Save your IT project from the scrap heap
- 01 February, 2009 22:00
To weather the current economic maelstrom, enterprises not only are reducing head count but also are cutting back on ambitious or long-term projects in IT. Knowing how best to keep your IT project in the pipeline could mean taking a cue from those best versed in achieving project approval: outside consultants.
"Without a doubt, companies are cutting back significantly this year," notes John Gardner, CEO of Integrative Logic, a data-driven marketing group that helps its clients build customer loyalty. "They're getting pressure to optimize every dollar to either stop the bleeding or start the recovery. From our perspective, the key is showing them at the finest level possible that continuing with our initiatives will not cut their costs but help generate revenue."
[ Formore tips on surviving the downturn, see " IT survivor: 7 tips for career growth in tight times" and " 20 more IT mistakes to avoid." ]
What's true for consultants such as Integrative Logic is equally true for IT managers looking to kick-start an internal project or to keep the project funding flowing. Those who are best at proving the value of their projects will win. And when it comes to uncertain times, keeping your project off the chopping block can end up saving your skin -- and even enhance your career. Here are six ways to do it.
IT project survival tip No. 1: Work the numbers
To paraphrase Benjamin Disraeli, there are three kinds of lies: lies, damn lies, and ROI calculations for IT projects.
To be sure, no company will pour money into IT without a strong case that the business will get something in return. For you, however, the issue will be to choose the right metrics and present them well. After all, calculating true return on investment goes beyond demonstrating cost reduction or bottom-line enhancement. Worse, top brass are no longer as likely to let simplistic metrics pull the wool over their eyes.
"As we move deeper into belt-tightening, we are seeing more and more ROI calculations being dismissed," says Esteban Kolsky, vice president of eVergence, a strategic consulting and managed services firm. "Most ROI calculations from vendors are flawed toward magical and large returns, and most calculations from users are too simplistic and unreliable. Bottom line: CEOs and CFOs don't believe them that much anymore."
Case studies that show how other organizations implemented similar projects and achieved positive results may have more credibility with management teams than straight ROI projections, says Kolsky.
Though numbers can't be rejected entirely, the kinds of numbers you use should vary depending on the ultimate goals of the project, notes Arabinda Roy, senior project manager at software services vendor Data Inc.
"Despite being a great decision-making tool, ROI is often a misleading indicator for deciding whether a project should be pursued or not," says Roy.
If the project aims at reducing head count, inventory, or transaction costs, so-called hard ROI numbers may be sufficient, notes Roy. But for projects with less measurable aims -- such as improving the business environment or coping with changes in the competitive landscape -- soft ROI, such as the increase in growth potential or business value as a result of improved relationships, comes into play. Here, demonstrating the value of your project can prove tricky, but if you focus on value hidden in these areas and make a strong case, you will significantly improve the likelihood that your IT project doesn't get scuttled.
But don't focus too narrowly on your project's niche lest you lose sight of the big picture.
IT managers also need to step back and look at the impact the project could have on the entire organization, notes Lou Trebino, CIO of Harry Fox Agency, an online licensing business for music publishers.
"You need to look at the opportunity costs," Trebino says. "What are we not going to be able to do, in terms of people and dollars, because we took on this project? Will we be able to do more or do what we do more effectively? Is this what we need to have a competitive edge in the marketplace? It can't just be cool -- there needs to be real competitive advantage."
Jon Rider, CIO for Gilbane, a $3.5 billion construction and real estate firm, says business need is the true ROI. If the business has asked for IT's hand in a project, that should be enough.
"If you're doing an IT project that is either not driven by the business or does not have direct bottom-line financial impact to the company, you probably should not be doing the project in the first place," he says. "Would you have the business or IT shop do an ROI on something as basic as an e-mail server? No one would tell you, 'There is no ROI, so we don't need it.' The business need bypasses the requirement for IT to sell an ROI back to those who requested it in the first place."
IT project survival tip No. 2: Talk like a CFO
Bruce Culbert, CEO of IT recruiting firm iSymmetry, says he recently helped convince a national retailer to build its own social networking platform to cull feedback and ideas from its customers.
Despite the cost -- a seven-figure budget over the next two to three years -- the retailer approved the investment "because the cost of not doing the project in terms of dissatisfied and lost customers was far greater than the addition of new IT capabilities," says Culbert.
In tough economic times, companies look to hold on to the customers they already have, he adds. Projects that reduce customer retention costs or increase the efficiency of marketing campaigns are more likely to get a green light.
But even the most ruthless, cost-slashing IT project can die a swift death if it's pitched in language your CFO can't understand -- and everybody talks about ROI just a little differently, says Culbert.
