The ultimate Guide for IT-Project Management

Neither controllers nor digital decision-makers are happy when they hear the word "IT project". Too often, they are complex, expensive, lengthy, and end up running late and over budget. According to a notorious survey by McKinsey and the University of Oxford, 17% of IT projects end so disastrously that they endanger the company's existence. Not much has changed since then - in some areas, up to 85% of tech projects fail. Not long ago, Lidl and SAP failed with a gigantic project. The sum written off: 500 million euros. And yet, the need for digital solutions is greater than ever.

In this guide, we show how to successfully implement an IT project, give concrete tips on the project process and how to save capacity with good planning and the smart integration of external service providers.

What is an IT Project?

The term IT project covers a broad spectrum. It includes the development of software and desktop or mobile apps, the implementation and management of databases, the implementation of ERP and CRM systems, the setup, repair and configuration of hardware as well as web development and the development of web applications.

A constant flow of new technologies and standards ensures that IT projects are becoming increasingly complex. Nevertheless, there are good reasons for implementing them. Small and medium-sized companies in particular are feeling the pressure of digitization today more than ever. The Digitization Index shows that while the prevalence of digital processes is increasing. At the same time, however, only slightly more than half of SMEs have a digital business model. The hesitant approach to IT projects means that digital potential is lying fallow.

When is an IT project worthwhile?

Typical IT projects in the corporate sector are, for example, the automation of processes, the implementation of a customer portal to digitize customer relationships or the expansion of the business model, for example with a rental platform. These solutions are attractive from a company's point of view because they promise, for example, higher sales and streamlined processes. Implementing them, however, is another matter.

To find out whether a project is realistic, it can make sense to conduct a feasibility study in advance. The first step is to determine what problem needs to be solved. This could be the need to enable sales representatives to access customer and contract data on the move.

On this basis, possible solutions are sought and discussions held on how realistic their respective implementation is. For a largely analog mid-sized company with a few sales representatives, the solution will look different from that of a large corporation with its own development team. At the end of this process, the solution is the one that can be implemented with the available budget and personnel - and the least risk.

The digital game changer: IT project management

The elementary characteristic of a project is that it is completed in time. To keep it that way, project management is needed. The IT project manager (ITPM for short) ensures that the IT project moves forward and does not get out of hand.

The tasks of IT project management include:

An IT project manager must possess organizational hard skills and leadership qualities while having sufficient technological know-how to understand the technical intricacies of the project. He or she also acts as the interface to all internal and external stakeholders.

Excursus for large companies: Enterprise Project Management (EPM)

Depending on the size, the requirements for project management in the IT area also change. For large companies - or those with many simultaneous IT projects - the special form of Enterprise Project Management (EPM) has become established.

In large companies, individual IT projects are rarely implemented. Here, there are usually numerous digital construction sites that are worked on in parallel and by several teams. EPM is designed to ensure that all ongoing projects function effectively. For example, it coordinates the exchange of expertise between teams and optimizes processes at a higher level.

Managing interests: These stakeholders exist in an IT project

IT project management is entrusted with many different tasks. In addition to the technical and organizational management of the project, this also includes communicating with and coordinating the diverse interests of all stakeholders - and prioritizing them. For example, the end users are important for planning features, whereas the project owner is important for the actual implementation. Depending on the structure of the project team, this role may also fall within the remit of the product owner.

These roles and positions exist in an IT project:

Not all roles are represented in every IT project. Exactly what the project team looks like depends on the product being developed, the company, and the available staff, among other things. Most roles in an IT project can be filled both internally and externally.

Methods of Project Management

Before the project starts, the approach must be defined. There are numerous methods for this, which are aimed at different project types and team sizes. Which one is used depends on the company-wide preference or is decided from project to project.

We will take a closer look at the two most common basic methodological models: waterfall project management on the one hand and agile project management (Agile for short) on the other.

Better than its reputation: waterfall

The waterfall model is the "classic" method for implementing IT projects. The process is divided into successive steps. One development phase is completed before moving on to the next. Between the phases, the current project status is approved for quality assurance purposes.

In the waterfall method, the entire development is planned in detail at the beginning of the project. The actual implementation then follows the predefined plan. This makes the IT project easy to plan and predict. Coordination and communication are less costly and this methodology is ideal for large companies that need to manage the interests of many stakeholders.

