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Five things your CEO should know about your IT transformation programme

Sebastian Jammer | May 28, 2012
Companies that are able to leverage IT effectively can realise cost savings and revenue upsides, while gaining market share over competitors.

An Asian car manufacturer was implementing an SAP ERP system. The ambition level of the senior management was high with respective expectations towards the new tool. In turn the scope was set very large and to be delivered in a big-bang approach, all at one drop. During implementation time it turned out that the complexity in the low-level business processes was overwhelming for the business and IT teams. The project timeline slipped and as costs sky-rocketed, the executive team decided to abandon the project completely, losing not only the business benefits expected from the programme but also the capital and labour invested into the programme.

In order to avoid such severe impact, successful IT executives try to slice the programme into smaller pieces and implement 'inch-by-inch'. Ideally the lead-time to deliver initial results should not exceed 12 month. This approach delivers results fast while retaining flexibility for changing business requirements in following phases. This does not mean that the overall ambition level of the transformation programme should be lowered. The transformation larger strategic goal should remain complete, but broken down into smaller milestones that each deliver business benefits.

The challenge for the planning teams is to find a viable way to break-up the scope. Typically legacy systems are complex and with heavily interwoven integrations. Replacing part-by-part can be costly as legacy systems have to be integrated before they get replaced. Technically it is sometimes more favourable to start on a 'green field' and build the new and advanced IT architecture in parallel to the legacy. In that case only selected processes, customer groups or products are migrated bit-by-bit to the new stack. Identifying the way to slice the business requirements and the technology architecture requires a careful and informed coordination between IT architects and business users.

CEO Focus
The CEO should aim for an ambitious goal but challenge the size and duration of the programme phases on the way to that goal. No phase should significantly exceed 12 months. This can be underpinned by a release of funding in line with the planned phases. At the same time the CEO has to manage the expectations of stakeholders that demand over-ambitions programme phases.

Build a Trusted Relationship with Key Suppliers
Procurement best practices standardise products and deliverables from suppliers and make prices comparable competition over price. As this practice works well for commodity goods it is also often replicated for complex IT programmes. Given the order of magnitude of the spending involved competition on price and commercial terms appears justified. Hence teams define the scope of work very sharp and use competitive leverage to squeeze prices.

The pitfall with this approach is that the scope of work can never be perfectly pre-defined and change is inevitable. Also many details can only be defined in a later phase of the project.

 

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