"You need to have a sound understanding of whatever language your company works in," he explains. "Do they use internal rate of return, payback period, time to value? Sometimes business leaders don't always sync up to the value language of the company. If capital is involved, you need to understand the process your finance department uses to approve the budget and get it into the language they speak."
Greg Baker, CFO of managed services provider Logicalis, agrees.
"Business case assumptions must be thoughtful and clearly supported in terms a CFO will understand," he says. "Include metrics on power usage, maintenance contracts, and head-count savings. These often can't clearly be seen until the next fiscal year. CFOs crave cost-control drivers that help manage long-term planning."
And if you can show payback for an IT investment over 18 months or less, even better. Finance officers love to recover the cost of tech assets before they're fully depreciated, says Baker.
IT project survival tip No. 3: Embrace optimism
All projects rely on assumptions. The bigger the project, the bigger the assumptions. Sometimes the key to getting your project approved is simply a matter of assuming the best rather than the worst.
Adam Nelson, director of IT consulting at Keane, tells the story of a statewide ERP project initiated six years ago. The ambitious project aimed to consolidate the financial, procurement, and HR resources of more than 50 state agencies on a single platform. Based on the initial projections of the IT professional services firm hired to do the job, the state legislature approved a fixed $68 million for the project, which was slated to take two to three years and produce up to $117 million in cost savings.
Well, that didn't happen. After two years, the project's original contractors asked for more money, got rebuffed, and left the project. Two years later, a second firm that had been brought in to finish the project did the same thing. The state government ended up taking control of the program.
"The reality is that if the original IT company had been 100 percent honest and said that this project would cost a minimum of $90 million and take at least five years, the legislature might have said no," says Nelson. "The optimistic financial picture probably seemed necessary to obtain sponsorship and budget, but the numbers were simply unrealistic."
Nelson adds that the ERP project is finally on the road to success, though it's still not fully deployed and its ROI will likely be much different than what was projected at the outset.
Yet without those initial rosy projections, the project would never have gotten off the ground -- and it needed to get off the ground, says Nelson. It really needed more accurate financials, supported by more standardized program management and earned value, more oversight, and smaller, more frequent milestones.
"In my experience, it's better to be transparent and realistic about everything, but there's no reason you shouldn't add assumptions and budget for contingencies," says Nelson. "I would never presume to ask for 100 percent of a project's costs initially because I don't know 100 percent of the project requirements."
Todd Lant, director of corporate IT at Blackbaud, a technology solutions provider specializing in nonprofits, recommends IT managers take a staged approach when pushing ambitious projects, one that relies on shorter milestones with metrics tied to future funding.
"If you cannot get funding for the whole project because of skepticism of deliverability or payback, ask for funding in phases," says Lant. "Each phase can have a checkpoint where [progress] is measured and funding for the next phase is approved or denied. If the business isn't happy with progress or results, there is much less risk."
IT project survival tip No. 4: Scale back to move forward
Keeping your project off the scrap heap may mean settling for a piece of the pie instead of the whole thing and hoping you can go back later for seconds.
As both CFO and acting CIO of Thomaston Savings Bank, a $530 million community bank, Steve Lewis sees IT projects from both perspectives.
But what Lewis saw last fall was a rapidly expanding datacenter that would start to run out of space and storage in less than two years, coupled with a management team reluctant to commit a lot of cash to projects during the middle of a global economic crisis.
So he brought in Presidio Networked Solutions, a managed services firm. Presidio proposed a virtualization solution using VMware and EMC storage that would cost in the neighborhood of $300,000.
That's too rich a neighborhood, Lewis replied. So instead of taking the bid to the bank's senior management budget committee for almost certain rejection, he worked with Presidio to scale it back.
Poring over the numbers, Lewis and Presidio realized they were really looking at one project with two distinct phases: virtualization and disaster recovery/business continuity, each of which would cost roughly the same.
"When you ask for a $300,000 project, it opens some eyes, especially in this economy," says Lewis. "Breaking it into pieces made it a much more presentable case."
Presidio also helped Lewis build his ROI argument, using industry-standard metrics to calculate how much the virtualization project would save the bank in power and maintenance costs. Another key argument: As servers are replaced in the datacenter, they can be farmed out to branch banks, saving them the cost of purchasing new hardware.
"That really made for a good ROI cost-recovery scenario," says Lewis.
Lewis says the bank has cut its tally of physical servers in half and hopes to slash that number in half again before he's through. He expects the project to pay for itself in about two years.
Todd Brinegar, chief marketing officer at Presidio, says the key is to separate what's truly critical to the business from their own wish lists.
