What Are the Real Costs of Your Technology Project?

As a project recovery specialist who works with organizations to help turn around troubled technology projects, I do a lot of cost evaluations and projections as part of my project review process.

Project budget and costs are topics of much discussion and I have more than once seen red faces and yelling matches between executives because of it. Lack of transparency, unexpected costs, and cost attribution being mostly the reason for such outbursts.

Understanding the real cost of a technology project helps you to determine if you should start, stop, or continue a project. It also helps you with vendor selection and project valuations. It is invaluable input for good decision making.

Total Cost of Ownership (TCO)

The real costs of your technology project can be found through the Total Cost of Ownership (TCO) of the solution your project is implementing.

TCO is an analysis meant to uncover all the lifetime costs that follow from owning a solution. As a result, TCO is sometimes called 'life cycle cost analysis.'

When evaluating the TCO, there are four main types of costs (or buckets) to consider:

1) Acquisition costs
2) Implementation costs
3) Operation costs
4) Improvement costs

The length of the TCO period depends on the expected lifetime of the solution. This can be any number of years, but typically for technology projects five years is used.

So, to estimate the TCO you calculate the cost for each bucket for each year of the chosen lifetime. In the end you add all costs up.

Acquisition Costs

Typically, this bucket will include the outright purchase of hardware and software. It is usually accounted for as a capital expense in the organization’s budget and can be depreciated over time.

There may also be a people component that should be accounted for in determining the total acquisition cost, represented by the time required to evaluate different vendors or solutions.

Additionally, acquisition cost may include the necessary pre-conditions to enable the new technology to function properly, such as new hardware to support a new software platform or the purchase of upgrades to existing hardware and software. In effect, any one-time purchase should be counted towards the acquisition cost of the technology.

With software as a service (SaaS) solutions like Salesforce or ServiceNow your acquisition costs are usually limited to the evaluation process. You will pay for the software on a monthly basis.

Implementation Costs

Once any necessary hardware or software has been acquired, it has to be set up, made operable according to its intended use, and deployed to the intended users. Costs in this category generally consist of the installation of hardware, software, and network connectivity.

Let’s take for example a Salesforce implementation. The increased use of web-based solutions might require a faster, more robust internet connection, which, depending on the organization’s office situation, could require installation costs on the part of the broadband vendor (or even a change in vendor), as well as the time cost of configuring and deploying the system.

Typically the bulk of your implementation costs come from the many people inside your company that will be key to your project’s success. Give a rough estimate of how many hours per week each of them will be involved in the research, implementation, and subsequent maintenance of your Salesforce implementation. In some cases, you may even want to hire a new staff member to oversee your implementation and maintenance.

Additionally, it’s also important to include the cost of training users on the new technology and have some sense of the impact of the change on productivity and efficiency. In almost every case, implementation of a new system causes a short-term dip in efficiency as users get used to working in the new environment. (Understanding that this dip is going to happen and planning how to help users transition through it is an important part of the change management process of a project.)

Depending on accounting interpretations, much of the implementation cost may be treated as a capital expense, and it is often the largest visible cost of a project, particularly when using external consultants to do the implementation.

Other fees to consider for a Salesforce implementation include additional licenses for your implementation partners as they’ll need their own login, a developer sandbox license for development and testing in an isolated environment, and a license for an API user. An API user will be how your third-party apps sync with Salesforce so this license needs to be separate from a user who might leave your organization at some point.

As with acquisition costs, implementation costs are generally one-time expenses, although they may fall within multiple budget years depending on project timing. Training and adoption support don’t usually qualify as capital expenses.

Operation Costs

Although often not highly visible in planning for projects, there are ongoing costs of keeping a new solution up and running in the long run, as well as scaling it to additional users. These are known as operation costs.

Operation costs include warranties, support contracts with external vendors, ongoing license costs and, occasionally, upgrade costs. The project charter must be able to forecast these recurring costs based not just on current numbers, but also on the organization’s planned future state.

For example, if Salesforce costs $25 per user per month with 3,000 current users, but the organization plans to scale it to 5,000 users in three years, the cost will also scale, which can provide an unwelcome surprise from a budgeting perspective unless it’s been planned for from the outset.

