Is Big Bad?
commentary The days of the "big bang" project are numbered with businesses now demanding real returns from day one.
National Australia Bank was recently reported to have cut its AU$1 billion technology project spending by up to AU$400 million, after years of criticism over poor management, rising costs, and slow progress. Most of the other banks abandoned last "big bang" projects over the last 1 to 2 years, reflecting the higher risk (and generally dubious return on investment) of these projects, that often took years to completion.
Late last year, Tony Boyd wrote in The Australian Financial Review that "Instead of the big bang approach, now virtually dead, the banks are undertaking discrete strategic initiatives that can be closely tracked and implemented within tight time frames".
On the other hand, Andrew Birmingham of The Australian wrote only a few months ago: "They're back. Huge IT projects are returning to the Australian business landscape" citing Victoria's AU$100 million, whole-of-government Rosetta project and its AU$320 million HealthSmart initiative. In the private sector, there's Woolworth's AU$1 billion supply chain integration initiative, Coles Myer's AU$604 million Project Refresh, and Commonwealth Bank, all of which have large-scale projects planned or underway."
There has also been a reported shortfall in IT auditors, driven partly by tighter corporate governance standards but also by the need for skilled in-house staff to manage complex IT projects.
Sheamus Causer, the Associate Director of Protiviti (an IT auditing and risk management consulting company) identified a number of key factors in this demand for IT auditing skill, including pent-up demand for large IT projects, which is fuelling the shortage as organisations begin rolling out major initiatives.
A recent survey of 956 business IT leaders worldwide, published by the Gartner Executive Programs unit, found that outsourcing remains a key area of interest for businesses. Most CIOs were considering outsourcing specific operations to achieve lower overheads, rather than the more involved practice of business process outsourcing (where a specific business operation, such as transactions processing, is farmed out for strategic as well as financial purposes).
There has been a clear shift in opinion away from large-scale outsourcing, although not necessarily an abandonment of large-scale projects. This reflects the realisation that while the outsourcers arguably have better processes and systems, enabling them to provide IT services more cost-effectively, these cost savings are not always fulfilled in practice.
Dinsha Palkhiwala, Project Manager for the University of NSW's e-learning initiative, sums up the survey result when he says: "I came in after the organisation had outsourced one of its critical core systems to an IT giant. In addition, there were dozens of subcontractors working on the project, but without any clear definition of who was doing what."
A Gartner survey last year of over 1000 outsourcing contracts issued over the past 14 years found the average duration of deals was about six years, compared to eight to 10 years in the mid 1990s.
Customers are signing smaller deals of a shorter duration, with more flexibility and an ability to keep key skills in-house. According to Gartner's Asia-Pacific sourcing analyst Jim Longwood, customers are simply not interested in long-term, single-supplier contracts any more.
Here's a final statistic to support the argument of big versus small: the Standish Group released its 10th annual CHAOS study last year (having reviewed over 40,000 IT projects in the last decade) and said 34 percent of the projects in its study were regarded as successful, compared with 16 percent when Standish began surveys.
So what's the bottom line? The Big Project is still around. However, it is subject to much tighter governance and is expected to deliver results (that's bottom line savings) over the life of the project, not just the promise of gold at the end. And it's being rolled out by a specialist IT supplier or partner, rather than an outsourcer as part of a whole-of-business arrangement.
Oliver Descoeudres is marketing manager at network IP/Internet network infrastructure builder and solutions provider NetStar Australia. He can be contacted at marketing@netstarnetworks.com or on 02 9805 9759.
This article was first published in Technology & Business magazine.
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