June 22nd, 2009

HP connects IT investment, value, and transparency

Posted by Michael Krigsman @ 3:39 pm

Categories: CIO issues, Governance, Hewlett Packard, IT issues, Project portfolio management

Tags: Hewlett-Packard Co., Information Technology, IT Investment, Project Portfolio Management, ROI Analysis, Brian, Project Management, Tools & Techniques, It Operations, It service Management

Last week, I attended HP’s Software Universe 2009 conference to participate on a panel discussion around success strategies for deploying project portfolio management (PPM). I used the opportunity to speak with HP executives about their vision for the future of PPM and its relationship to enterprise value creation.

To understand the company’s PPM product direction, I spoke with four folks representing HP’s views on features, strategy, and customer implementation:

• Paul Muller, VP for Strategic Marketing
• Ken Cheney, Director of Products, IT Financial Management
• Bruce Randall, Manager of Product Marketing, PPM
• John Wills, Practice Principal for HP’s Business Intelligence Solutions group

HP’s primary strategic message about the future direction of PPM involves helping IT departments improve their ability to quantify project costs, benefits, and derived value, which Paul described this way:

We automate the spreadsheet Kung Fu that IT often uses to analyze financial data. Our goal is reducing decision-making cycle times and creating transparency that quantifies the business value of IT operations.

Ken Cheney elaborated on this message:

Many organizations find it difficult to get an accurate handle on IT costs. We link IT with the business services it delivers and assign value to help IT appropriately price these services. The future of PPM is helping organizations clearly see the total cost of ownership of all IT services.

HP’s strategy positions PPM as a building block in a broader IT financial management offering, as the following diagram illustrates:

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January 27th, 2009

5 tips to reduce outsourcing risk

Posted by Michael Krigsman @ 6:22 am

Categories: CIO issues, Consulting, Devil's Triangle, IT issues, Interview, Project strategy, Vendor relationships

Tags: Project, Risk, Managed Hosting, Outsourcing, It Operations, Business Operations, Outsourcing & Subcontracting, Michael Krigsman

Service providers present a special challenge to organizations involved with complex IT projects. Although consultants are integral to many projects, dysfunctional service provider relationships can increase the customer’s risk of failure.

To explore this issue, I spoke at length with Alec Miloslavsky, CEO of Exigen Services, an outsourcing supplier that specializes in Agile development. I asked him why traditional relationships with system integrators sometimes cause a gap between customer goals and consultant interests:

Traditional consulting companies base their relationship model on labor arbitrage, where the services provider gains financial benefit primarily from differences in labor costs. As a result, the consulting firm neglects key issues in IT project delivery, increasing the customer’s risk.

Alec added that projects generally face three types of risk:

• Financial risk, where project cost rises above expectations
• Time to market risk, where the project is late
• Delivery risk, where the project doesn’t achieve planned objectives

Pure labor arbitrage contributes to all these problems, especially in environments where there is insufficient governance to control results.

I asked Alec for five tips to help services customers get the most from their relationship with external consultants. Here is his list:

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November 18th, 2008

Texas gov. intercedes in failing IBM project

Posted by Michael Krigsman @ 7:19 am

Categories: CIO issues, Cultural issues, Devil's Triangle, Financial impact, Government projects, IT issues, Implementation, Politics, Project failures, Project strategy, Vendor relationships

Tags: Texas, IBM Corp., Advertising & Promotion, Marketing, Michael Krigsman, Agency, State, Backups, Outsourcing, It Operations

Texas Governor, Rick Perry, ordered state agencies to stop transferring data to IBM to prevent data loss on a failing project. Texas also fined IBM $900,000 for failing to meet data backup requirements specified in the state’s $863M outsourcing contract.

This backup situation represents only tip of the iceberg with lots more failure to come. Be forewarned: as they say, “You ain’t seen nothin’ yet.”