In addition to Salesforce licenses, you may need licenses for other applications. This could include a form solution, a payment processing solution, an email marketing solution, and more. After all, one of the biggest reasons people move to the Salesforce ecosystem is the ability to integrate third-party apps.

Additionally, future costs planning must take into account the staff resources necessary to meet the organization’s needs. This could include support or administrative staff for the technology, general technology support to keep up with the organization’s growth, and management capacity to keep up with the organization’s strategic planning.  This capacity may be maintained in-house or provided by external partners. Both having different impact on your TCO.

Improvement Costs

Deploying new or additional functionality or moving into a higher tier of an implemented SaaS solution with more features are typical improvement costs. Custom development and integrations with legacy systems are also very common business needs.

In my opinion you should take a certain percentage of your operation costs and budget these as improvement costs, because this is reality. Fifteen percent is a good value to start discussions.

The Real Costs of Your Project

Now that you've made estimates for each of the four bucket areas for each year of the chosen solution lifetime you can compute your project's Total Cost of Ownership.

With that, you're one step ahead in understanding the real costs of your technology project. You understand now the cost drivers for implementation as well as operation. You can compare different solutions as well as offers from different vendors and implementation partners.

You also have 50% of the information you will need for a project valuation. The other 50% of information you need are the benefits of your project which I cover in my article "What Are the Real Benefits of Your Technology Project".

In a nutshell: In order to make a good decision about starting, continuing, or ending a project you need to understand the real costs of the project. The Total Cost of Ownership (TCO) is the only metric that provides this understanding.

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Case Study 8: How Hertz Paid Accenture $32 Million for a Website That Never Went Live

Car rental giant Hertz is suing consultant mammoth Accenture over a website redesign that ended in something that never saw daylight.

The U.S. corporation Hertz operates the car rental brands Hertz, Dollar, and Thrifty, and has approximately 10,200 corporate and franchise locations throughout the world.

With the rapid growth of rideshare apps like Uber and Lift, increased competition, and falling used car prices, Hertz has struggled with profitability over the last five years, and the stock price has fallen 85 percent since then. The company has replaced its CEO twice over the same period, most recently at the start of 2017.

Hertz hired Accenture in August 2016 to completely revamp its online presence. The new site was due to go live in December 2017, but this had to be delayed to January 2018. A second delay put the new go-live date to April 2018, which was then also missed.

As Hertz endured the delays, it realized that there was a nasty situation at hand: the product and design apparently didn't do half of what was specified, and even that was still not finished. "By that point, Hertz no longer had any confidence that Accenture was capable of completing the project, and Hertz terminated Accenture," the car rental company complained in a lawsuit against Accenture in New York in April this year.

Hertz is suing for the $32 million it paid Accenture in fees, and it wants more millions to cover the cost of fixing the mess. "Accenture never delivered a functional website or mobile app," Hertz claims.

Don’t let your project fail like this one!

Discover here how I can help you turn it into a success.

For a list of all my project failure case studies just click here.

Timeline of Events

2015

Hertz hires Tyler Best as the new chief information officer (CIO) and creates a plan to transform the Hertz IT environment, which has become very complex over the years. According to a presentation at a MuleSoft conference in 2018 they had at the time around 1,800 IT systems, 6 database vendors, and 30 rental processing systems. In order to add a new product, Hertz needs to make 18 system changes.

The company launches a major end-to-end technology upgrade program that includes outsourcing operations of its legacy systems to IBM, and designing and building a cloud-based infrastructure for Hertz’s five core platforms: digital, CRM fleet management and fleet accounting, reservations, and rentals. The overall cost of the program is expected to be in excess of $400M.

First half of 2016

Hertz wants to redefine the customer experience of its market-leading brand of the same name by creating a new, modern website and mobile applications.

The envisioned solution is intended to be readily extendable to other Hertz brands, like Dollar and Thrifty.

Hertz engages Accenture to assist in validating its strategy and planning for the project. The engagement is governed by a consulting services agreement between Hertz and Accenture that has been in place since 2004.

The program appears to have adopted an “agile” methodology with the use of product owners and the application of sprints to deliver iterations of the solution.

