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Pawel Brodzinski on Software Project Management

Alternative Cost

You could have heard that several times.

How much time it will take to complete that?

Two months. But we can’t complete that project in two months from now.

Why? Isn’t that just a matter of resources?

No it’s not. Whole core team is at the moment fully engaged in other project and we’d need at least two of them here.

Let’s take two of them then.

OK, but consider the other project as late by half of the year. Fair enough?

No. Can’t you find other people to do job?

Yes I can. I will have them in the office in 2-3 moths. And after another half of the year they’ll be ready to undertake the task…

Resources (what a “great” name for people) are almost never time independent. When you talk about a team, they probably have work planned for next several months. Sure, you can go, change their priorities but you should always consider alternative cost of doing that.

It’s not only people’s work which costs you money. There are other commitments also. Commitments your salespeople have already cashed in their income forecasts. Commitments you’d have to break if you took some people out to other tasks. With all consequences. Consider those broken commitments as your additional cost. Alternative cost of focusing on something else.

Now you have the full picture. And full cost of telling the customer it’ll be done in a couple of months.

By the way: you’re really lucky if your salespeople understand this concept. Personally I’m lucky enough to work with really reasonable sales team. They do understand.

in: project management

1 comment… add one

  • Ray White June 24, 2008, 6:05 am

    Nicely put! Sometimes I hate the word “resource” because it reduces human beings to machines that can crank out work on a scheduled basis. Some of my customers won’t even use the term.

    –ray

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