eyetoit

Thinking About Offshoring As a Solution: What's The Unit of Measure?

I continue to be surprised at the continuing flight many firms are making to offshore development, even as many of the early adopters of offshoring are returning to domestic sourcing of more services (See "Return to Sender"). I think much of the pressure for offshoring comes from flawed assumptions and possibly flawed logic, both of which merit discussion.

Possibly the most pernicious situation with offshore development is the preordination or blanket directives for using offshore development. As an example, about three years ago I was in discussions with a global manufacturer about contracting with my firm to build a reasonably complex software application. I knew what the complexity of the system was because my firm had already built a very, very similar application. As we are able to do with most of our engagements, I suggested that we could do this for a fixed fee, and ballparked a fixed fee cost of approximately 1/2 of the next best (primarily offshore) development estimate they had on the table. Seems like a no-brainer, right?

The Double-Edged Sword of Customer Data

Many companies see Customer Relationship Management (CRM) software as an incredible opportunity to enhance their share of wallet of their customers. For large-scale retailers like Wal-Mart, Target or Albertson's, the ability to maintain detailed transaction-level data, when coupled with advanced data mining and analytics tools promises the ability to offer customers the right promotions at the right time as well as better predicting what inventory to have available at which store. This Sunday's New York Times led the business section with just such a tale about Wal-Mart and their use of data mining tools to know that they should get beer and strawberry toaster pastries to stores in regions under threat from Hurricane Frances. (I'm not kidding about the Poptarts, they apparently are big sellers before a hurricane.) But there is a potential downside to having all that data as well.

Project Success Rates Revisted: Gartner on Bite-Size Software

A few days ago I wrote about the downward trend in project success rates, one of the hidden reasons I mentioned was the increase in large enterprise application and ERP upgrades over the past year. As I mentioned, one of the downsides of the suite or all-in-one approaches taken by large vendors is the enormous, and consequently costly and risk-prone, projects to implement or upgrade those application suites.

Computerworld reports on Gartner Group's recommendations that software manufacturers move to offering more "bite-size" software options for companies, to give them the flexibility to upgrade components of their systems asynchronously, without having to roll out an entire new enterprise application suite just to get the new warehouse management functionality, for example. Of course the additional benefit to companies would be that such a "bite size" component approach would also reinvigorate large ERP vendor competition from Best-of-Breed niche players in particular segments. I find it questionable how much motivation the large vendors such as SAP or Oracle would have to break their applications into these bite-sized chunks, especially as they are already hungry for ways to drive additional revenue. And then of course, there is the issue of integrating all of these bite-sized pieces into a meal fit for a global enterprise. As I have written, integration projects have their own challenges as well.

IT-Savvy Board Representation

A couple of weeks back, Information Week had a cover story on CIOs in the boardroom ("Tech-Smart Boards") The article points to research indicating that those firms with an IT expert on the board achieve 6.4% higher shareholder returns than the average global company.

In many respects, this makes sense. I have often argued that the importance for business leaders in understanding IT is two-fold, both the positive impact that IT can have on an organization, and the negative impact bad IT can have on an organization. Since failures by IT, in the form of overruns, have a direct impact on bottom-line profitability, failures have a very visible cost, especially for stocks that float largely on a P/E metric. However, there is more to this issue to consider for companies considering filling open board seats.

Project Success Rates Drop in 2004 (And the hidden reasons why)

Frank Hayes wrote in ComputerWorld today about the preliminary results of the annual Standish Group study on IT project failure rates. They are actually up from last year. This year saw 28% of IT projects were entirely successful (delivered expected functionality within budget) and 18% were canceled before completion - complete failures. Last year's study had things at 34% - 18%. Apparently the numbers are not yet finished being tabulated and analyzed, but Hayes learned from Standish that there were a few things of note:

1) Projects are getting bigger again, and we know from experience that big projects are more likely to fail

2) Larger projects have meant a return to more traditional development schedules

3) Lack of user involvement has gone back into the #1 spot for project failure. (Last year's #1, lack of executive support is still running a tight second).

The obvious advice is to work to keep projects small. Hayes correctly identifies well-known reasons smaller projects are more likely to succeed: fewer people means less communication and management overhead; small projects can more easily be developed iteratively with a high degree of user involvement; finally, they avoid the corporate politics that can come to pass with large projects.