Learning from ‘Failure’ or ‘A Tale of Three Projects’ Some observations from personal experience Peter M Salmon, C.A . 26 June 2009

Corporate Governance Corporate governance is the system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies. The shareholders’ role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate governance structure is in place. The responsibilities of the board include setting the company’s strategic aims, providing the leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship. The board’s actions are subject to laws, regulations and the shareholders in general meeting. http://bit.ly/A8qZO - the reference is to a more detailed presentation I gave to the ISACA Governance event last October Learning from Failure © June 2009 Peter M Salmon & Manning Charles & Associates Ltd

Corporate governance is the system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies. The shareholders’ role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate governance structure is in place. The responsibilities of the board include setting the company’s strategic aims, providing the leadership to put them into effect, supervising the management of the business and reporting to shareholders on their stewardship. The board’s actions are subject to laws, regulations and the shareholders in general meeting.

http://bit.ly/A8qZO - the reference is to a more detailed presentation I gave to the ISACA Governance event last October

Governance Model – ISO 38500 Learning from Failure © June 2009 Peter M Salmon & Manning Charles & Associates Ltd Source-ISO 38500

IT Governance Principles Responsibility Strategy Acquisition Performance Conformance Human Behavior Source:ISO 38500 Learning from Failure © June 2009 Peter M Salmon & Manning Charles & Associates Ltd

Responsibility

Strategy

Acquisition

Performance

Conformance

Human Behavior

Source:ISO 38500

Three projects Project A – sale of a software package from a small vendor to a major corporation, vendor had previously only built custom software on smaller scale Project B – systems integration project involving supply of third-party application to a new venture, personal relationships a key factor Project C – customisation of overseas software application to meet needs of a major new customer, in an operational outsource Learning from Failure © June 2009 Peter M Salmon & Manning Charles & Associates Ltd

Project A – sale of a software package from a small vendor to a major corporation, vendor had previously only built custom software on smaller scale

Project B – systems integration project involving supply of third-party application to a new venture, personal relationships a key factor

Project C – customisation of overseas software application to meet needs of a major new customer, in an operational outsource

Project A Small vendor with limited capability sells package to large company, based 3000 miles away. First sale of package Agrees to customise application for purchaser needs Business owners, experienced professionals, let development head and team lead them into the deal All starts well, but after a few months there is a team in the client and a team at home base, two versions of the package are emerging No contract with client is in place Development head quits Problems begin to emerge both at client and at home base Client executives at ‘war’ with each other Relationships deteriorate – bills not paid Vendor manages to put contract in place Learning from Failure © June 2009 Peter M Salmon & Manning Charles & Associates Ltd

Small vendor with limited capability sells package to large company, based 3000 miles away.

First sale of package

Agrees to customise application for purchaser needs

Business owners, experienced professionals, let development head and team lead them into the deal

All starts well, but after a few months there is a team in the client and a team at home base, two versions of the package are emerging

No contract with client is in place

Development head quits

Problems begin to emerge both at client and at home base

Client executives at ‘war’ with each other

Relationships deteriorate – bills not paid

Vendor manages to put contract in place

Project B New client won by a systems integrator Deal involves using third party application and database software to implement new, high volume transaction system for new market entrant in highly competitive business sector Personal relationships initially strong Problems start to emerge No contract in place Relationships begin to deteriorate All parties bring in new management, new client management wants internal cheap solution Third party sub-contractor begins to play rough, no back to back in place Client starts to build internal solution Learning from Failure © June 2009 Peter M Salmon & Manning Charles & Associates Ltd

New client won by a systems integrator

Deal involves using third party application and database software to implement new, high volume transaction system for new market entrant in highly competitive business sector

Personal relationships initially strong

Problems start to emerge

No contract in place

Relationships begin to deteriorate

All parties bring in new management, new client management wants internal cheap solution

Third party sub-contractor begins to play rough, no back to back in place

Client starts to build internal solution

Project C Major BPO deal both parties for various reasons wanted to do deal Package customisation turned out to be materially mis-scoped Legal, regulatory and market requirements much more complex than initially understood Vendor unable to meet time-frames Customer proved extremely difficult to manage and refused to make timely decisions Customer business processes poor Customer had history of failed projects Constant scope creep Poor contract Learning from Failure © June 2009 Peter M Salmon & Manning Charles & Associates Ltd

Major BPO deal both parties for various reasons wanted to do deal

Package customisation turned out to be materially mis-scoped

Legal, regulatory and market requirements much more complex than initially understood

Vendor unable to meet time-frames

Customer proved extremely difficult to manage and refused to make timely decisions

Customer business processes poor

Customer had history of failed projects

Constant scope creep

Poor contract

Outcomes None of the projects met their original objectives Each cost all the participating parties more than forecast Neither A or B were ever delivered and the parties disengaged C was delivered but in a much different form from that originally envisaged Learning from Failure © June 2009 Peter M Salmon & Manning Charles & Associates Ltd

None of the projects met their original objectives

Each cost all the participating parties more than forecast

Neither A or B were ever delivered and the parties disengaged

C was delivered but in a much different form from that originally envisaged

Principle 1- Responsibility Individuals and groups within the organization understand and accept their responsibilities in respect of both supply of, and demand for IT. Those with responsibility for actions also have the authority to perform those actions. In each case responsibilities were not understood Learning from Failure © June 2009 Peter M Salmon & Manning Charles & Associates Ltd

Individuals and groups within the organization understand and accept their responsibilities in respect of both supply of, and demand for IT. Those with responsibility for actions also have the authority to perform those actions.