The Dallas Morning News reported:

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October 27th, 2008

Agile: Anatomy of a failed project

Posted by Michael Krigsman @ 12:57 pm

Categories: CIO issues, Consulting, Cultural issues, IT issues, Project failures, Project management, Project strategy, Vendor relationships

Tags: Project, Michael Krigsman, Customer, Agile, Mitch Lacey, Corporate Communications, Team Management, Marketing, Management

A finite set of problems causes almost all IT failures: including lousy requirements planning and mismatched expectations among key stakeholder groups. Agile practitioner and trainer, Mitch Lacey, dissects these issues in a valuable video presentation titled, “When Working Software Is Not Enough: A Story of Project Failure.”

Mitch describes the project background, details initial warning signs, walks the audience through progressive steps of failure, and suggests post-mortem lessons learned. Mitch explains how Agile development could not overcome basic misunderstandings that ultimately led to catastrophic failure.

Several key warning signs early in the project suggested downstream failure. Most significantly, in my view, the customer stated a $500,000 budget, while Mitch’s team assessed the cost at $1 million. To meet this budget, the developers pushed critical work back to the customer, as described in the following slide:

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December 4th, 2007

SAP Influencer Summit: SOA grows up

Posted by Michael Krigsman @ 8:31 pm

Categories: CIO issues, IT issues, SAP, SaaS, PaaS, and SOA, Vendor relationships

Tags: SAP AG, SOA, Service-Oriented Architecture (SOA), Product Development, Business Structures, Tools & Techniques, Web Services, Strategy, Enterprise Software, Middleware

I’m spending a couple of days at the SAP Influencer Summit, an invitation-only event for approximately 500 key SAP partners, bloggers, analysts, user group leaders, academics, and the press. According to Mike Prosceno, Vice President for Marketplace Communications, the Influencer Summit is intended to facilitate “networking and relationship building, and is the last formal opportunity of the year for SAP to address its ecosystem of SAP watchers.”

Through a carefully-orchestrated set of presentations, SAP offered attendees a glimpse at important accomplishments and future plans. Here are some thoughts and impressions from the first day of this event:

Overall, I’m impressed. SAP’s product vision is forward-thinking and comprehensive. Years of SOA-based product development effort have finally started paying off with Business byDesign and the revamped ERP Suite, both based on the NetWeaver platform. Business byDesign, an ERP suite for small enterprises, was created from the ground up, using modern development tools, methods, and a globally distributed development environment. Call me a geek, but I buy into the platform’s underlying depth and elegance.

In the long run, products such as Business byDesign will make implementations shorter and more successful, reducing the size, scope and impact of potential project failures. Obviously, that’s a good thing.

Simplifying complexity is an important theme which arose during presentations, as well as in private blogger meetings with SAP executives, such as CEO Henning Kagerman and Executive Board member Peter Zencke.

Customizing is out; extending is in. Continuing a mantra stated during dialog at Sapphire in Vienna last spring, custom code is history at SAP. In response to my question, Peter Zencke described three types of customization:

1. Setting configuration “switches,” which continues to be an accepted and approved method to make packaged SAP software work in varied customer environments.
2. Directly modifying code, “which SAP will not support, so customers can maintain the ability to perform in-flight maintenance.”
3. Extending the software, using a “composition layer” that gives access to SAP’s SOA services, has become the approved way for adapting SAP software to meet specific requirements, such as those posed by “micro-verticals”.

In plain English, SAP now provides a foundation, on top of which third-parties (customers and partners) can write new applications and which prevents the core SAP code from being changed. This approach ensures a clean, future upgrade path without the downstream costs traditionally associated with custom code. Customer adaptations integrate directly with the core SAP software to extend it’s functionality, but again, the core remains protected.

In subsequent conversation, Jim Hagemann Snabe, who is responsible for SAP’s Business Suite product line, reaffirmed the importance of avoiding custom code.

Some observers remain skeptical. Analyst and blogger Judith Hurwitz, who also attended the Summit, registered concerns during a late-afternoon conversation:

It all works, if you assume you live in SAP-only world. But the reality is many customers have complicated, multi-vendor environments that include many parts. Unless you make the SAP world your context it wont work. In fairness, you can say that about any enterprise software world. Each vendor wants you to view their offerings as the center of the world.

