I've had a few interesting conversations on budget for UX work and UX institutionalization. Probably everyone knows that the spend for UX work should be about 10% of the overall development budget. I think I first published that in about 2001 as I was working out joint UX and delivery processes with Tata Infotech. When you worked it out, the UX component usually ran around 10% of the overall project costs. But, what about institutionalization of UX?
Think about it like the difference between going in for surgery as against the cost of setting up a hospital. There is a SEPARATE budget needed for setting up the UX practice. I generally see clients spending $800K - 1.2Million over about two years. That is not for UX design work. It is for training, standards, methods, and tools.
Is it really worth a million bucks to institutionalize user experience? Well, it is NOT if you have a very small operation. But, there are huge savings to be had from doing the design right the first time. Royal Bank of Canada ran a study on just the implementation of an HFI web UI standard. They found over a 10% reduction in the OVERALL cost of development. This happened by avoiding reinventing designs, and by increasing the use of reusable code. They were not even measuring maintenance costs, or the value of improved UX in terms of customer relationships. That 10% pays for the cost of UX work itself. And don't forget. Even if you have NO UX staff, you are still investing in design. The design is just being done by people who don't have the skills and resources to do it quickly and well. Hardly a bargain at that.