IT Project Governance
Prof. Dr. Juliana Sutanto
Chair of Management Information Systems (MIS)
Scope of Work
Strategic
Portfolio Management The continuous process of identifying, selecting, and managing the optimum set of Portfolio investments to realize maximum business value.
Tactical
Project management
The application of knowledge, skills, tools, and techniques to Project activities to meet the Project requirements
Sources: • Chevron
• Gartner Group • PMI Combined Standards Glossary (2nd ed.)
Scope of Initiatives
IT
Business/IT
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Enterprise
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Agenda
• IT Development
• IT Implementation
• IT Outsourcing
– Vendor Selection
• IT Offshoring
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IT Project Phases
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Alternative IT Development Approaches
Approaches
Description
Focus
Traditional System Life Cycle
Go‐through a fixed sequence of steps with sign‐offs after each step and careful documentation.
Prototyping
Quickly develop a working model of the system; use the model to gain experience and decide how the final system should operate.
Application Packages
Purchase application software from a vendor; customize the software if necessary.
End‐User Development
Provide tools and support that make it practical for end users to develop their own information systems.
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Comparison
Approach
Traditional
System Life
Cycle
Prototyping
Advantages
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Application
Packages
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End-User
Development
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Disadvantages
Systematic development processes
Enforces quality by maintaining standards
Less likely to make mistakes or have
Omissions
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Helps clarify user requirements
Helps verify design feasibility
Promotes user participation
May produce part of the final system
„
Software exists (& can be tried out)
Software has been used for similar problems
elsewhere
Shortcuts delay for system development
Documentation Available
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By pass the IT Dept and avoids delays
User controls the application & can change it
as needed
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Excess documentation
Problematic Sign-offs
Long Process
(Unclear user requirements)
Inadequate problem analysis
User may not give up the prototype
May require “super-programmers”
Confusion completion
Controlled by vendor
Package’s limitations may prevent desired
business processes
May be difficult to customize
Lack of intimate knowledge of the system
System Quality
May eventually require more consulting &
maintenance effort from the IT Dept.
(Alter, 2002)
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Hybrid Approaches
• Examples:
–
Use a Prototype as part of the Traditional System Life
Cycle
–
Use a small Application Package as a Prototype
–
Adopt aspects of a Traditional System Life Cycle to
purchasing an Application Package
–
Add End-User Development component to Traditional
System Life Cycle
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Two Antithetical Development
Approaches
1. MDA (Model Driven Architecture)
2. XP (eXtreme Programming)
• Both of them can lower development costs?
(Alter, 2002)
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1. MDA
• Yet another architectural scheme
• Start with a Platform Independent Model (PIM)
which lives forever
• Then translate it (using automated tools) to a
Platform Specific Model (PSM)
(Alter, 2002)
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1. MDA
• Sponsored by the OMG
• Its underlying technologies, XML and UML are
widely accepted standards
• In practice, very tool dependent
(Alter, 2002)
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2. XP
• Assume:
“organizations evolve so rapidly that bothering to
set up a highly detailed architecture (prior to
beginning coding) is a waste of time”
(Alter, 2002)
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2. XP
• Can be viewed as a form of rationalized RAD
• No requirements/design effort can anticipate
change. It’s inevitable – embrace it, prepare to
support it.
(Alter, 2002)
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2. XP
• OO Languages and development methodologies
have been successful in allowing big projects to
be composed from modular components
• Allow each component to be an RAD project,
– Quick initial development
– Constantly evolving as inevitable changes are
discovered
(Alter, 2002)
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2. XP
• Program in pairs (continuous mutual code review)
• No specialization
– Programmers = architects = designers = analysts
– Continuous changes (toward simplification) are
encouraged at any level (code to architecture) at
any time
• Development is driven by tests
• Integrate immediately after development and
successful unit testing
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(Alter, 2002)
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Both techniques have success stories?
• XP works for extraordinarily talented and flexible
development teams in highly volatile
environments
• MDA works in more stable environments with
more traditional “big shop” development teams
(Alter, 2002)
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Agenda
• IT Development
• IT Implementation
• IT Outsourcing
– Vendor Selection
• IT Offshoring
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IT Implementation
Conversion Strategy
• Direct Cutover (Big Bang)
• Parallel Strategy
• Phased Approach
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Tektronix Case Example
• Spent around 2 months ensuring that Oracle could do what
Tektronix needed
• Phased implementation approach
– 5 major sub-projects
1. Implement financial management system (FINANCIALS)
2. Implement order management/accounts receivable (OMAR) in the
1st division
3. Implement OMAR in the 2nd division
4. Implement OMAR in the 3rd division
5. Global rollout
– Financials were implemented in parallel with OMAR at the 1st division
– Implement in the US first
(Harvard Business School, 1999)
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Tektronix Case Example
(Harvard Business School, 1999)
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Tektronix Case Example
• Total costs: approx. $55 million
• Total time taken: around 6 years
• Results:
– Finished goods inventory visibility regardless of where
in the world it was located
– Same day shipments rise from 15% to nearly 75%
– Cycle time expended in obtaining credit approvals,
from over 24 hours to virtually 0 hour
(Harvard Business School, 1999)
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Cisco Case Example
• Spent 10 days writing RFP, giving vendors 2 weeks to
respond. After a 75-day selection process, Oracle won
• Big bang implementation approach:
1.
2.
3.
4.
Demonstrate software’s capacity to take a Cisco order all
the way “from quote to cash”
Make the system works: generate detailed scripts of
procedures used to complete a business process
Test the system
Test the full system & Assess readiness to “go live”
(Harvard Business School, 2002)
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Cisco Case Example
• Total costs: approx. $15 million
• Total time taken: around 9 months
• Results?