At the same time Hertz is implementing a large MuleSoft middleware and Oracle enterprise resource planning (ERP) project to upgrade the firm’s transaction processing capabilities.

Second half of 2016

Hertz requests proposals from several of the leading technology services providers to implement the new solution.

They eventually select Accenture, relying on Accenture’s claimed world-class expertise in website and mobile application development.

Hertz completes outsourcing many of its U.S. IT jobs to IBM in efforts to cut back on office costs.

Accenture and Hertz engage in phase 1 of the project, producing a “solution blueprint” that describes the functionality, business processes, technology, and security aspects of the envisioned solution. Fees paid to Accenture for this phase total $7M.

First half of 2017

Hertz announces a new CEO and board member, Kathryn Marinello.

Accenture and Hertz enter into discussions about phase 2 of the project to design, build, test, validate, and deploy the website, mobile applications, and other deliverables.

During an investor presentation in May, Hertz commits to delivering the “modernized e-commerce platform” by the end of 2017.

Accenture removes the product manager and a project architect from the project.

Second half of 2017

Accenture and Hertz sign a formal agreement for phase 2 with fees totaling $26M for this portion of the project. The contract states that Accenture will provide “project management” services, including Accenture’s obligation to “plan, control, and lead the execution of Accenture’s scope of services.” The agreement includes language regarding “a focused objective of launching the [website and mobile applications] platforms and experience in December 2017.”

Soon after signing the agreement Accenture reports that it will not be able to meet the December 2017 go-live date and requests a one-month extension to January 2018. Not long afterward, the go-live date is further postponed until April 2018.

At the end of the year Hertz and Accenture sign a change request. According to Accenture, this change order altered the party’s responsibilities under the phase 2 scope of work (SOW) and includes language in which both parties release any claims “arising out of or related to the need to provide Services beyond” the project's estimated December 2017 launch date, and agree that they will not bring any suit related to delays in the project.

2018

Hertz pays Accenture for the work contracted under the SOW and the first change request. A second change request is signed for Accenture to provide additional services for Hertz for an agreed-upon amount of fees.

In April Hertz’s CIO Tyler Best steps down and receives a severance package that is consistent with firing without cause. The CEO, Kathryn Marinello, takes over on an interim basis.

In May Accenture is removed from the project.

In June Hertz hires a new vendor to complete the project. Hertz claims to have spent an additional $10M in fees to correct or replace the work produced by Accenture.

On July 31 Hertz announces Opal Perry as the new CIO. She joins the company from Allstate Insurance.

2019

On April 19, Hertz files a lawsuit against Accenture.

A spokesperson for Accenture tells The Register: "We believe the allegations in this lawsuit are without merit, and we intend to defend our position. Because this is an ongoing legal matter, we decline any further comment."

In May Accenture submits a statement that the damages should be limited to only Accenture’s direct damages capped by Accenture fees and further that Hertz’s claims are barred by the mutual release that both parties entered into as part of the first change request that was signed for the phase 2 SOW.

Hertz responds that the releases agreed on expressly exclude breach of warranty.

According to the letter, the work, which consisted of redesigning the car rental provider’s “website, apps, digital marketing and related services,” unfolded in two phases, the first of which “proceeded relatively smoothly.” The letter acknowledges that phase 2 included “some delays and setbacks” that required the parties to adjust the statement of work twice as planned launch dates came and went.

The letter claims that Hertz and Accenture agreed on these changes to the contract and that the client paid for the first extension period. When Accenture asked to be paid for the second period, however, Hertz claimed it was not obligated to pay “due to perceived deficiencies in Accenture’s work on earlier phases of the project.”

It followed by suing the firm to prevent further requests for payment, stating in its own filing that Accenture “never delivered a functional website or mobile app.”

The letter continues, “Accenture intends to assert counterclaims, including for payment of these past-due invoices.”

On June 7, the judge issues scheduling orders that sets the trial date for March of 2020.

On June 20, 2019, Hertz files an amended lawsuit against Accenture and lays out their case on their claim of deceptive and unfair practices. In doing so, Hertz takes aim at Accenture talent and trashes the team that had worked on the Hertz program.

