Many IT objectives relate to projects, whether it is new software design projects, hardware or software implementation projects, or website development projects. Unfortunately, IT projects have an especially poor track record for successful implementation. In fact, research indicates that up to 70 per cent of IT projects fail to deliver their objectives. According to the British Computer Society, only 16 per cent of IT projects – at best – can be considered truly successful. Failure in IT projects can be defined in the same way as failure in any other project: the project was not delivered on time or on budget, or it simply didn’t deliver what it was supposed to deliver.
In this article I look at three IT KPI examples to help you measure project performance: IT Project Schedule Variance (IT PSV), IT Project Cost Variance (IT PCV), and IT Project Earned Value (IT EV). As always, feel free to adapt or add to these IT KPIs to make them a better fit with your business objectives.
Let’s look at each of the KPI examples in turn:
IT Project Schedule Variance (IT PSV)
This IT KPI helps to answer the following question: ‘To what extent are our IT projects delivered on schedule?’ It is calculated as follows:
IT Project Schedule Variance (IT PSV) = Scheduled Completion Time (SCT) – Actual Completion Time (ACT)
Where ACT and SCT are measured in time intervals such as days or weeks.
Example: Your company is running three separate IT projects:
IT Project A: SCT = 105; ACT = 129
IT Project B: SCT = 25; ACT = 25
IT Project C: SCT = 40; ACT = 35
The IT PSV for each project is as follows:
IT PSV Project A = 105 – 129 = -24
IT PSV Project B = 25 – 25 = 0
IT PSV Project C = 40 – 35 = 5
If you want to calculate the total IT Project Schedule Variance (i.e. the schedule variance of all projects combined) you simply add the individual IT project variances for each separate IT project together for an actual number, or calculate a straight or weighted average variance score:
In this instance, total IT PSV = -19 (-24 + 0 + 5).
If the IT Project Schedule Variance is zero then the project was completed on time, as promised. If the variance is negative it shows an overrun and if the variance is positive it highlights completion ahead of the planned completion date. However, keep in mind that positive numbers may indicate poor planning or the IT project owner’s deliberate attempt to add too many contingency days into the project so they can look good when it’s finished ahead of time!
IT Project Cost Variance (IT PCV)
This IT KPI helps to answer: ‘To what extent are our IT projects delivered on budget?’ It is calculated as follows:
IT Project Cost Variance (IT PCV) = Scheduled Project Cost (SPC) – Actual Project Cost (APC)
Example: Going back to the three separate projects outlined above, the costs were:
IT Project A: SPC = $800,000, APC = $950,000
IT Project B: SPC = $150,000, APC = $152,000
IT Project C: SPC = $350,000, APC = $300,000
The IT PCV for each project is therefore:
IT Project A = -$150,000 ($800,000 – $950,000)
IT Project B = -$2,000 ($150,000 – $152,000)
IT Project C = $50,000 ($350,000 – $300,000)
To calculate the overall IT Project Cost Variance simply add the individual project variances for every separate IT project together for an actual number or calculate a straight or weighted average variance score:
In this instance, total IT PCV = -$102,000 (-$150,000 + -$2,000 + $50,000).
If the IT Project Cost Variance is zero then the project was completed on budget, as promised. If the variance is negative it shows an over spend and if the variance is positive it shows the project was delivered under budget. Like the IT PSV above, a positive number may indicate poor planning or the IT project owner’s deliberate attempt to inflate the estimated budget so they can look good when it’s finished under budget.
IT Project Earned Value (IT EV)
This IT KPI helps to answer: ‘To what extent are our IT projects making the desired progress?’ It is calculated as follows:
IT Earned Value (IT EV) = Budgeted Cost of Work Performed (BCWP) × per cent complete
- BCWP is the total budgeted costs for labour and resources for the project.
- Performance Level = Actual Cost of Work Performed (ACWP) / Earned Value (EV) x 100
- Actual Cost of Work Performed (ACWP) is the total amount in labour and resources that has been spent on the project to date.
Example: You have initiated an IT project with a total BCWP of $200,000. So far the ACWP (or what’s actually been spent so far) is $145,000. However, the project is only 30 per cent complete:
In this instance, the IT Earned Value (IT EV) = $60,000 ($200,000 × 30 per cent).
The Performance Level is therefore 241 ($145,000 / $60,000 x 100).
When using IT EV, remember that project costs rarely occur exactly and when as budgeted, so it’s perhaps best to treat this IT KPI more as an early warning indicator.
If you would like to see more examples of IT KPIs or metrics in other key business areas, why not browse our KPI library for more inspirations. Completely free to use, the library is designed to help you choose the right measures for you and your company.
As with any KPI examples, it is important to customise the key performance indicator to your business, and develop your own unique KPIs that are tied to your strategy.