Why Your IT Project May Be Riskier Than You ThinkSeveral comments on a must-read HBR article for an organization considering any IT project of significant size …. Why Your IT Project May Be Riskier Than You Think by Bent Flyvbjerg and Alexander Budzier Harvard Business Review – September, 2011 http://hbr.org/2011/09/why-your-it-project-may-be-riskier-than-you-think/ar/1 I found several points in this article particularly insightful: 1. “As global companies become even more reliant on analytics and data to drive good decision making, periodic overhauls of their technology systems are inevitable. But the risks involved can be profound, and avoiding them requires top managers’ careful attention.” >>I’m afraid the large majority of IT professionals don’t really get this … even if they say they do. Prevalent IT requirements methodologies don’t address it well at all. It’s essential that the approach a company takes involves business people to develop business solutions based on business goals before creating system designs. There’s a business problem first, then and only then a technology problem. 2. “Insufficient procedures for financial reporting and internal controls …” >>We see this time and time again as IT designers create very ‘open’ designs that are not based on a common set of business concepts and do not embed a common business perspective. The inevitable result — “revenue leakage” … and as this article points out, much worse. Again, there’s a business problem first, then and only then a system problem. 3. “When we broke down the [IT] projects’ cost overruns, what we found surprised us. The average overrun was 27%—but that figure masks a far more alarming one. Graphing the projects’ budget overruns reveals a “fat tail”—a large number of gigantic overages. Fully one in six of the projects we studied was a black swan, with a cost overrun of 200%, on average, and a schedule overrun of almost 70%. [Only one in six? I think that figure is too low!] This highlights the true pitfall of IT change initiatives: It’s not that they’re particularly prone to high cost overruns on average … It’s that an unusually large proportion of them incur massive overages … By focusing on averages instead of the more damaging outliers, most managers and consultants have been missing the real problem. ” >>The point is simply that IT ‘change initiatives’ are risky propositions, and need to be addressed with … what else … upfront business strategy. That’s what we call a Policy Charter, and we’ve been guiding organizations through its creation for more than a decade. Doesn’t take that long … if you have the right people and the right motivation. Skip it … and pay the consequences!
Tags: business manager involvement, change initiatives, cost overruns, financial controls, IT methodology, IT project, IT project risks, Policy Charter, strategy