In each case responsibilities were not understood

Principle 2- Strategy The organization’s business strategy takes into account the current and future capabilities of IT; the strategic plans for IT satisfy the current and ongoing needs of the organization’s business strategy . Broadly satisfied in each case as regards the 3 projects Learning from Failure © June 2009 Peter M Salmon & Manning Charles & Associates Ltd

The organization’s business strategy takes into account the current and future capabilities of IT; the strategic plans for IT satisfy the current and ongoing needs of the organization’s business strategy .

Broadly satisfied in each case as regards the 3 projects

Principle 3- Acquisition IT acquisitions are made for valid reasons, on the basis of appropriate and ongoing analysis, with clear and transparent decision making. There is appropriate balance between benefits, opportunities, costs, and risks, in both the short term and the long term. My opinion looking back is that each case there was failure in this area, both from the viewpoint of the acquiring organisation and the supplying parties Learning from Failure © June 2009 Peter M Salmon & Manning Charles & Associates Ltd

IT acquisitions are made for valid reasons, on the basis of appropriate and ongoing analysis, with clear and transparent decision making. There is appropriate balance between benefits, opportunities, costs, and risks, in both the short term and the long term.

My opinion looking back is that each case there was failure in this area, both from the viewpoint of the acquiring organisation and the supplying parties

Principle 4- Performance IT is fit for purpose in supporting the organization, providing the services, levels of service and service quality required to meet current and future business requirements. For A and B this proved not to be the case. In C the eventual outcome was adequate. Learning from Failure © June 2009 Peter M Salmon & Manning Charles & Associates Ltd

IT is fit for purpose in supporting the organization, providing the services, levels of service and service quality required to meet current and future business requirements.

For A and B this proved not to be the case. In C the eventual outcome was adequate.

Principle 5- Conformance IT complies with all mandatory legislation and regulations. Policies and practices are clearly defined, implemented and enforced. This was not the case Learning from Failure © June 2009 Peter M Salmon & Manning Charles & Associates Ltd

IT complies with all mandatory legislation and regulations. Policies and practices are clearly defined, implemented and enforced.

This was not the case

Principle 6– Human behaviour IT policies, practices and decisions demonstrate respect for Human Behaviour, including the current and evolving needs of all the ‘people in the process’. From my perspective this was not the position. Learning from Failure © June 2009 Peter M Salmon & Manning Charles & Associates Ltd

IT policies, practices and decisions demonstrate respect for Human Behaviour, including the current and evolving needs of all the ‘people in the process’.

From my perspective this was not the position.

Lessons learned Strong governance should be in place as part of organisational culture Failures in the areas of Responsibility and Acquisition meant that each of these projects were ‘doomed’ from the outset The signal shortcomings in Performance further compounded the issues, though much of this was due to the cultures of the acquiring organisations involved and the failures in the area of Responsibility Consequently Conformance and Human Behaviour fell short. If appropriate governance had been in place these projects would either have not got off the ground or, would have been very different. Ego and individual desires for business success were key elements in each of these projects and were material factors in the problems which emerged. Various players in each of the dramas could be said to have taken excessively optimistic views of the circumstances. Learning from Failure © June 2009 Peter M Salmon & Manning Charles & Associates Ltd

Strong governance should be in place as part of organisational culture

Failures in the areas of Responsibility and Acquisition meant that each of these projects were ‘doomed’ from the outset

The signal shortcomings in Performance further compounded the issues, though much of this was due to the cultures of the acquiring organisations involved and the failures in the area of Responsibility

Consequently Conformance and Human Behaviour fell short.

If appropriate governance had been in place these projects would either have not got off the ground or, would have been very different.

Ego and individual desires for business success were key elements in each of these projects and were material factors in the problems which emerged. Various players in each of the dramas could be said to have taken excessively optimistic views of the circumstances.

Lessons learned Monitoring was lacking, compounded by Failure to adequately Direct and Evaluate Business pressures and perceived business needs overwhelmed the personnel involved, due to the absence of a vigorous governance model in each case – which model should be understood by all involved. Learning from Failure © June 2009 Peter M Salmon & Manning Charles & Associates Ltd

Monitoring was lacking, compounded by

Failure to adequately Direct and Evaluate

Business pressures and perceived business needs overwhelmed the personnel involved, due to the absence of a vigorous governance model in each case – which model should be understood by all involved.

Peter Salmon– Principal - Manning Charles & Associates Ltd Peter is a senior executive and consultant with an extensive business management, professional services leadership and delivery background. He combines this with significant organisational change, business assessment, and resource management experience. This is complemented by having worked in a number of countries and a varied range of business sectors. Peter's consulting experience includes IT consulting, general consulting, financial investigations and valuations, and litigation support. His other experience includes:- practice development, practice management including service economics and profitability, quality assurance and resource management. This knowledge and expertise is combined with a strong record of achievement. For many years Peter has worked with CxO level executives, management and staff to provide business focused outcomes to issues . Learning from Failure © June 2009 Peter M Salmon & Manning Charles & Associates Ltd

Peter is a senior executive and consultant with an extensive business management, professional services leadership and delivery background. He combines this with significant organisational change, business assessment, and resource management experience. This is complemented by having worked in a number of countries and a varied range of business sectors.

Peter's consulting experience includes IT consulting, general consulting, financial investigations and valuations, and litigation support. His other experience includes:- practice development, practice management including service economics and profitability, quality assurance and resource management.

This knowledge and expertise is combined with a strong record of achievement. For many years Peter has worked with CxO level executives, management and staff to provide business focused outcomes to issues .