Judith discussed the same issue on her blog:

So, why does this bother me? I think that because that the strategy and platform assumes that customers will be willing to adopt a single vendor platform that everything in their enterprise will flow through. To its credit, SAP does expect that third party applications and environments can be integrated through well defined interfaces. These outside resources would be integrated through the repository. However, will a customer want to give a single vendor that much power? Perhaps? Will most customers overcome the internal political issues to have everyone agree on a single platform across departments, subsidiaries, and even partners? I would say that I am skeptical.

Fellow Enterprise Irregular, Prashanth Rai, offered another note of concern during a conversation. He’s impressed by the technology, but wants to see businesses adopt the new software before he fully buys-in. From Prashanth’s perspective, without more customers, the vision remains unproven:

SAP has delivered and continues to deliver on the technical aspects of “business network transformation,” but the realization of this, from a business/customer point of view, remains to be seen in 2008.

When a large company such as SAP offers a view across its many initiatives, it’s not possible to comment on everything at once. This post summarizes first impressions, based on a long day spent trying to absorb buckets of information very quickly. Others may disagree with these assessments and opinions, but that’s my broad comment for today.

October 13th, 2006

Reducing Consulting Costs with Productized Content

Posted by Michael Krigsman @ 10:03 pm

Categories: Implementation, Packaged Services

Tags: Michael Krigsman

High-priced, open-ended consulting deals often fuel enterprise software implementation failures.

As a result, a trend has developed among consulting companies and software vendors to package services into pre-defined, discrete units, decreasing risk and lowering costs for the customer. As examples, see here (pre-configured content shipping with software), here (packaged services), and here (more packaged services).

Pertinent to this subject, Jason Busch at SpendMatters writes, “In the consulting and software worlds, the lure of the billable hour or high margin application deals has traditionally trumped a content- or information-based sale. But perhaps things are changing.” Jason goes on to describe a newly-announced partnership between software company Procuri and consulting company AT Kearney Procurement Solutions.

Procuri will include AT Kearney’s Market Solutions tool content as part of it’s software product offering. The Solutions tool includes “templates and guides for RFPs and auctions, and supply market reports and insights for a broad range of sourceable goods and services.” In other words, AT Kearney has packaged its knowledge into productized form, which can then be leveraged and reused across multiple client engagements.

Of course, there is a place for open-ended consulting arrangements, especially on complex and strategic projects taking place in a changing, dynamic environment. However, open billing arrangements potentially create an incentive for the vendor to rack up hours beyond what is required to get the job done. In contrast, fixed-fee engagements tend to shift project risk away from the customer to the consultant. In many cases, this risk shifting forces the vendor to be more efficient.

For customers, the allure is obvious: lower project risk combined with lower consulting costs.

October 10th, 2006

Productized Services - AT Kearny

Posted by Michael Krigsman @ 1:55 pm

Categories: Consulting, Packaged Services

Tags: Michael Krigsman

Jason Busch at the SpendMatters blog has a great post describing AT Kearny’s procurement-related consulting offerings. His description of AT Kearny’s services is instructive for anyone interested in packaged services:

Procurement Solutions is focused on creating repeatable, expert solutions to Spend Management versus a more traditional management consulting approach which looks at each new procurement and supply chain opportunity from a generalist, one-off analytical lens.

[M]ore sophisticated organizations are most likely to use their services to augment their own capabilities where there is a specific need. In contrast, the management consulting organization is typically a better fit from a sourcing and category basis with clients who are less mature and need greater process help and all around Spend Management expertise and guidance.

The exception to this are more sophisticated companies looking to solve abstract problems or those that demand industry specific expertise — these situations are also a better fit with AT Kearney’s more traditional management consulting services arm. But quite often, the two organizations cross pollinate on projects, joining forces to help clients. Management consulting type-engagements, however, such as a complex make / buy manufacturing analyses, which are large and transformational in nature, are more likely to be led by generalist firm resources than specialized Procurement Solutions ones.

Jason makes a couple of key points to which I want to call attention. First, he emphasizes repeatable vs. one-off solutions: productized services are all about defining repeatable activities, documenting them, and delivering them more efficiently. Second, he correctly notes that the packaged approach is not always a good fit; for example, on large strategic projects where the dynamics are unique and complex.