What Went Wrong

Before we can understand what went wrong we have to understand what was planned to be delivered. Hertz describes the five-layer digital platform architecture below in its suit. They suggest that Accenture recommended this architecture.

Front End Layer – The presentation layer in which the screens and the interface were presented to the users using the JavaScript framework Angular.

Content Management – Adobe Experience Manager (AEM) was the tool of choice to update and revise the content that appears on the website.

Microservices Layer – Composed of code that performed various “services,” such as searching for a Hertz location or for a type of vehicle, writing a review, sending an email to a Hertz representative, etc.

Integration Layer – MuleSoft was the tool of choice to allow the front-end systems to request and receive data from the back-end systems.

Back-End Systems – Hertz’s reservation systems, rewards systems, etc.

Now that we know the plan, we can have a look at the results.

No responsive design

One of the most staggering allegations in Hertz's suit is that Accenture didn't incorporate a responsive design, by which web pages automatically resize to accommodate the visitor's screen size, whether they are using a phone, tablet, desktop, or laptop.

This has been a standard website practice for years, and is even included in the contract that was signed. But somehow the team from Accenture decided that only desktop and mobile versions were needed, according to Hertz.

When Hertz execs asked where the tablet version was, Accenture "demanded hundreds of thousands of dollars in additional fees to deliver the promised medium-sized layout."

No common core

The specification documents defined a common core of libraries to be "a fundamental principle of the design" so that the company could share information and structures across all its companies' websites and apps. And Accenture, well, completely ignored that, according to Hertz.

"Accenture deliberately disregarded the extensibility requirement and wrote the code so that it was specific to the Hertz brand in North America and could not be used for the Hertz global brand or for the Dollar and Thrifty brands," the lawsuit alleged.

Vulnerable code

Hertz states the code that was written by Accenture was terrible and a security nightmare waiting to happen.

"Accenture’s developers wrote the code for the customer-facing e-commerce website in a way that created serious security vulnerabilities and performance problems," it says before noting that "the defects in the front end development code were so pervasive that all of Accenture’s work on that component had to be scrapped."

See "Cloud Computing Threats, Vulnerabilities and Risks" for more insights on this topic.

No experience with used technologies

In its revised suit, Hertz states that Accenture represented that they had “the best talent in the world,” “the skills needed to win,” and that they would “put the right team on the ground day one.”

Hertz claims that they were far from experts in these technologies and that Accenture was deceptive in their marketing claims.

Where the previous point regarding vulnerable code shows that the front-end developers were not familiar with and did not really understand Angular, the Accenture developers were also inexperienced with the Adobe Experience Manager (AEM) code.

The lawsuit complains that Accenture decided to use Adobe's AEM analytics but didn't follow its archetype in either the coding or the file structure "which made the application unreliable and difficult to maintain, as well as making future updates challenging and inefficient."

On top of this Accenture apparently told Hertz that to speed up the production of the website's content management system, it wanted to use something called "RAPID" — and told Hertz it would have to buy licenses for it to do so. Hertz bought the licenses; however, it turned out that Accenture didn't actually know how to use the technology and the quick-fix took longer than it would have without it.

The lawsuit notes: "As Accenture's project leaders acknowledged, Accenture 'spent a good deal of time fighting through integration of RAPID' into Hertz’s environment."

See "Outsourcing Technical Competence Is a Very Bad Idea" for more insights on this topic.

No testing and documentation

Accenture also failed to test the software, Hertz claims, and when it did do tests "they were seriously inadequate, to the point of being misleading." It didn't do real-world testing, we're told, and it didn’t do error handling.

Accenture’s developers also misrepresented the extent of their testing of the code by commenting out portions of the code, so the code appeared to be working.

On top of that, despite having specifically requested that the consultants provide a style guide in an interactive and updateable format — rather than a PDF — Accenture kept providing the guide in PDF format only, Hertz complained.

When Hertz confronted the consultants about the PDF problem, guess what the response was? Yep, it wanted "hundreds of thousands of dollars in additional fees" to cover the cost.

See "The Only Test Plan You Will Ever Need" for more insights on this topic.

