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(Assignment Title)(Your Name)(Your Institutional Affiliation)Explain some of the basic principles of cost management, such as profits, life cycle costs, tangible and intangible costs and benefits, direct and indirect costs, and reserves.The basic principles of cost management are actually the key measures to review an IT project in term of the cost, including but not limited to profits, life cycle costs, tangible and intangible costs and benefits, direct and indirect costs, and reserves.Profits are revenues minus expenditures CITATION Kat14 \l 1033 (Schwalbe, 2014) and most commonly represented in profit margin as the ratio of revenues to profits. Life cycle costs are total cost of ownership of a project throughout its life cycle including research, development, deployment, maintenance and final disposal. Tangible and intangible costs covers all estimated costs that ever spent on an IT project, including measurable, billable (tangible) items such as research fee, and immeasurable, non-billable (intangible) items such as personal effort. Direct costs are referring to the controlled items directly contributing on the products or services such as staff salaries, hardware and software. In the other hand, indirect costs means related cost items allocated to a project such as electricity, water and building maintenance. Reserves are simply a reserved fund allocated to risk mitigation for unpredicted cases.What is meant by a Sunk Cost? Give examples of typical sunk costs from an IT project as well as examples from your personal life. Why is it difficult for people to ignore them when they sound?Sunk Cost is an expenditure that has been spent as a billable item related to an IT project in the past. In most situations it is considered a loss from a point of view of finance. However it should not be calculated as a cost for the project to be invested or a motivation to invest further.Like a mistake we made in our life, we should leave it and move on rather than living in the shadow of the mistake or trying to make up the mistake by introducing more mistakes. The same principle applies to IT cost management as well. For example, Microsoft Bob was one of Microsoft's more visible product failures though the Redmond Giant spent years and millions of dollars developing itCITATION Wik16 \l 1033 (Wikipedia Contributors, 2016). Steve Ballmer, the former CEO of Microsoft, mentioned Bob as an example of a situation in which "we decided that we have not succeeded and let's stop" CITATION Wik16 \l 1033 (Wikipedia Contributors, 2016). But not all IT managers can be such rational like Ballmer simply because what has been paid or previous investment could be a significant burden and pressure for them and force them to continue their endless projects in a hope of turning the tables like on gambling. Explain how earned value management (EVM) can be used to control costs and measure project performance, and explain why you think it is not used more often. What are some general rules of thumb for deciding if numbers for cost variance, schedule variance, cost performance index, and schedule performance index are good or bad? Earned value management (EVM) is a project measurement technique against performance and progress in order to provide an integrated view to the project management triangle: scope, time, and cost data. Hence, given a cost performance baseline, project managers and their teams can determine how well the project is meeting scope, time, and cost goals by entering actual information and then comparing it to the baseline CITATION Kat14 \l 1033 (Schwalbe, 2014). That’s basically how EVM works, traditionally.However, as the core concept and rules of EVM are based on estimation, from the beginning of it whole process, the EVM practice, outcomes and benefits high depends on most recent cost estimation data, good planning and constant information tacking, which are something very difficult for many projects, especially small and medium IT projects in varied developing models. Therefore traditional EVM practices are not used more often today, more and more software development teams are moving to an Agile approach - Agile EVM model, which is light-weight, easy to adopt and scalable for various project management structure and team size CITATION Pau11 \l 1033 (McMahon, 2011).EVM practice involves calculating three kinds of values for each activity CITATION Kat14 \l 1033 (Schwalbe, 2014), one of them is earned value (EV) which is an estimate of the value of the physical works actually completed, including cost variance (CV), schedule variance (SV), cost performance index (CPI), and schedule performance index (SPI) in numbers. As a general rule, negative numbers for CV and SV indicate the project is costing more or taking longer than planned, while numbers in positive mean project is under control and even costing less or taking less than planned. Similarly, CPI and SPI in ratio of less than one or less than 100 per cent also indicate problems, while the ratios are greater than one or more than 100 per cent mean the project is under budget and ahead schedule.Bibliography BIBLIOGRAPHY McMahon, P. E. (2011). Integrating CMMI? and Agile Development Case Studies and Proven Techniques for Faster Performance Improvement . Addison- Wesley.Schwalbe, K. (2014). Information Technology Project Management (7 ed.). Course Technology, Cengage Learning.Wikipedia Contributors. (2016, 10 11). Microsoft Bob. Retrieved 10 31, 2016, from Wikipedia, The Free Encyclopedia.: ................
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