For the higher degree of predictability, one accepts less flexibility. Once the waterfall process has started, adjustments, e.g. additional features, are not easy to implement.

Agile Project Management

Agile IT project management, often simply called Agile, is in many ways the antithesis of the waterfall method. Agile projects are characterized by the fact that they are iterative and adaptive - they can be adjusted at short notice and very flexibly. At the core of this is the division into sprints. At the beginning of the time segments, which usually cover a few weeks, it is determined what is to be achieved in the next sprint.

In agile projects, the customer - internal or external - is heavily involved in the development process. The customer side works directly with the project team and defines, among other things, what the result of the next sprint should be. On the one hand, this enables close coordination and a high degree of control. On the other hand, not all customers have the desire or capacity for this high level of active participation.

Another distinctive feature of Agile is the team composition. In Scrum, the best-known type of Agile project management, the Scrum Master performs the duties of the IT PM. In addition, since upfront costing is not counted as part of the actual project, there are no analysts on Scrum project teams.

Agile projects do not have clearly predefined interim goals and progress cannot be checked as easily as in waterfall projects. In large companies with extensive IT projects, agile methods are therefore rarely used.

This is how an IT project works

There are numerous methods for project management: IPMA, PMBOK, PRINCE2, etc. Although they differ at the detailed level, they can all ultimately be divided into similar phases. These five phases can also be applied to IT projects.

At the beginning, there is the initiation phase, in which the project is set up. Subsequently, the project planning is made and prototypes are created. A special feature of software and app development is solution design, which defines the functions of the product. 

Only then the actual implementation begins. With the deployment of the first executable version (the MVP), the project is about to be completed.

1) Initiation, Ideation, Definition

In the first project phase, it is defined which result, or which product, should be at the end of the project ("Output & Outcome"). At this point, it is already clear why the project should be carried out. The basis for this is, for example, a feasibility study.

In this phase, the necessary resources for the project are released and it is determined how the finished product will be managed after the project is completed. This can be done by an internal team or handed over to external service providers. Project management still plays a subordinate role here.

2) Prototyping & Planning

Now the first visible results are achieved. Prototypes are created and designs developed with the help of wireframes and click dummies. In this phase, initial customer feedback can also be gathered, for example in interviews and focus groups.

The task of project management is to define responsibilities, plan resources and teams, and create the project plan. At this point, the ITPM should have a complete picture of the project: organizational and technical requirements, as well as possible risks (e.g., potential for delays). This is where the intermediate goals, milestones, for the project period are defined.

3) Solution Design

In Solution Design, the concrete IT solution is developed. This task is performed by a solution architect. Here, the requirements of the new development are translated into a concrete product.

The existing IT structure with all relevant legacy systems must be taken into account. A new project can be a good occasion to put the existing systems to the test and to tackle a renewal of the legacy systems. Outdated or incompatible systems can complicate development and slow down processes in day-to-day operations.

Project management has the responsibility to have defined and agreed on as many framework parameters as possible in advance so that the highly specialized solution architects can take care of the solution design as smoothly as possible.

4) Build/ Implementation

In the fourth project phase, project managers and product owners come into play. This is where the actual implementation of the IT solution takes place. Communication with the development team and checking the schedule and budget are the PM's core tasks.

It makes sense to communicate too much rather than too little. A regular exchange, for example in the form of Dailies, reduces organizational hurdles and makes potential sources of error quickly visible and simplifies their resolution.

5) Launch & Project Completion

The deployment of the first executable version, the MVP, heralds the final phase of the project. On this basis, errors and bugs are eliminated. At the end, the finished IT solution is handed over, for example to the internal support team.

When the project is completed, it makes sense to hold a final retrospective. The goal is to record what went well and what went badly, what insights were gained and what lessons can be learned for future projects.

This keeps the project on time and on budget

IT projects tend to get out of hand - the bigger the project, the more so. Ten years ago, according to a survey by McKinsey and the University of Oxford, large IT projects were on average 45% more expensive than planned.

