How to take out cost without killing the project
Some major SAP projects are being canceled or postponed, while others are being accelerated – depending on the ROI. We are also seeing organisations looking to reduce the costs of implementations by changing aspects of the way projects are managed.
Soft targets in project budgets include project management, quality assurance reviews or mid project risk reviews. These line items in a project are often viewed as nice to haves and not necessarily material to the project outcome.
In this author’s opinion, good project Governance, project management and adequate risk framework reviews are absolutely essential to delivering the business case for IT and SAP projects, and the need to deliver an adequate return on capital or operational funds committed has never been more critical.
The onus of responsibility is on the IT or business department commissioning the project, and on the implementation partner, to deliver the goods. Both groups have different motivations but ultimately are looking for the same outcome – a successful project that delivers the agreed business benefits.
In an uncertain environment is a natural tendency within the IT department to look to shift the risk as quickly and efficiently as possible outside the organisation. This often includes bundling up projects or parcels of work and looking to guarantee those outcomes through a contract management approach with the implementation partner. Unless well managed with a strong contract and project Governance methodology this approach can rapidly breed distrust and a break down in relations between both parties.
A project that is delivered through managing to the contract is more likely to fail both commercially and from a business benefits basis. It is not practicable to write a contract clean enough to allow a project to be managed completely from the contract itself and attempts to do so will likely fail.
With an increased current level of uncertainty in the IT services market, it is an implementation partner’s natural tendency to try and secure a larger portion of the work available at almost any cost. This leads to a number of potential issues for the clients involved. Clients need to be absolutely certain today that the implementation partner who is promising to deliver the project outcome can actually make this outcome a reality in the timeframe and within the agreed budget.
In today’s tough environment implementation partners may look to scope light (to reduce the initial potential cost) and attempt to vary their way to a profitable project outcome. Or, look to cut their costs to the absolute minimum, often buying the work to keep their team busy, and their consulting teams intact.
Both these scenarios leave the client significantly exposed to the risk that a successful project outcome will not be delivered. They also threaten the long-term viability of the implementation partner through exposure to the significant reputational risk of unsuccessful project outcomes, or financial risk around their ability to deliver contracted deliverables, or their long term financial profitability and security.
- Without over-engineering the approach, there are some simple steps that both the commissioning organisation and implementation partner can take to reduce the potential for a failed project;
- by having the implementation partner involved early in the project process and ensuring they are actively involved in building and verifying the business case, the partner will have a better understanding of the desired business outcome. This will also enable them to better scope and therefore price project delivery, reducing the chance of surprises down the track;
- break the project into smaller deliverables and establish an overall programme of work approach to deliver the business case outcome. This will help ensure successful milestone completion, ensure the project customers get a steady stream of new functionality (as opposed to having to wait for a big bang approach) and increase the potential for an overall successful business outcome;
- prior to starting the project review the scope thoroughly and check for understanding with the team that will ultimately deliver the outcome. This will help to reduce the potential for scope variations mid project and improve likely project success;
- continue to insist on adequate project governance, reporting, business change management and training, risk management (where appropriate) and quality assurance. Without a level of each of these components the opportunity for the project to go off the rails is real and almost inevitable;
- asking the implementation partner to go open book will provide you with assurance that they are not just buying the work, but have a commercially sound model behind the project to help ensure success. Whatever you might think, an implementation partner who delivers a client a project with little or no profit will not be around to provide support or needed bug fixes. This is a situation where no one wins.
These steps are relatively simple to achieve – but are often not carried out within a pressured project environment. By continuing to use a strong project Governance framework regardless of the economic environment the chance of a successful project and ultimately business outcome is improved – thereby giving the business the confidence to continue to invest to improve business performance.
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