You’re 12 months into a three-year critical IT project, one-quarter of the work has been done and two-thirds of the approved budget has been spent. Now the executive team and board of directors are faced with a serious decision: cut their costs, fund the difference or kill the project?
Just how common is this?
IT projects are notorious for exceeding budget, delivering below expectation and taking longer to complete than originally planned. Making a good buying decision is crucial to reducing project risk and achieving a successful outcome for the business.
Making an IT selection decision without first checking the degree of fit with a detailed set of business requirements is like taking a step into the unknown. Once the new IT system goes live, the business needs to own it, customers need to benefit from it, the IT department needs to support it, the finance and internal audit teams need to be happy with it and the chief risk officer needs to approve of it.
Agreeing on the detailed requirements for a new IT platform with a diverse stakeholder group is no walk in the park.
It’s not enough just to meet current needs; companies must also consider those of the foreseeable future. The needs of customers, the moves of competitors and new regulations will all stress-test the buying decision over the course of the project. A lot can change in three years, and it’s better to reflect on this before signing a contract rather than 12 months into the project.
Let’s put this into perspective. Say a company contracts a software vendor on the basis that its “out of the box” product meets 90% of the company’s essential business requirements, and the cost of customizing the remaining 10% of the product is estimated at $2 million. But then say 12 months into the project the business launches a new product, a competitor launches a mobile channel, the regulator introduces new money-laundering rules and the business signs up another supply chain partner requiring a new interface with the IT system.
Maybe the company has also discovered that the development work on the 20 existing internal/external interfaces that should have been completed two months ago is only one-third done. And just to make matters worse, it also discovers that the 90% requirements fit was based on the current system’s functionality and didn’t include the executive team’s longer-term process transformation and customer service vision.
This, in a nutshell, is a major problem and can be a serious wake-up call for the executive team – and one that’s much more common than you might think. If these wake-up calls occur late in the project life cycle, they can leave the team with a limited number of costly options. The cost of these options will often be far higher than the cost of investing in a thorough business requirements and IT selection exercise at the outset.
A comprehensive list of business requirements provides the baseline to compare the various IT selection options. Your business requirements should reflect what’s currently required to run your business, plus what’s necessary to support your strategy for organizational development and growth.
It’s important that your business stakeholders approve and own these requirements because they’re generally very demanding and vocal if they see gaps when the early concept becomes a reality prior to launch.
It’s also important for all parties to understand the consequences of not being sufficiently diligent when signing off on the requirements because later solutions can be severely limited and very expensive.
To manage cost and avoid misunderstanding, the finalized requirements should be incorporated into a request for proposals requiring IT vendors to state whether their “out of the box” product meets your company’s business requirements or whether it will need customization and, if the latter, at what time and cost.
IT projects can go off track for many reasons. In many cases, the root cause is a superficial understanding of your company’s business requirements and a lack of attention to detail when selecting the new system and vendor. Getting this right up front can significantly reduce the risk of making a wrong selection decision and avoid expensive downstream disruption to your business. •