No matter how much you budget for IT development projects, you’re likely to have more demand than capacity. You’ll have different stakeholders within the organization competing for that software development capacity to accomplish their favorite projects. When you can’t do them all, how do you know which to choose? Which do you choose to do first?
For internal IT projects, while you can generally figure on spending about the same the next year as you did the past, there is still competition for the capability that budget is buying.
Empire Enterprises Chooses between Competing IT Projects
"We’ve allocated project teams for our strategic initiatives, and it looks like we’ve got some capacity for the more mundane projects in our queue. One team is finishing up a project this month, and another team will be available in a month or two after that."
"The Sales and Marketing department of the Motors and Headphones Division is complaining that their consumer sales website is too pedestrian to attract much attention. They feel they could sell more product direct to consumers if the website could accept promotional coupon codes. The discounts of the coupons would be less than the wholesale discount to retailers."
"The new Accounting Manager has noticed that the Accounts Payable system pays invoices in the order in which they’re entered into the system, rather than according to the due date of the invoice. This means that invoices are paid up to a month before they have to be, and we lose the interest on that money."
"The Contract Management office often feels overwhelmed by the processing and monitoring of bids let out to contracting companies. While they could hire more clerks, they feel that the root problem is that the Bid Monitoring system is clunky, outdated, and hard to use. They suggested streamlining that system to make it easier to avoid errors and oversights. If it were easier, they could avoid increasing the labor costs."
How do you decide which of these projects to take on next? There are lots of different ways you could make the decision.
Criteria for Choosing Which Project
"The Sales group has been very vocal about their needs. They call me every week. They keep emailing my manager."
"The Accounting office can calculate how much money we’re losing in interest. Their project has a guaranteed payoff."
"The Contract Management office has had their request in for almost a year now. We can’t keep putting them off. They’ve been waiting longer than anybody."
One common way of looking at this problem is in economic terms, recognizing the time value of money. If something has high value and can be done quickly with low effort, we certainly would rather do that before something else that has low value and high effort. That’s a clear choice. But what about the choice between low-hanging fruit, the low-value, low-effort projects, and the bigger initiatives that have higher value, but also take more effort? How do you choose between those alternatives?
Using the Cost of Delay to determine priority order of projects involves dividing by the project duration to calculate a weighting factor called CD3, or Cost of Delay Divided by Duration. The highest CD3 is generally scheduled first, an approach called Weighted Shortest Job First (WSJF). This prioritization is often done with relative estimates of cost and duration. Relative estimates are easier to produce, but should be used with caution. Nonlinearities in the relative estimates might juggle the outcomes.
