Cost

8/10 public-sector IT projects take longer than expected, compared with just more than half of projects in the private sector. Cost overruns occur in nearly 1/2 public-sector projects, as opposed to about 1/3 in the private sector.

1. Definitions

1. Cost savings are reduction in costs or expenses.
2. Cost avoidance is preventing/avoiding future costs/expenses that would have been incurred if no action was taken.
3. So cost savings reduces current or existing costs, while cost avoidance prevents future costs from occurring in the first place.
4. Total addressable market (TAM) is total revenue opportunity available to a product or service with 100% market share, i.e., max market demand and revenue potential.
5. Capital Expenditure (CAPEX) is funds used by a company to acquire, upgrade, or maintain fixed assets such as buildings, equipment, machinery, or land. These are major investments that are capitalized on the balance sheet and depreciated over their useful life.
6. Operating Expenditure (OPEX) is ongoing costs incurred by a company for its day-to-day operations and maintaining its existing facilities and equipment. These expenses are recorded on the income statement and are fully tax-deductible for the period in which they are incurred. Examples of OPEX include rent, utilities, salaries, and supplies.

2. Goals

1. We strive to be as lean and cheap as possible.
2. Money we spend must be worth the ROI.
3. Money spent must solve real problems.

3. Questions

1. What is the TAM?
2. What are the trade-offs across cost, value, performance, security?
3. More costs to mitigate what additional risks?
4. Why would it take X man months?
5. How much of the cost is attributed to compliance, admin, overheads?
6. Is this a $40M or a $400k problem
7. How much cost savings, cost avoidance, manpower savings, manpower productivity are we going to achieve?
8. How will we measure savings, avoidance, productivity benefits?
9. Why are we satisfied with X times savings/productivity gains?
10. Why do we need a project management or admin wrapper fee that contributes nothing to the product?
11. What are the CAPEX and OPEX for X?

4. Dealbreakers

1. People say "Sounds about right" when talking about cost items & full-time engineers (no shit, Sherlock).
2. $100M is ok because the previous project was $90M and after factoring in inflation it sounds about right.
3. The TAM is negligible and users are sticking around because of compliance reasons.
4. We need to build ourselves because we have unique requirements
5. We must develop our own product because we need to continue to serve past requirements.
6. We get the ultimate versions of licenses because we might need it in future.
7. A lot of cost is needed to almost completely mitigate X cyber security risk, but nevermind it was a theoretical risk in the first place.
8. We spend $10M over several years to reduce 1 headcount (might as well spend $150K on that headcount and save $9.5M).
9. Might as well spend it since the FY is closing.
10. Everyone dumps their requirements onto a project to get funding.
11. Staffers say they need to find a new justification to get funding for 2.0 of their project.

5. Suggestions

1. Treat every (realistically) $10K you spend as if it's your own.
2. Start projects you would want to invest in personally.
3. There's no shame to you or your team to kill projects.
4. Get opinions from people who know their stuff - nothing worse than pretending to approve when you've no idea.
5. Buy the cheapest option of anything and use it to the limits before you upgrade (you'd do the same for your own laptop anyway, who starts off with an i9?)
6. Developer resources are the most precious they're not your pptx/docx machines!