November 16th, 2009

Resistance to change: The real Enterprise 2.0 barrier

Posted by Michael Krigsman @ 10:29 am

Categories: CIO issues, Cultural issues, Enterprise 2.0, Failure 2.0, Governance, IT issues, Project strategy, Research and statistics

Tags: Barrier, Enterprise 2.0, Michael Krigsman

Large organizations continue to embrace Enterprise 2.0 as a viable addition to the corporate business process toolbox. As evidence, look no farther than the rapid growth of The 2.0 Adoption Council, which was founded this past June and currently boasts more than 100 member organizations, each of which has more than 10,000 employees.

Despite clear interest from the enterprise, discussion persists around obstacles to large-scale adoption of Enterprise 2.0 approaches, tools, and methods.

ZDNet’s Joe McKendrick summarized key obstacles in blog post at Fast Forward:

Resistance to change	52%
Difficulty in measuring ROI	42%
Integrating with existing technologies	41%
Security concerns	32%
Budget	25%
Product knowledge	23%
Tools not enterprise ready	22%

It should not surprise us that the top issue is resistance to change. Readers of this blog know that business projects of every kind suffer from issues related to poor communication, conflicting agendas across information silos, and related organizational causes of failure.

A recent study from The 2.0 Adoption Council also describes resistance to change as the significant barrier. This compelling slide clearly summarizes that message:

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November 6th, 2009

18 truths: The long fail of complexity

Posted by Michael Krigsman @ 5:55 am

Categories: CIO issues, Cultural issues, Governance, IT issues, Project strategy, Research and statistics

Tags: Accident, Failure, Enterprise System, Richard Cook, Complex System, Human Practitioner, Policies And Procedures, Human Resources, Michael Krigsman

Enterprise systems are inherently complex, often involving many business processes, people, and organizations across a company. Given this built-in complexity, it’s no surprise that failures abound; it’s amazing these systems function at all.

We could make these same comments about any complex, mission critical system. For example, look no further than the space program or health care delivery. In both cases, massive complexity is connected to a need to get things right: failure means potential loss of life.

To say that complicated systems are more prone to break down than simpler systems is obvious. But there are also other, more subtle truths regarding failure and complex systems.

A paper copyrighted in 1998, called How Complex Systems Fail and written by an M.D., Dr. Richard Cook, describes 18 truths about the underlying reasons complicated systems break down. On the surface the list appears surprisingly simple, but deeper meaning is also present. Some of the points are obvious while others may surprise you.

THE EIGHTEEN TRUTHS

The first few items explain that catastrophic failure only occurs when multiple components break down simultaneously:

1. Complex systems are intrinsically hazardous systems. The frequency of hazard exposure can sometimes be changed but the processes involved in the system are themselves intrinsically and irreducibly hazardous. It is the presence of these hazards that drives the creation of defenses against hazard that characterize these systems.

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October 21st, 2009

Gartner Magic Quadrant lawsuit: Sour grapes or real gripes?

Posted by Michael Krigsman @ 9:48 am

Categories: CIO issues, Project strategy, Research and statistics, Vendor relationships

Tags: Lawsuit, Quadrant, Analyst, Gartner Inc., Michael Krigsman

Industry analyst firm, Gartner, is the target of a lawsuit from software vendor, ZL Technologies, challenging the “legitimacy” of Gartner’s Magic Quadrant rating system. The suit has brought forth an array of divergent opinions.

Background. As one of the top analyst firms, with revenue in excess of a billion dollars, Gartner’s opinions and recommendations carry substantial weight with technology buyers and influencers.

On a special website page devoted to the lawsuit, ZL Technologies claims that Gartner’s Magic Quadrant does not present a fair and accurate portrayal of the software market. The company says:

Gartner’s use of their proprietary “Magic Quadrant” is misleading and favors large vendors with large sales and marketing budgets over smaller innovators such as ZL that have developed higher performing products.

Here is the original legal filing:

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September 30th, 2009

Annual cost of IT failure: $6.2 trillion

Posted by Michael Krigsman @ 6:10 am

Categories: Financial impact, IT issues, Politics, Research and statistics

Tags: Gross Domestic Product, Information Technology, Failure, Roger Sessions, Strategy, Management, Michael Krigsman

The total annual cost of worldwide IT failures is $6.2 trillion dollars, according to calculations performed by Roger Sessions, über-expert enterprise architect and CTO of ObjectWatch.

Roger presents his analysis in a blog post:

According to the World Technology and Services Alliance, countries spend, on average, 6.4% of the Gross Domestic Product (GDP) on Information Communications Technology, with 43% of this spent on hardware, software, and services. This means that, on average, 6.4 X .43 = 2.75 % of GDP is spent on hardware, software, and services. I will lump hardware, software, and services together under the banner of IT.

According to the 2009 U.S. Budget, 66% of all Federal IT dollars are invested in projects that are “at risk”. I assume this number is representative of the rest of the world.