Packaged, productized services can substantially reduce software implementation time and cost, lowering the risk of project failure. If you are a consulting company or services group inside a software vendor, get on this train, as I have recommended here and here and here.

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October 2nd, 2006

Reducing Services Costs

Posted by Michael Krigsman @ 2:47 pm

Categories: Implementation, Packaged Services

Tags: Michael Krigsman

Vinnie Mirchandani posts on IBM’s strategy to productize services.

Almost a year ago, Vinnie posed this challenge: “IBM’s SI/outsourcing groups do not think like its software group. They want to sell more bodies, not automation. If they allowed the same software team which is working on self-healing systems management to work on SI automation, I would be willing to bet they could develop significant labor saving tools.”

When I saw this quote, I had to respond.

First, Vinnie absolutely right in asserting the tension between the stated goal of reducing services costs and the way consultants are incentivized. This is a big deal, and productized services can only work in the context of a more fundamental shift in service delivery strategy, which includes adjusting the consultant compensation model.

Second, Vinnie mentions consulting automation tools. I say YES YES YES to that! Recently, I gave a presentation on exactly this subject; here are several approaches to consulting automation from that talk:

1. Implementation toolkits. Document the process, including roles and activities, and package it into a sharable tool. (Blatant self-promotion note: Cambridge Publications has worked with SAP, IBM, and others to create such toolkits. There is no one in the world better at it than we are.)

2. Reusable content. For example, developing pre-configured systems, along the lines of what SAP and Oracle have done.

3. Automation tools. Well-designed tools reduce hours spent on routine consulting tasks. For example (another blatant self-promotion note follows), Asuret has created a consulting tool to perform rapid pre-implementation risk assessments. We quickly gather data and then automate the reporting. There are also a variety of tools on the market to automate such things as data conversion and system configuration.

Consulting organizations that develop such tools will reduce their cost to customers, thereby improving their competitive position in the market. However, as a developer of such tools, I can say with certainty that consulting automation requires an investment that many services organizations will be reluctant to make.

If you are a services group, either standalone or part of a software company, then beware: now is the time to start thinking about automating your routine activities. Rest assured, your smartest competitors have already begun this process for themselves.

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September 26th, 2006

Reducing Implementation Costs

Posted by Michael Krigsman @ 10:40 pm

Categories: Implementation

Tags: Software, Software Company, Michael Krigsman

Vinnie Mirchandani posted an insightful comment on this blog related to software implementation time and cost. He correctly points out that even so-called “successful” implementations often run substantially over-budget. In most fields, a project that has run 2-3 times over-budget would be considered a failure, but the expectations around software seem to be different. Why do otherwise rational, sane people find huge cost overruns acceptable on software-related projects?

I recently spent an afternoon consulting to a group of senior executives from an important enterprise software vendor. Their challenge: reducing implementation time as a means to increase customer satisfaction. This is easier said than done, given complexity around both the software and the customer environment. To some degree, definitively solving the implementation problem requires that software products and related services be designed with implementation in mind. This is not easily accomplished, but in the long run lowering implementation costs almost always helps a software company sell more product.

Hey software vendors, this is a simple concept: make your products easier to deploy and you will sell more!

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May 26th, 2006

INTERVIEW: Lydia Segal on Government Waste and Corruption

Posted by Michael Krigsman @ 10:37 pm

Categories: Government projects, Interview

Tags: Michael Krigsman

Some of the most dramatic examples of IT-related waste can be seen in public sector projects.

To get a handle on why government projects are so problematic, I spoke with Lydia Segal, one of the nation’s foremost experts on waste and corruption in public schools. I asked Lydia to explain why government projects are so susceptible to waste, failure, and corruption.

The organizations Lydia has studied are very large. For example, she says, “New York City ’s operating budget would rank it 7th in the nation if it were a state. It runs on $16 billion a year for 1.1 million students. That’s not including its capital budget. Los Angeles’s school system, colloquially known as the LAUSD, costs over $13 billion year for 727,000 students. The New York City school system serves over 850,000 meals a day, making it the second largest food provider in the country after the U.S. Army.”