A bad ending...

After missing the April deadline the team working on the project was pulled off by Accenture "but their replacements did not have the same level of experience, and a good deal of knowledge was lost in the transition," Hertz states.

Despite having missed the deadline by five months, with no completed solution and slowed down by buggy code and an inexperienced team, Accenture tells Hertz it will cost an additional $10M — on top of the $32M it had already been paid — to finish the project.

How Hertz Could Have Done Things Differently

On July 15th, Accenture delivered their response to the initial Hertz lawsuit. These responses are straight to the point, and they show a number of things that Hertz could have done better.

The following represents a summary of Hertz’s claims (in bold) and Accenture’s responses.

Accenture claimed they had “the best talent” and “the skills needed to win.”

> Hertz’s claims are made on marketing language. “Simply put, no reasonable person, much less a Fortune 500 company planning a multi-million dollar redesign of its digital platforms, could interpret a statement in a marketing presentation that a company had ‘the best talent’ and the ‘the skills you need to win’ as a factual assertion that everyone who ever worked on the project would perform their work flawlessly.”

> Accenture limited its warranty to only what was defined within the contract and expressly excluded all other conditions and representations.

Accenture said they had the best talent in the world and would provide their best team from the start.

> Hertz provided no evidence that Accenture claimed to bring the best Angular JS front-end and AEM back-end coders.

> Accenture had the right under the contract to determine all staffing, including to replace staff at will, with no agreement as to the minimum levels of experience of any particular staff member.

Accenture had the responsibility to deliver the product by December 2017.

> Accenture only had responsibilities to manage the portions of the project for the Accenture scope of services.

> Hertz was responsible for implementing mid-tier and backend integrations, security, and user acceptance testing.

> Hertz was responsible for managing all third parties.

> Hertz was responsible to provide all website content, without which the website could not launch.

Accenture exhibited “extortionist-like” claims, asking for more money to complete work.

> This was not a fixed-price contract and instead, Accenture was paid on a time-and-materials basis. Therefore, there are no circumstances under which an Accenture request for payment would be considered “extortionate.”

Accenture did not properly test the code or comment out sections of the code. 

> Hertz did not provide specific examples of this situation as required by governing law, so Accenture would have the ability to specially respond or defend itself. These claims should be dismissed.

We are entitled to consequential damages as a result of the delay in the program and additional costs to a third party.

> The consulting services agreement signed in 2004 between the companies barred Accenture from being liable “for any consequential, incidental, indirect, special or punitive damage, loss or expense (including but not limited to business interruption, lost business, lost profits, or lost savings)."

Closing Thoughts

This is an incredibly important case for any company that will be engaging systems integrators like Accenture, IBM, Deloitte, EY, and others. This case is an early high-profile case in digital transformation using agile methodologies.

The information available in these suit filings provides insights into how these integrators position themselves in contracts and marketing materials, and how they behave when actively engaged with the buyer.

As with any dispute, there are at least two sides to every story. There are many questions that will need to be answered to understand what really happened, but no matter what the answers are, Hertz did not act as a responsible buyer.

A responsible buyer of third-party systems and systems development will have excellent knowledge, understanding and experience in defining, planning, directing, tracking, controlling and reporting systems development projects. They will know what should be done, when, why and how.

You can delegate authority for doing the project management to the supplier but you cannot delegate responsibility.

In a nutshell: Responsibility for the project — including responsibility for it failing — always rests ultimately with the buyer. 

Don’t let your project fail like this one!

Discover here how I can help you turn it into a success.

For a list of all my project failure case studies just click here.

Sources

> THE HERTZ CORPORATION vs ACCENTURE LLP Civil Action No. 19-3508

> Letter Accenture - Hertz May 17

> Letter Hertz - Accenture May 23

> Presentation Hertz - Mulesoft 2018

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My Talk "Artificial Intelligence and Machine Learning" @ Business Angels Switzerland

Yesterday I gave a 2.5-hour interactive talk about Artificial Intelligence and Machine Learning at BAS Academy in Geneva.

The three main goals of my talk were:

1) Explain the basics of AI and ML by creating an agent that predicts good startups.