A large number of these will eventually fail. I assume the failure rate of an “at risk” project is between 50% and 80%. For this analysis, I’ll take the average: 65%.

Every project failure incurs both direct costs (the cost of the IT investment itself) and indirect costs (the lost “opportunity” costs). I assume that the ratio of indirect to direct costs is between 5:1 and 10:1. For this analysis, I’ll take the average: 7.5:1.

To find the predicted cost of annual IT failure, we then multiply these numbers together: .0275 (fraction of GDP on IT) X .66 (fraction of IT at risk) X .65 (failure rate of at risk) X 7.5 (indirect costs) = .089. To predict the cost of IT failure on any country, multiply its GDP by .089.

Based on this, the following gives the annual cost of IT failure on various regions of the world in billions of USD:

REGION        GDP (B USD)  Cost of IT Failure (B USD)
World         69,800       6,180
USA           13,840       1,225
New Zealand   44           3.90
UK            2,260        200
Texas         1,250        110

THE PROJECT FAILURES ANALYSIS

Quantifying the cost of failure is an exceedingly important step in communicating the scope and breadth of this worldwide problem. Roger Sessions deserves our thanks for doing so.

The calculations are highly dependent on the underlying assumptions. Some of the key variables include:

• Definition of “failure”
• Rates of failure
• Global variation in rates across country

Although Roger’s calculations are not precise, they paint a clear, directional picture suggesting the financial impact of IT failures.

Please share your thoughts on how these calculations can be refined.

[[Image from iStockphoto.]

August 3rd, 2009

CRM failure rates: 2001-2009

Posted by Michael Krigsman @ 6:15 am

Categories: CIO issues, CRM, IT issues, Research and statistics

Tags: Butler Group, AMR Research, CRM, Advertising & Promotion, Customer Relationship Management (CRM), Enterprise Software, Marketing, Software, Michael Krigsman

Discussions about failed CRM projects often begin with statistics describing failure rates. To facilitate those conversations, here’s a summary of CRM failure stats for the period 2001-2009.

This is the basic list; see down below for more detail:

• 2001 Gartner Group: 50%
• 2002 Butler Group: 70%
• 2002 Selling Power, CSO Forum: 69.3%
• 2005 AMR Research: 18%
• 2006 AMR Research: 31%
• 2007 AMR Research: 29%
• 2007 Economist Intelligence Unit: 56%
• 2009 Forrester Research: 47%

This table lists the year, organization conducting the research, and reported failure rate. As described below, measurement differences make comparing rate changes across years difficult at best.

RESEARCH DESCRIPTIONS

2001 Gartner Group: 50%. Gartner released numerous CRM-related reports during the 2001-2002 period. Significant among these was research (September 2001) claiming that:

Through 2006, more than 50 percent of all CRM implementations will be viewed as failures from a customer’s point of view….

Several years later, in a 2004 interview with CustomerThink, Gartner’s Vice President and CRM Research Director, Ed Thompson, qualified this statistic by saying:

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July 23rd, 2009

CRM failures on tap

Posted by Michael Krigsman @ 8:03 am

Categories: Blog annoucements, CIO issues, CRM, IT issues, Research and statistics

Tags: CRM, Advertising & Promotion, Customer Relationship Management (CRM), Enterprise Software, Marketing, Software, Michael Krigsman

Customer relationship management is an interesting and important part of the enterprise technology landscape. Given the significance of CRM, this blog is long overdue devoting attention to CRM failures. I’m now rectifying that problem.

CRM is a broad domain that encompasses an organization’s entire set of relationships and interactions with customers. Although technology plays a large role, developing effective customer relationships is really a corporate “lifestyle” decision that values customer satisfaction, retention, and loyalty.

Fellow ZDNet blogger and true CRM guru, Paul Greenberg, captures this spirit in a definition on his personal blog. The major theme is relationship and shared value:

CRM 1.0 (2003): “CRM is a philosophy and a business strategy, supported by a system and a technology, designed to improve human interactions in a business environment.”

CRM 2.0 (2008): “CRM 2.0 is a philosophy and a business strategy, supported by a technology platform, business rules and processes, designed to engage the customer in a collaborative conversation to improve human interactions and provide mutually beneficial value in a trusted and transparent business environment. It is the company’s response to the customer’s ownership of the conversation.”

Since customer interactions extend in many directions, the supporting technology must also be diverse. Forrester Research principle analyst, Bill Band, describes an “Extended CRM Application Ecosystem” that brings order to the many technology areas comprising CRM.

The diagram shows how the tentacles of CRM reach across many technologies:

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July 13th, 2009

Evaluating the enterprise software buyer's 'Bill of Rights'

Posted by Michael Krigsman @ 4:43 am

Categories: CIO issues, Devil's Triangle, IT issues, Research and statistics, Vendor relationships

Tags: Bill, Vendor, Customer, Life Cycle Horizon, Tools & Techniques, Enterprise Software, Management, Software, Michael Krigsman

Complicated relationships between enterprise software buyers and vendors contribute to late, over-budget, or otherwise painful IT projects. To help customers bring greater transparency to their relationship with software vendors, Forrester Research analyst, Ray Wang, has developed a detailed framework covering the ownership life cycle.