These organizations are enormous. What makes their projects so prone to  waste?

Waste can be sporadic or it can be systemic and built-in. The biggest drain is obviously the latter. Built-in waste hemorrhages money day-in, day-out. In schools, as in most government agencies, the major cause of built-in waste is structure and orientation: a command-and-control organizational structure concerned with inputs at the expense of outputs.

In schools, the root of waste (as well as corruption) lies in the layers of bureaucratic oversight, detailed standard operating procedures, and regulations built up over the years to control waste and fraud. Every time anyone wasted or, heaven forbid, stole, money, school districts would respond by establishing a new layer of supervisors and a new set of rules and tightening control at the top. Rules prescribe virtually every little thing: how it must be done, by whom, and by when. As I describe in my book, as urban public schools grew, the focus on saving every penny eventually displaced the focus on productivity. The entire oversight machinery became the source of the very waste, abuse, and mismanagement that it was intended to curb.

I have a chapter in my book called “Watching the Pennies, but Missing the Millions,” that offers many examples of how red tape sucks away millions of dollars in large districts. Consider the case of the $4 battery pack. To prevent waste and abuse, the New York City school system passed a rule saying that, to get reimbursed for small expenditures, employees must submit a detailed explanation for why they needed the item along with the receipt.

Well, one high level official requested reimbursement for a $4 battery pack. Unfortunately, he didn’t include a detailed enough explanation for why he needed it, so the clerk in the central office rejected it. The clerk’s supervisor also dinged it. He explained that the clerk was following rules to protect taxpayers against waste. The supervisor’s supervisor, however, panicked because a high level official was involved. A flurry of meetings ensued with managers at successively higher levels until they got the Director of the Division of Financial Operations — the top guy of the division responsible running the finances for a $16 billion-a-year school system! So with the all man-hours involved and with managers averaging between $80 to $100 an hour, they spent thousands of dollars to process a $4 claim. So you have rules designed to stop waste that now cause it. The waste is built into the rules and reinforced by the myopic organizational culture that those rules fostered.

You describe how a system designed to avoid waste actually creates failure. Can you elaborate on that?

Another example of how rules designed to stop waste cause it, is the way schools deal with outside contractors. For most school systems, the name of the game – the way they try to prevent waste and save money – is to disallow as many contractor invoices as possible. They require contractors to follow a maze of rules and submit volumes of paperwork that must be approved by dozens of supervisors to get paid. Schools use these procedures to play “gotcha” with contractors. So if a contractor, say, fails to sign, date, attach a proper receipt, or properly complete his paperwork in any way, school officials will reject the invoice, no matter how minor the transgression.

From the contractors’ perspective, it becomes extremely expensive and unpleasant to do business with schools. It can take years to get paid for legitimate work. One contractor did $800,000 worth of work for the LAUSD without receiving a nickel. Many contractors told me that they had to hire about 30% more personnel just to deal with the stead flow of rejected invoices.

One contractor told investigators that the LAUSD refused to pay him for work he had done on a school vacation day. Since that day was not a day-off for his company, he showed up with his laborers, did the work, and submitted an invoice with documents certified and signed by each employee. To no avail. Another contractor described how school officials rejected his expenses because he filed them late - even though his reason was that the Facilities Division had not approved his work authorization in time, a common complaint.

Are there specific conclusions we should draw from all this?

The upshot is that, while these gotcha procedures might save schools a couple of dollars in the short-term, they waste millions of dollars in the long-term. Small companies without enough cash reserves or borrowing ability simply can’t do business with schools, while the best contractors refuse to do business with them. So schools lose out on the benefits of free market choice and are left with a tiny pool of large companies to select from. Also, contractors do what any contractor would do to a difficult client. They stick it to him. So contractors overcharge. They cut corners. They put in phony orders. They drag their feet on projects. All this to get even and make up for the exorbitant costs and hassles of doing business with an intransigent bureaucracy.