2) Discuss applications and use cases for AI and ML.

3) Give the participants a number of questions they can ask startups to better identify good investments in this space.

You will find my slides here at SlideShare.

BAS stands for Business Angels Switzerland, and is an association giving young entrepreneurs the opportunity to present their projects and start-up companies to seasoned investors and successful entrepreneurs to obtain funding and coaching.

The association’s 100 members are split into two sections: the Swiss-German one, based in Zurich, and the Suisse Romande one, based in Lausanne. I am an active angel investor and a member of the selection committee of BAS.

BAS Academy is an initiative to support investors in start-up companies. BAS Academy provides training and networking to help business angels improve their skills. Participation is open to all investors, whether or not they are members of BAS.

When you think such a talk could be of interest to your organization as well, have a look at my speaking page or just contact me.

Henrico can simplify any AI/blockchain/IT topic, summarize it and extract the essence for investors to make proper technical due diligence. Well done! - Managing Director @ Reinhart Capital

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Consensus Is the Absence of Leadership

The title of this article is a famous quote from former prime minister of the United Kingdom Margaret Thatcher. Below is more from her on consensus.

"Ah consensus … the process of abandoning all beliefs, principles, values and policies in search of something in which no one believes, but to which no one objects; the process of avoiding the very issues that have to be solved, merely because you cannot get agreement on the way ahead. What great cause would have been fought and won under the banner 'I stand for consensus'?"

Her rejection of consensus is seen as a reflection of her leadership and her ability to stand by her principles, unlike the modern-day political leaders driven by opinion polls and focus groups. Her saying and doing what she believed was an indication of her authenticity as a leader.

Today, some find issue with her statements — especially in our current non-judgmental world where everyone must be in agreement.

In workplaces today consensus decision-making is often touted as the ultimate solution for all problems. After all, it can increase employee participation and engagement, and thereby increase productivity … right?

Unfortunately, that's far from the case. The problem with consensus thinking is that most people don't understand its dangers. While all people may be created equal, they are certainly not all equals in the workplace. Different roles, responsibilities, objectives, motives, knowledge, skills, and information will make sure of this.

The thought that all employees should have an equal say is simply more politically correct thinking run amok. While I’m a true believer in candor in the workplace, and have always encouraged feedback and input at every level of an organization, this doesn’t mean everyone should have an equal say. They shouldn't.

For an organization or team to function there must be leadership.

Working in teams is not about equality at all; it has nothing to do with consensus. Rather, teamwork is about the alignment of vision with expectations, ensuring team members clearly understand their roles, and making sure they have the right resources to perform their duties with exacting precision.

Consensus thinking is devastating to all things productive.

When a leader asks others what direction to take, what values to believe in, and what purposes the business should be pursuing, he or she is not leading. That leader is, in fact, giving up on leadership.

Being truly interested in your employees' opinions and what they want is both admirable and necessary, but it is not the starting point. Knowing what you as a leader want and the direction your business is pursuing must come first.

As an executive who is bringing a business idea to life by means of a project, the vision must be yours. You cannot delegate it or abdicate it.

In a nutshell: Your role as a leader, as a guiding and inspirational force of your organization, cannot be delegated or shared.

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Interview With Urs Monstein (COO, VP Bank) on Project Sponsorship

For the last decade I have dedicated myself to helping C-level executives to recover troubled technology projects. If there's one thing I've learned in the process, it's that executive project support is priceless.

Engaged executive sponsors help organizations to bridge the communication gap between influencers and implementers, thereby increasing collaboration and support, boosting project success rates, and reducing collective risk.

Urs Monstein is an example of such an engaged project sponsor. I met Urs for the first time about ten years ago when he was leading the post-merger integration of ING Bank (Switzerland) into Julius Baer.

Tell us a little bit about yourself.

I am currently COO of VP Bank, a mid-size bank in Liechtenstein. Beforehand, I was globally responsible for IT at Bank Julius Baer. Over the last two decades, I ran various strategic integration and development projects in the role of both project manager and project sponsor.

Can you tell us something about your experience as a project sponsor?