"It's the 'want to have' versus the 'have to have' list," says Brinegar. "You need to look across your organization and decide where you need to be today and where you want to take your infrastructure moving forward."
IT project survival tip No. 5: Just do it
All the PowerPoint slides in the world may not convince your bosses to pull the trigger -- or to get out of your way. Sometimes you just have to go for it. And if you can do it with a minimum of risk, so much the better.
Mark Zwartz learned this the hard way when he tried to virtualize his company's datacenter. Zwartz is IT manager for three separate companies -- an insurance company, a hedge fund, and a real estate investment firm -- all owned by the same family in Chicago.
Every IT decision had to pass through the insurance company's CFO, the real estate firm's controller, and the chief of operations for the hedge fund. None knew anything about technology, and none of them really wanted to learn.
For these guys, visiting Zwartz was like going to the doctor; aside from an annual checkup in January when he met with all three companies, the only time he saw them was when they had a problem they needed him to fix.
The company's business continuity plans consisted of a high-availability site that mirrored the primary datacenter, so employees could access company data from home if a disaster struck. But the contract on the high-availability site was expiring, and tests with the Microsoft SharePoint and Exchange servers often failed in any case. The datacenter was maxed out in terms of rack space, the servers were old, and simply renewing the maintenance contracts on them would cost almost as much as replacing them.
Zwartz knew the answer to many of his problems lay in virtualization. But explaining what virtualization actually meant to his technophobe bosses, let alone the benefits, was nearly impossible.
So he began lobbying for virtualization in November 2007. He started by giving his bosses a running countdown -- what month the Exchange e-mail servers were going to run out of storage and what was likely to happen.
He showed them photos of physical servers next to virtual ones, and charts illustrating the cost of knocking down walls to build a bigger datacenter versus using blade servers and VMware. He sent them articles on virtualization and links to Web demos. He gave them jump drives with images of virtual desktops on them. In April 2008, when complaints about Exchange, cooling, and space problems began to mount, he had a 90-minute powwow with the bosses.
"I swear I was looking at ghosts," he says. "Their jaws sagged open, their eyes glazed over. They still could not get their heads around the concept of one virtual server replacing seven physical ones. To them, it seemed like magic. If I'd had any hair left, I'd have pulled it all out."
Then, out of the blue, he got a call from SunGard, which offered a free 90-day beta test of its Virtual Server Replication Services. Zwartz jumped at the offer. He says the service worked so well in his tests that he retired the physical servers at the high-availability site and moved his entire disaster-recovery plan to SunGard last October.
Now, with a successful high-availability virtualization project under his belt, Zwartz was able to convince the insurance firm to go virtual at the production site. The other two firms are waiting to see what happens.
Bottom line: IT managers may have to work extra hard to sell the benefits of technological change without overwhelming decision makers with the details.
"The result of doing -- or not doing -- the project must be clear to the CEO or manager without them having to read a novel or translate tech," says Glenn Phillips, president of Forte Online, an IT consulting and services firm. "If you cannot do nerd-to-English translation, get someone that can."
And if push comes to shove, practical results from a project put in motion can provide all the explanation you need -- assuming you can get away with it.
IT project survival tip No. 6: Murder your pets
Sometimes to get a key project approved, you need to kill one of your pet projects -- or several of them. The ability to choose the initiative that's more beneficial for your business over the long haul will ultimately earn you more support for projects when times are flush.
"Offer to cancel a project that's being supported in exchange for the strategically significant one," suggests Blackbaud's Lant. "This will show that you believe in the value of these key projects and are willing to sacrifice to protect them."
You need to be willing to take a hard look at every new initiative, even those you desperately want, says Johanna Rothman, principal at Rothman Consulting Group and author of Manage It!: Your Guide to Modern, Pragmatic Project Management.
"Be honest and ask about each project, 'Should we do this project at all?'" she says. "If not now, put your project on the project backlog or the parking lot or kill it outright. Senior managers are more likely to fund a project if they think you're optimizing at the organization level rather than at your group's level."
The problem is that managers tend to kill the wrong things, says Nelson. They'll cut longer-term projects that cost more money in favor of cheaper, short-term projects that produce quick wins. In many cases, the success of that short-term project may depend on two or three others that didn't make the cut. Instead, Nelson says, IT managers need to look at their entire portfolio of projects and select those that map closest to the business's long-term strategic objectives.
The good news is that all this slashing can be better for your long-term career prospects.
"Even as R&D and investment projects go away, IT managers should be able to prove every project's worth and not give up," notes Keane's Nelson. "Managing a reduced budget is a better career builder than spending an increase."
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