Service and solutions providers in the IT industry need to follow the example of project management in the construction industry to ensure they don`t get their fingers burnt, says Richard Firth, chairman of IT consulting and software development house MIP Holdings.
"In the construction industry, every project is strictly controlled and governed by pre-determined deadlines based on the realistic expectations of the abilities of the construction companies and allied contractors and sub-contractors to deliver. Every step of the construction project is documented, proportions are measured, quantities of materials and labour requirements assessed and the attendant costs and times required to complete the project carefully calculated. The thumb suckers don`t last long in construction," says Firth.
In the construction industry, regular progress reports, project and site meetings ensure the project keeps to deadline. Unforeseen obstacles that crop up are factored into the equation, expectations are tempered, and when deadlines are not met, explanations are required and penalties are levied. Clients use these penalty clauses to ensure that contractors operate as professionally and diligently as possible.
"If these rules and parameters were to be transferred to IT industry, there would be a major turnaround in the modus operandi of the IT service providers," says Firth.
"It could become a reality if project managers were given sharper teeth and more dedicated, professional project managers were used to drive projects. It is just as important for the client, the outsourcee, to have internal project managers to manage the relationship with the service providers, as is the case in the construction industry.
"Professional IT project managers are ideally people who have a strong IT background, who understand all aspects of IT costing and can protect the client against unscrupulous service providers. Accountants and other non-IT professionals are not appropriate as they have no point of reference as to the true cost of IT service provision. Nor do they always understand the full implications and requirements of an IT project. They cannot detect where prices are being inflated or where deadlines are being unnecessarily extended."
Firth maintains that many IT service providers inflate their prices and extend their deadlines to cover up the failings of their weak internal management structures.
"The IT industry has virtually begun to believe its own publicity and its own excuses for late implementation and failed projects. The time has come for outsourcing service providers to develop a conscience," he says. Outsourcees can begin to build protective penalty clauses by including key performance indicators into outsourcing contracts. For example, when contracting a software house to develop a new business administration system, the client needs to insist that the new system will result in increased sales, reduced costs, improved lead times and reduced stock levels.
"These indicators have to be measurable, and the contract needs to stipulate the period of time required for the client to establish if the system is delivering these benefits. To do this, the client needs to document where his business is before the new system is put in place and then monitor the progress after the system has gone live.
"One of the best motivators to achieving effective systems is to build in a shared risk/reward factor so that the service provider has everything to gain from delivering a successful system or service. For example, by paying the IT service company per transaction or per client; or by allowing the service provider to sell certain aspects of the system outside the client`s industry.
"Outsourcees also need to understand that when they set unrealistic deadlines, their service provider`s only real recourse is to cut down on testing time to the detriment of the client.
"Very often IT companies win contracts based on the affability of the sales team. They introduce the feel good factor and they articulate IT concepts better than their competitors. Based on this superficial window dressing, fortunes are gambled and rewards are few."
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