Looking back about 20 years at the role of project sponsor, I found that smaller projects (< USD 100k) were steered as part of the project portfolio without a dedicated steering committee. The average project volume was between USD 1–5M. Bigger projects beyond USD 10M could have a duration of up to three years.

What do you think is the single most effective thing a project sponsor can do to positively influence a project?

The most effective thing a project sponsor can and should do to positively influence a project is to proactively support the project manager in reaching his goals. In that sense, a project sponsor should:

> Critically assess project progress against the plan in order to detect not yet recognized risks/issues (outside-in view)

> Make decisions the project manager might not be empowered to make, or where the project manager needs support from senior management

> Motivate the entire project team by showing real interest and strong involvement from senior management

> Continuously represent the project and its progress to the executive management.

What do you think is the single most effective thing a project sponsor can do to negatively influence a project?

Insufficient empowerment of the project manager and thus acting as micromanager rather than as a trusted partner to the project.

What was your biggest success as a project sponsor, and why?

Successful delivery of a strategic business project on time and on budget despite complex circumstances (for example, implementation of new technologies, integration of a variety of business applications, and a politically cumbersome environment).

What was your biggest challenge as a project sponsor?

Replacement of a reporting system that was more complex than initially assessed, which led to significant delays and cost overrun. In the end, the system was successfully rolled out as we were able to align the external provider and the internal team towards the common goals and thus inspire them to go the needed extra mile.

What was your biggest failure as a project sponsor, and why?

Initiating the implementation of a new CRM solution despite clear indications that the application did not yet have the needed maturity. Finally, the project needed to be shut down after more than one year. My biggest failure as a project sponsor was the inability to stop the initiation at the very beginning.

How do you determine a project is really necessary and valuable?

Availability of a dedicated business sponsor who feels responsible and accountable for the success of the project delivery and, as such, who is willing to spend the needed time on the project, to actively influence scope management, and to take over investment and running costs of the project delivery in his future budget.

How do you recognize your project is in trouble?

Usually, it's based on experience whilst continuously assessing project progress by assessing project status (this includes spending time with the project team on the ground). Clear signals might be a status that's too positively reported, missing project risks, and demotivated project staff.

What advice would you give to a first-time project sponsor?

Carefully select your project manager (with regards to the person and relationship rather than based on his skills only).

Additionally, I would suggest the following traits:

> Close connection to the project (weekly bilateral meetings with the project manager)

> Periodic spend time with the project team on the ground and engage in conversations.

> Curiosity (asking all the questions which are not reported in the periodic status report).

What are you looking for when selecting a project manager for your project?

> Leadership skills (the capability to lead a team of cross-functional specialists)

> Good personal relationship/trust.

Overall, I select a project manager in the same way as I select senior line managers.

What are you looking for when selecting a steering committee member for your project?

> To assure all stakeholders are included

> To ensure that involved stakeholders are willing to contribute their part in the project whilst taking over personal accountability for the success of the project (in contrast to treating the STC as an “honorary club”).

What is/are your most important lesson(s) learned as a project sponsor?

> In-depth analysis as the be-all and end-all of the project

> Active scope management (with the aim not to enlarge the scope but to assure business success after rollout)

> Adaptation of project organization in the course of the project life-cycle (the initial setup will not necessarily be the right one throughout the entire project duration)

> Timely replacement of project manager and/or project specialists, if needed.

This is the first in a series of interviews with executive project sponsors.

Read more…

Be a Responsible Buyer of Technology

Being a responsible buyer of technology and outsourced software development services, and working well with suppliers during projects are crucial skills for any organization.

Yet, the absence of those skills explains more project failures in third-party projects than any other factor. You will find some prominent examples of these among my project failure case studies.

Some may argue that suppliers should have all the skills required to make their projects a success, but any company relying completely on the skills of a supplier is making themselves dependant on good luck.

If you are not a ‘responsible buyer’ then you risk not spotting when the supplier and/or the project is failing.

A responsible buyer of third-party systems and systems development will have excellent knowledge, understanding and experience in defining, planning, directing, tracking, controlling and reporting systems development projects. They will know what should be done, when, why and how.

