects or investments as one set of

interrelated activities in a portfolio

 Five levels for project portfolio management

1. Put all your projects in one database
2. Prioritize the projects in your database
3. Divide your projects into two or three budgets based on type of investment
4. Automate the repository
5. Apply modern portfolio theory, including risk-return tools that map project risk on a curve

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Benefits of Portfolio Management

 Schlumberger saved $3 million in one year by

organizing 120 information technology projects

into a portfolio

 META Group research shows that:

 Organizations that evaluate information technology projects by what their business impacts are and what their potential business values will be implement projects that result in 25 percent more improvement to the bottom line  Business executives state that using project portfolio management allows managers to make decisions faster and with more confidence

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Using Software to Assist in Cost

Management

 Spreadsheets are a common tool for resource

planning, cost estimating, cost budgeting, and

cost control

 Many companies use more sophisticated and

centralized financial applications software for cost

information

 Project management software has many cost-

related features, especially enterprise PM

software

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Chapter Summary

 Project cost management is a traditionally weak

area of IT projects, and project managers must

work to improve their ability to deliver projects

within approved budgets

 Main processes include:

 Cost estimating  Cost budgeting  Cost control

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