|More Budget Stories on CIO Update|
Cost vs. Value IT Forecasts, Budgets and Post Audits PPM and Project Estimation Part I PPM and Project Estimation Part II
Alas, at many companies, this is not the case. Hundreds of millions are often wasted because the inability of the CIO and/or the business to identify and eliminate non-performing projects. One large insurer, for example, has spent the better part of the last six years trying implement a real-time transaction processing system for their geographically distributed agents.
After spending nearly $300 million to date, the company is on its third go around and prepared to spend another $90 million to get this mission-critical project done. But, because of the projects status as mission critical, it is very difficult for the company to justify anything but success.
Is This You?
There many reasons why projects tend to take on a life of their own: cultural issues, political issues, and sunk costs are the main drivers. Even so, it is up to IT to lead the charge when it comes to failing projects that are diverting valuable resources from other, more promising efforts. It is up to IT to inform the business when a project is looking bad and to educate the business as well; laying the groundwork for future decision-making and building trust between IT and the business.
For the IT department, its got to be whats good for the business, said Thomas Cutting, a senior principal consultant for Keane, Inc. A project manager cant think along the lines his specific project, hes got to think outside that: Is this project good for the company in the long term? Is this project going to save the company money or cost the company money?
Of course, IT can only really recommend. It is generally a business decision to cancel projects. It is up to IT to become the trusted advisor in that process. The better the help they provide, the better the relationship between IT and the business can become.
Part of being a seasoned IT professional is to be able to educate those around you as to not only what the metrics are, but what they mean and how to read them, said Stephan Wyman, VP of Technology at custom software developer TandemSeven.
Like most things, this is easier said than done. If the culture of a company is such that dissent is squashed, then it becomes an uphill battle to get your voice heard; especially, if you are in line to take the blame when a project fails. Still, its better to say, I told you so, than thinking I wish I had told you so as youre walking out the door, file box in hand.
If the problem is political, like when a projects sponsor is high up in the firm, there probably isnt much you can do except spend some time on education efforts and hope for the best. One tack to take in this instance is to show how the resources diverted to the executives pet-project are either hampering efforts on other important projects or just being wasted.
If the problem is financial, the general advice is to cut you losses, said Keanes Cutting.
That sunk-cost factor is something that shouldnt be considered as much as it usually is in determining if a project should be cancelled or not, he said. First of all, the sunken cost, youre not going to recoup those anyway so not stopping a project just because you spent a lot of money on it doesnt make sense.