In many projects the supplier should be running the above-mentioned processes as part of helping a buyer achieve their target business outcome (after all, the supplier is expected to have done a great many projects of this type). However, this does not mean that the supplier will, in fact, be doing all of those things.

That's why it is vital that the buyer themselves knows what needs to be done.

In most large technology projects, it is excellence in program and project management that is the crucial factor in determining success — not knowledge of technology. This is often true in situations when, for example, a project is being carried out across an organization (especially a global organization); across a group of companies in collaboration; or on behalf of a central marketplace and its participants (such as a stock exchange).

In large business-critical projects neither the supplier nor the buyer should be doing any aspect of the project in isolation, as doing so will increase the risk of failure. This isn’t just a need for transparency, it is a need for active communication plus active confirmation and verification that messages have been received and understood.

The following three excuses for total project failure will never work in court:

1) "I was drunk,"
2) "I thought the buyer or supplier knew what they were doing," and
3) "I thought the buyer or supplier was doing it, not me."

If you are the buyer and you do not have all the necessary skills and experience to be able to define and control important projects (which is perfectly understandable as in most companies they don’t happen very often), there is an easy fix for this problem: Hire a very experienced interim executive to act on your behalf, even if the supplier will still do most of the project management and other work. You can delegate authority for doing the project management to the supplier but you cannot delegate responsibility.

Responsibility for the project — including responsibility for it failing — always rests ultimately with you, the buyer.

Your highly experienced interim executive can assume delegated responsibility on your behalf. However, that means that he or she becomes your authorized representative and therefore you can never blame that person for anything (e.g., in the way you might blame the supplier).

The supplier will thank you for this clarity of thinking around responsibility and authority. Be a responsible buyer of technology — there is nothing worse for a supplier than a buyer who is unable or unwilling to fulfill their responsibilities during an important engagement.

In a nutshell: Responsibility for the project — including responsibility for it failing — always rests ultimately with you, the buyer.

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The 10 Critical Success Factors of Effective Project Sponsorship

An executive project sponsor's role is a difficult one to navigate and execute.

There are many strings pulling you in different directions, especially at the higher levels of management – such as multiple priorities and initiatives that compete for limited organizational resources, capacity, funding, and focus.

You also have a day job and perhaps other projects to support. To be effective you will need to focus on the high impact factors of project sponsorship.

According to extensive research on how executive sponsors influence project success the following ten factors are the most critical for success.

Project Initiation Phase:

1) Set performance standards
2) Select and monitor the project manager
3) Establish priorities

Project Planning Phase:

4) Ensure planning
5) Develop relationships with stakeholders

Project Execution Phase:

6) Ensure adequate and effective communication
7) Maintain relationships with stakeholders
8) Ensure quality

Project Closing Phase:

9) Identify and capture Lessons Learned
10) Ensure that capabilities and benefits are realized

Timothy J. Kloppenborg and Debbie Tesch conducted four separate studies; one study for each of the stages of initiating, planning, executing and closing. In all, more than 1,000 people participated in the research (about one-third executives, one-third managers, and one-third consultants, educators and researchers).

The participants were recruited from professional groups, conferences and networks. About half had more than 25 years of experience. Just over half of the projects were less than one year in duration. About two-thirds of the participants were from the United States. No respondent helped in two consecutive parts of the research (such as focus group and pilot survey) or in the studies of two consecutive stages (such as initiating and planning).

For each study, they started with literature searches, discovering generally more than 100 possible sponsor behaviors. They then conducted focus groups with senior managers from various industries to help document similar behaviors, express ideas more clearly and eliminate irrelevant data.

They conducted pilot surveys to reduce the length of the study and eliminate any possible confusion. Then they conducted large-scale surveys. Finally, for each project stage, they conducted principal components analysis to identify, reduce and confirm both sponsor-behavior factors and project-success factors.

To estimate the effects of sponsor-behavior factors on the project-success factors, a path model was created for each project stage. This identified the core sponsor behaviors that a sponsor should perform at each project stage and the specific success factor each helps achieve.

Detailed findings from the research were reported in the February/March 2014 issue of Project Management Journal.

In a nutshell: Successful project sponsorship isn’t as simple as this list, but it will put you on the right path for the journey.

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