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Cost Management-Revised SM
Cost Management-Revised SM
Cost Management-Revised SM
and Cost
Management
Prof: Shaukat Mulla
Learning Objectives
Understand the importance of cost
management
Explain basic cost management principles,
concepts, and terms
Describe the process of planning cost
management
Capital Costs
Operating Costs
Time Value of Money
10
11
12
13
Types of Costs
Capital Costs
One time costs
Could be repeated after some time
Example of Capital Costs
Operating Costs
Revenues
Growth based on service
Price Erosion
14
15
16
Estimating Costs
Project managers must take cost estimates
seriously if they want to complete projects within
budget constraints
Its important to know the types of cost estimates,
how to prepare cost estimates, and typical
problems associated with IT cost estimates
17
18
19
20
21
22
23
Controlling Costs
24
25
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
Plan cost management
Estimate costs
Determine the budget
Control costs
26
25,000
11,500
9,000
2.1 Staff
16,000
16,480
16,974
16,974
3,200
3,200
5,000
4,250
2.3 Training
2,000
1,000
1,000
21,200
20,680
22,974
21,224
86,079
46,200
32,180
31,974
21,224
131,579
4.1 # of Customers
100
125
150
163
500
425
340
50,000
53,125
51,000
3 Total
- 45,500
4 Revenue
154,125
28
Date:
Dec 20,
2013
8.00%
Year
0
1
2
3Total
46,200 32,180 31,974 21,224 131,578
1.00
0.93
0.86
0.79
46,200 29,927 27,498 16,767
120,392
0 50,000 53,125 51,000
1.00
0.93
0.86
0.79
0 46,500 45,688 40,290
(46,200) 16,573 18,190
(46,200) (29,627) (11,438)
23,523
12,086
154,125
132,478
12,086
10%
Payback in Year 3
Assumptions
Enter assumptions here
Subs increasing at good rate
Revenue erosion in year 3
NPV
29
Acknowledgements
Information Technology Project Management,
Seventh Edition