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Module 4

The document outlines the budgeting process for IT projects, including defining scope, estimating costs, and tracking expenses. It also discusses Net Present Value and Break Even Analysis, highlighting their importance in assessing financial viability and investment decisions. Challenges in cost identification and external factors affecting project outcomes are noted.

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Esha Rane
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28 views8 pages

Module 4

The document outlines the budgeting process for IT projects, including defining scope, estimating costs, and tracking expenses. It also discusses Net Present Value and Break Even Analysis, highlighting their importance in assessing financial viability and investment decisions. Challenges in cost identification and external factors affecting project outcomes are noted.

Uploaded by

Esha Rane
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Budget & Timeline

Dr. Anup Palsokar


Professor & Head – Computer Applications
SIES College of Management Studies

References : 1) MIS : Jaiaswal & Mittal


Budgeting for an IT Project
 Define the scope
 Identify resource requirements
 Estimate cost for each resource
 Categorise costs
 Develop Budget breakdown structure
 Allocate costs over time
 Plan Contingencies
Budgeting for an IT Project cont….

 Review and refine the budget


 Approve Budget
 Track and monitor expenses
 Analyse variances and take corrective actions
 Update and revise budget (if required)
2. Net Present Value

 Expected Cash generation - Expected cash


Investments
 Issues
 Not viable for IT projects as the effect is seen in a
range of 3-4 years
 Cash generation depends upon business
environment
 Changes in cost and revenue is difficult to predict.
3. Break Even Analysis
 Helps to determine the point at which your IT project's
total revenue (or benefits) equals its total costs
 To perform BEA we need to identify the following
 Fixed Costs : Developmental, Infrastructure, personnel
 Variable costs : Services, Transactions, Marketing & Sales
 Revenue : Income from sales, service and transaction
3. Break Even Analysis cont….
 BEP in terms of Unit
 Break -Even Point (Units) = Total Fixed Costs / (Selling Price Per Unit
−Variable Cost Per Unit)
 BEP in terms of revenue
 Break -Even Point (Revenue) = Total Fixed Costs / ( 1 – (Total Variable Cost /
Total Revenue))
3. Break Even Analysis cont….
 Advantages
 Helps determine the financial viability
 Pricing strategy
 Cost management
 Investment decisions
 Risk assessment
 Performance monitoring
3. Break Even Analysis cont….
 Challenges
 Issues in identifying variable costs
 Development Cycle time (Long / uncertain)
 Technological Changes
 Market Conditions
 Policy Changes
 Competition

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