A document called An Enterprise Software Licensee’s Bill Of Rights, V2 describes this framework. Although the bill of rights does an excellent job explicitly highlighting issues that can become points of contention between software buyers and vendors, it does not address customer roles and responsibilities in achieving project success. This gap is significant, as I discuss below.

Software Ownership Life Cycle. The report defines a software ownership life cycle and provides a checklist of issues keyed to different life cycle phases.

The life cycle horizon extends out over a decade, accurately reflecting the long time spans over which some enterprise software contracts extend. One of its most valuable features is raising concerns about intangible considerations that don’t come into play until years after a large software contract is signed.

This graphic shows the life cycle:

Bill of Rights checklist. The bill of rights guides customers to raise key points when negotiating with vendors. The next diagram organizes this checklist by life cycle phase. The first step, general rules of engagement, outlines overall expectations of vendor conduct across the entire term of the software business relationship.

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July 6th, 2009

Enterprise 2.0 collaboration communities: measurement and metrics

Posted by Michael Krigsman @ 2:09 pm

Categories: CIO issues, Enterprise 2.0, Failure 2.0, IT issues, Research and statistics

Tags: Customer Service, Collaboration, Social Media, ROI, Enterprise 2.0, Roi/Tco, Product Marketing, Customer Relationship Management (CRM), Finance, Managerial Accounting

Many participants in the collaboration / Enterprise 2.0 world offer Kumbaya-style enthusiasm without showing concrete evidence of business value. As an antidote to this substance-free clamoring, Forrester analyst Natalie Petouhoff developed a data-driven framework that systematically measures business-oriented ROI in collaboration communities.

• Related: Enterprise 2.0: The Kumbaya irony

Natalie’s report, The ROI of Online Customer Service Communities, presents an ROI model, discusses the business value and benefits, offers concrete examples, and raises a host of implementation obstacles and success factors.

In contrast to less substantive Enterprise 2.0 discussions, where creating good feelings is the dominant theme, this research adopts a more structured and analytical approach. Although Petouhoff focuses narrowly on customer service communities, many of her conclusions are easily adaptable to other Enterprise 2.0 collaboration deployments.

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May 18th, 2009

Gov't IT projects: Billions at risk

Posted by Michael Krigsman @ 5:41 am

Categories: Government projects, Politics, Research and statistics, Uncategorized

Tags: Project, Agency, Information Technology, Strategy, Management, Michael Krigsman

New Congressional testimony by the General Accountability Office (GAO) reports that “352 [US federal government] projects totaling about $23.4 billion—were poorly planned.”

The report, which is titled, Information Technology: Management and Oversight of Projects Totaling Billions of Dollars Need Attention, adds:

In our analysis of the high-risk projects in June 2008, we found that of the 472 IT projects that were categorized as high risk, at least 87 had performance shortfalls—collectively totaling about $4.8 billion in funding requested for fiscal year 2009. Agencies reported cost and schedule variances that exceeded 10 percent as the most common shortfall.

These are striking numbers, even for the most jaded of project failure observers.

The testimony recommends that federal agencies take a number of steps to improve oversight on high-risk projects. These steps include:

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May 6th, 2009

Research: Gov't lacks oversight on services contracts

Posted by Michael Krigsman @ 7:57 am

Categories: CIO issues, Governance, Government projects, IT issues, Politics, Research and statistics, Uncategorized

Tags: Contract Management, Supplier, Risk Management, Service Contract, Risk Management Arrangement, Service Management, Channel Management, Government, Marketing, Michael Krigsman

Rigorous contract management is a basic and crucial element necessary to successfully oversee procurement and execution of complex projects. However, new research from the UK Public Accounts Committee, a monitoring group within Parliament similar to the US Office of Management and Budget (OMB), states the UK government mismanages services contracts on a large scale.

Although based on UK data, the lessons should also be applicable to US government projects. The report, titled Central government’s management of service contracts, offers this summary [edited for length]:

[The] central government makes limited use of financial incentives to encourage suppliers to improve performance. In addition, 38% of contract managers did not always apply financial penalties where suppliers under-performed. The extent to which central government tests the value for money of ongoing services and contract changes is variable. For example, 41% of contract managers had not tested the value for money of new services purchased under an existing contract.

Planning and governance is one of the weaker areas of contract management, although there are examples of good senior level engagement. Less than half the organizations surveyed, however, had an individual with overall responsibility for contract management, and there was no documented plan for managing 28% of contracts. [M]any contracts do not have in place some or all of the elements of good practice risk management; for example, 56% of contracts did not have a contingency plan in case of supplier failure and 30% of contracts where suppliers were dealing with personal or security information did not have a risk register.

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