VBM Cost Benefit Analysis

VBM - Vision Based Methodology™

Activity 1: Selling the Idea

A Quick Approach to Cost-Benefit Analysis

At some point during the proposal of any development or enhancement project someone is finally bound to ask: "how much is all this going to cost?" Their next natural follow-up question is usually something like: "and what should we expect to get for the investment?" Determining how to respond to these questions at this point in the proposal process can be a little like answering a child when he or she asks: "how tall will I be?" You may have a general idea, but you never really know.

So how should the project champions and sponsors address these concerns without making promises they can not keep? Several approaches to making realistic cost and benefit estimates exist, but probably the most common is the utilization of the Project Justification Chain. This method emphasizes moving from high level goals to tangible cost predictions, utilizing the results of each activity along the chain as the basis for those remaining.

Goals -> Scope -> Estimates -> Costs -> Benefits -> Risks

Listed below is each individual component of the project justification chain:


Accumulate high-level general requirements through both formal and informal approaches such as interviews, meetings, and group focus sessions.

Categorize and prioritize these requirements in a manner which allows an initial executive decision to be made as to the broad direction and mandate which should be pursued.


Examine available existing systems or systems with similar characteristics in order to appreciate the size and scope of the effort.

Quantify as many of the requirements results as possible to facilitate the creation of accurate estimates.


Utilize high level estimating tools or generic workplans to determine the approximate man-hours required.

Compare these with past system building experiences to build confidence and insure reasonableness.


Build spreadsheets to calculate the high level costs based on the estimated team size, the project duration, the required man-hours, and the projected administrative expenses. Some of these costs may include:

Compare these results to the high level budget goals and modify the scope if necessary. Iterate through this process as many times as necessary in order to achieve a balance between the projected project cost and the resulting system scope.


Perform the following analysis to determine the key system benefits:


Perform the following analysis to determine the key project risks:

A High Level Look at the Budget

Nailing down a stringent budget and then actually sticking to it, has been the "Holy Grail" of project managers for years. This is ironic since the national data processing motto seems to be: On time and Under budget! Unfortunately, within some organizations from time to time the question begs to be asked: How much time and What budget? All too often, projects are launched "card blanche", with no real, formal cost plans or budgets ever being created. This can lead to wandering projects which explore every avenue and spend buckets of money.

A better approach is to knuckle down and put some costs on paper, then require the team to work toward financial as well as technical goals. Throughout the life of the project, whether the budget is being met or exceeded, at least some cost containment and control safeguards are in place.

itmWEB Group LLC, Copyright © 2013, All Rights Reserved