Another example of how the centralized structure causes waste concerns computers. Central school bureaucracies control all the money and sign all the contracts. But since they remote and are out of touch with what is happening in the field, their rules and contracts often end up being a waste.

To illustrate with another example from the New York City schools, they recently has spent $85 million on computer technical support. Yet many computers are sitting around unused. Why? Because when central headquarters signed a contract for technical support with its primary computer contractor, they stipulated that the company offer technical support primarily via telephone. Sounds like a good idea, right? Well, the problem is that most classrooms have no telephones. So when a computer goes down, the teacher has to take a note to the principal’s office and have the secretary call tech support. When the technician asks what the problem is, the secretary, needless to say, does not know. So a technician must be dispatched to the school, which can take days. And the problem is sometimes as simple as a cable that isn’t plugged in. how much better would it have been to let school principals buy their own computers and arrange for tech support themselves, as they are closer to the problem and know what their teachers need?

Are government projects doomed to fail or is this problem solvable?

My whole purpose in writing the book was to offer solutions. A number of school districts that have curbed waste and abuse and describe what they did and how other districts can replicate their efforts.

Since the root of the pathology is the effort by school headquarters to control virtually every detail of what happens below, the solution is to loosen top-down controls, push decision-making authority down the chain of command, and find other ways to check employee behavior, such as through software that can track how people spend money.

I advocate radically reshaping school districts to put real decision-making authority in the hands of principals and local school managers. I recommend a new balance between accountability for job performance and fiscal compliance.

Can you offer a real-life example of IT success?

One of the many success stories that I describe in my book is the example of the school system in Edmonton, Canada. It used to be a bloated bureaucracy rife with waste that transformed itself through a series of radical structural changes into a highly effective, lean district where children are learning and employees at all levels display great pride and creativity in their work.

Let me illustrate with the story about Edmonton’s Information Technology Unit (IT). During the 1980s and most of the 1990s, Edmonton’s central IT Unit was a tiny, moribund unit that hardly interacted with schools . They received their funding from the top and had a lot of cumbersome red tape designed to prevent waste, which made it hard for schools to get assistance from them.

Then, in 1998, when the government allotted a huge infusion of money for school technology, Edmonton tried something new. In Edmonton, as in most school districts, the top controls all the money – it tells schools what services they are eligible for and they control those services. Edmonton, however, decided to send the IT funds directly to its schools, bypassing the entire central bureaucracy. It allowed principals to decide whether to buy IT services from the central IT Unit or hire private sector IT contractors.

Well, the central IT Unit realized that, if it didn’t act quickly to attract that money, it would die as business flowed to outside competitors. Within days, IT Unit officers were visiting schools and handing out questionnaires to find out what they needed. The Unit set up a help desk. Most important, it did away with all the superfluous anti-waste, anti-corruption rules and regulations that had stood in the way of its helping principals. And instead of losing money to waste, business started booming. So many principals clamored for central IT services that it grew from 20 technicians to 65 in just three years. Today it has contracts with virtually every school and receives glowing evaluations all around.

Government IT leaders read this blog. Can you offer these folks advice on how to make their projects more successful?

The most important thing is to give people in the field – or the people for whom the project is intended — a major role in shaping it. In government agencies, projects usually fail because central headquarters thinks it knows best what everyone else needs and wants. But the larger the agency, the more out of touch the top generally is with what people actually need and want and how they do business. So it is absolutely critical for executives to have feedback loops with people in the field.

Also important is achieving balance in oversight and controls against waste and fraud. Bad controls will wind up creating incentives for more waste, abuse, and corruption than they prevent. As I describe in my book, there are many ways using modern technology to control waste and fraud while simultaneously allowing for flexibility and creativity.

Lydia Segal  is a professor of Law and Public Management at John Jay College, City University of New York. She has a J.D. from Harvard Law School and a Masters degree from of Oxford University. Her most recent book, Battling Corruption in America’s Public Schools, (Harvard University Press), chronicles waste and corruption in large school systems and is the standard-bearer on the subject. Lydia is a consultant to government agencies on reducing costs and improving accountability in the public sector, and can reached by email at lsegal@jjay.cuny.edu.

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