In the meantime, of course, a lot has happened, especially on the technological side. However, only slightly more than half of projects are still completed on time and within budget. Almost one in eight IT projects fails - and that doesn't include projects that need to be reworked.

IT projects stand and fall with their planning. The better the project is thought through in advance and the more contingencies are considered and covered, the smoother its implementation will run. This makes the project a success instead of a waste of time and money.

Budget management in IT projects

According to PMI, only 61% of projects end within budget. To avoid unpleasant surprises, good preparation is particularly important in budget planning. The better the overview of the necessary resources, required expertise and involved stakeholders, the better the budgetary effort can be planned.

It may even make sense to take a step away from budget management and focus more on the stakeholders involved, because stakeholder management is essential right from the initiation phase. Internal support for the project is crucial to its success.

By involving all key stakeholders in the project in advance, IT project management can align expectations with the available budget at an early stage. Communication hurdles can be identified and resolved at an early stage.

In the course of the project, this minimizes misunderstandings that can lead to costly realignments, for example.

Regular interim goals help to keep track of the budget spent in relation to the progress of the project. To this end, for example, a retrospective is scheduled when 25%, 50% and 75% of the estimated budget has been spent.

How to keep your IT projects on time

In terms of time management, IT projects perform even worse than budget management, according to PMI. Only 55% of projects are completed within the planned time frame. Here, too, it is important to know as precisely as possible before the start of the project what tasks need to be mastered, what expertise is required, and who the stakeholders involved are.

One time factor that is often underestimated is communication. Both internally with the project team and externally with the customer or other stakeholders - in order for the project to move forward purposefully, it is important to be in constant exchange with everyone involved. This is exhausting and time-consuming, but it helps to identify and solve problems and misunderstandings at an early stage.

The composition of the project team also has a direct influence on the time required. Developers with a lot of experience are usually fast and achieve good results directly - but are also expensive and sought-after professionals. Young, inexperienced developers are cheaper, but usually at the expense of quality and time. With a primarily inexperienced team, additional review and testing loops must be scheduled. 

If the required expertise or experience is not available internally, it can be brought in from outside. IT freelancers and external service providers are an integral part of the repertoire of modern IT projects.

External service providers in IT projects

Implementing an IT project is no easy task. If no relevant IT is available and the solution is to be more than just a no-code app, external service providers come into play.

A developer team that is too small or inexperienced means longer development time and can compromise quality. External expertise can help develop a better solution, but it also increases costs. The integral task of project management is to balance cost, time and quality.

When Outsourcing pays off

External service providers have many advantages from the company's point of view. The biggest is the tangible expertise they can bring to the IT project. It also makes IT spending easier to plan, as it turns fixed costs (for maintaining an in-house team) into variable costs.

The involvement of agencies and the like is now well established, and the benefits of the additional IT expertise usually outweigh the high costs. The internal team also benefits from experienced contact and exchange partners, for example.

For the development of web applications there is another solution. Freelancers and agencies using ROQ already know the tech stack used and need only a very short training period. This makes better use of the external service provider's time - and reduces development costs.

Successfully managing external service providers

In order for the cooperation with external service providers to be a success, good planning is crucial. It should be clarified in advance what type of project is to be implemented and the project plan drawn up. On this basis, the ITPM has a good feel for which positions should be filled internally and which should be brought in externally. Depending on the scope of the project, entire project areas can also be handed over, for example to an agency that has a specialized development team.

Regular exchange is the key to smooth collaboration. Today, communication with freelancers and external service providers is largely decentralized and digital. For example, the agency involved is located in a different city, while the freelance solution architect even works in a different country and a different time zone. Short dailies and regular jour fixes ensure that communication with all parties involved is nevertheless successful.

Finally, it is important that business-critical knowledge is not permanently outsourced to external team members. What sounds banal can quickly become a problem if, for example, the only database specialist was on the side of the recently replaced agency. The fewer external parties come into contact with customer and company data, the lower the risk of leaks and problems with the GDPR.

With the right preparation to successful IT projects

Many IT projects fail or become more expensive and protracted than planned. This does not have to be the case. Often, hurdles and delays can be identified and solved in advance with smart planning.

Good pre-planning and open stakeholder communication is the key to project success. When this basis is right, project management skills come into their own - and the project becomes a success.