When MarTech project costs get out of control
When your MarTech projects start to spiral out of control in terms of costs, it often becomes a situation that is difficult to rectify. The accumulation of negative news and the challenges faced in project management can turn into a nightmare. Over the years, our consultants have identified a set of factors that contribute to cost overruns. It is crucial to create awareness at every stage of the project.
1. Escalating production costs
To estimate the production costs of a project, it is essential to consider the following budgets:
- Human resources for development and support (e.g., project management, legal support)
- Costs of software, licenses, or installation of production tools
- Agency costs (if external assistance is required)
When it comes to MarTech projects, direct costs can easily spiral out of control. This is often the result of underestimating business complexities and technical challenges. For instance, if the final requirements estimate is made during the pitch or initial briefing stage, cost slippage is almost inevitable.
Here’s our advice: According to various studies, actual project costs tend to be, on average, 25% higher than the initial proposal. It is advisable to estimate the necessary resources at the beginning, considering this level of flexibility. The final estimate can only be made once the specifications have been validated.
2. Underestimating project management costs
The success of a project is often closely tied to the quality of its management. Apart from the technical and interpersonal skills of the Project Leader, quality management relies on meeting client requirements. Depending on the number of meetings, sprint meetings, email exchanges, reporting, etc., costs can escalate significantly. This is especially true when processes and communication channels have not become standard practices for all project stakeholders.
By default, project management costs account for approximately 15% of production costs. This includes one sprint meeting per week and regular meetings between key stakeholders and the Project Leader. It is considered a standard practice. However, for projects involving well-established clients, these costs can be reduced by up to 10%. Otherwise, management costs can easily reach 20%.
Here’s our advice: It is crucial to assess the situation right from the beginning and establish clear expectations with the client regarding how they wish to be treated. Just like in a restaurant or hotel, the customer defines their desired level of service.
3. Need for deadline extensions
Time is money. When a project fails to be delivered on time, it can result in business losses or negative impacts on other objectives.
When a project faces delays, extending the deadlines is often the simplest solution. This approach can help limit the increase in direct project costs (such as production, licenses, and agencies). However, adjusting deadlines can have significant implications for the company in the medium and long term. In many cases, allocating additional resources to the project can salvage short-term business opportunities.
Here’s our advice: Evaluating deadlines should be done in a pragmatic, almost accounting-like manner. It is essential to anticipate the effects of new deadlines on the entire company. Making hasty decisions can lead to far-reaching consequences.
4. Challenges in managing client requirements
Sometimes, the relationship with the client deteriorates due to various reasons, including:
- The briefing being questioned multiple times due to economic or business strategy concerns
- The fragility of the company’s structure, especially when project participants change abruptly and new members need to be integrated into the ongoing project
- The company’s internal policies taking precedence over the smooth execution of the project
- Complicated decision-making and approval processes, particularly concerning lead times
- The briefing being incomplete and not yet validated, but the client demanding production to commence
- Abrupt changes in the required level of quality, both in terms of management and production
- The client not sharing all the necessary information with the Project Leader and production team despite repeated requests
- Sudden shortening of deadlines
Here’s our advice: The client needs to recognize and comprehend the consequences of the various decisions made throughout the project. It is crucial to discuss similar examples during the early stages, such as the briefing phase. Ideally, each change should be accompanied by a new cost estimate. The client must understand the rationale behind these changes; otherwise, the project is at risk.
5. Managing technical aspects can be challenging
During client briefings, technical aspects are often discussed in overly general terms. Production specialists provide their opinion on the project’s feasibility based on a “typical” scenario. However, during the development process, production teams can encounter unexpected difficulties. Here are a few examples:
- Sudden increase in complexity of the initial project
- Requirement for knowledge of additional programming languages or software, often requiring collaboration with different experts
- Encountering unfamiliar situations for the production team
- Unstable MarTech environment on the client’s side, including issues with code structure, integrations, and data flow
- Technical complexity during the testing phase
Here’s our advice: Regular technical communication between the client and the production team is essential. The Project Leader should stay informed about potential developments in the MarTech environment. Additionally, the client’s technical teams should conduct quality control as soon as any technical element is delivered.
In summary, when MarTech project costs get out of control…
When the costs of your MarTech projects spiral out of control, it’s often too late to take corrective action. That’s why it’s crucial to approach every project with a qualitative and transparent mindset. From the project’s inception, the client needs to understand all the challenges involved.
The client holds the decision-making power, acts as the arbitrator, and bears the financial responsibility (directly or indirectly). By investing time in thorough project discussions, a climate of trust can be established. When difficulties arise, the client and Project Leader collaborate in a positive and constructive atmosphere to find solutions.