(Harvard Business School, 2002)
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Agenda
• IT Development
• IT Implementation
• IT Outsourcing
– Vendor Selection
• IT Offshoring
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Why Outsourcing IT?
• Vendor Economics of Scale
– Cost Reduction
– To Increase Shareholder’s Value
• Vendor Specialization
– Improve Performance
– To Focus on Core Competence
• To Provide IT Professionals Better Career Prospects
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Types of IT Outsourcing
Why Finding the Right Vendor is Important?
• To ensure continuity
• To potentially gain a strategic partner
(Bogue 2005)
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Vendor Selection Process
(NPower Network)
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Vendor’s Competencies
(Willcocks et al. 2009)
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Some Criteria for Vendor Selection
• People Fit
• Cost
–
–
–
–
–
–
• Technical Fit
–
–
–
–
–
Completeness
Ease of Use
Documentation
Transportability
Expandability
Purchase Price
Customization Cost
Training Cost
Maintenance Cost
Consulting Charges
Conversion Costs
• Financial Strength
• Track Record
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Sample Evaluation Matrix
(NPower Network)
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Hidden Costs of IT Outsourcing
Vendor Search
&
Contracting
Costs
Original Idea
to Outsource
•
Initial
Transition
Costs
Cost of Managing the
IT‐Outsourcing
Effort
Post‐IT‐
Outsourcing
Transition
Costs
Time
Change of IT Vendor or
Reintegration of IT
Beginning of the
IT‐Outsourcing
Relationship
Reducing Hidden Costs
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Choose activities that are safe to outsource
Spend some time researching vendors
Contract or hire people with outsourcing experience
Draft tight contracts
Cultivate the vendor relationship
Keep key IT people in-house
(Barthélemy, 2001)
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The Golden Triangle
Time
Time
Budget
Quality/Scope
Budget
Time
Budget
Quality/Scope
Quality/Scope
Quality
& Scope
Budget
Time
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IT Outsourcing Management
• Relationship with vendor must be
aligned with the strategic intents
underlying outsourcing initiative
– IT improvement
• Do IT better
– Business impact
• Use IT to achieve better business
results
– Commercial exploitation
• Exploit IT assets externally
(DiRomualdo & Gurbaxani, 1998)
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Eastman Kodak Case
•
Best-of-Breed IT Outsourcing Strategy with 4 Main Suppliers
•
Relationships with vendors
– Collaborative; not adversarial
– Long-term mutual benefits; not short-term
– Making systemic improvements on a global basis; not local
•
Results
– IT capital costs dropped 90%
– PC support costs dropped 5-10%
– Mainframe operations costs were cut 10-15%
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Agenda
• IT Development
• IT Implementation
• IT Outsourcing
– Vendor Selection
• IT Offshoring
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Offshoring Trends
•
Rising spend on offshore outsourcing for IT and business services
– > $55 billion in 2008
– Annual growth rate of 20% over the next 5 years
•
Multi-sourcing
•
India’s changing role and China’s promise
– India and China are increasing their own offshoring work to other
countries
•
Emerging country competition (non-BRIC)
– Shared language, culture and/or history continue to influence
purchasing decisions (e.g. France to Northern Africa, UK to South
Africa, USA to the Philippines)
•
Near-shoring vs long-run “bestshoring”
(Willcocks et al. 2009)
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Offshoring Trends
(Willcocks et al. 2009)
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Countries Attractiveness – Key Factors
1. Costs
– Labor costs
– Infrastructure costs
– Corporate taxes
(Willcocks et al. 2009)
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Countries Attractiveness – Key Factors
2. Skills availability
(Willcocks et al. 2009)
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Countries Attractiveness – Key Factors
3. Environment
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Government support
Business environment
Living environment
Accessibility
(Willcocks et al. 2009)
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Countries Attractiveness – Key Factors
4. Infrastructure quality
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Telecoms and IT
Real estate
Transportation
Power supply
(Willcocks et al. 2009)
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Countries Attractiveness – Key Factors
5. Risk Profile
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Security
Disruptive events
Regulatory risks
Macroeconomic risks
Intellectual property risk
(Willcocks et al. 2009)
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Where will you offshore your IT?
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Takeaways
• IT development approaches (traditional & hybrid)
• IT implementation approaches
– “One-size does not fit all”
• IT vendor selection processes and criteria
• IT offshore
– Countries attractiveness
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References
•
Alter, S. Information Systems, Prentice Hall, 2002
•
Barthélemy, J. The Hidden Costs of IT Outsourcing, Sloan Management Review, 2001,
pp.60-69
•
Bogue, R.L. Three keys to selecting the right vendor for your next project, TechRepublic,
2005
•
Cisco Systems, Inc.: Implementing ERP, HBS, 2002
•
DiRomualdo, A. & Gurbaxani, V. Strategic Intent for IT Outsourcing, Sloan Management
Review, 1998, pp.67-80
•
NPower Network, Selecting the Right Technology Vendor
•
Tektronix, Inc.: Global ERP Implementation, HBS, 1999
•
Willcocks, L., Griffiths, C., Kotlarsky, J. Beyond BRIC: Offshoring in non-BRIC countries:
Egypt – a new growth market, LSE Outsourcing Unit report, 2009
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Next Week Group Presentation
Harley
1. Based on the information in the case, which
provider would you select (and why)?
2. What is your overall assessment of Harley’s
approach to enterprise software selection?
What (if anything) would you have done
differently?
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