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Emerging Demand For Business Project Audits

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  • 1. The Emerging Demand for Business Project Audits Presented by: Dr Raymond Young DrRYoung@gmail.com ISACA Technical Session Sydney, 14 March 2007 © Raymond Young The Emerging Demand for Business Project Audits No 1
  • 2. To ensure management is focussed on above average returns taking account of risk (Hilmer) AWB, James Hardie Backlash against risk Corporate Sarbanes-Oxley Governance CLERP9, ASX, AS8000 ENRON, True and Worldcom Legislative fair view avoid box ticking The Emerging Demand Turnbull (1999) Hampel Risks (1998) for Controls Directors are responsible for risk Business Project Audits Testing Bosch (1995) KING Disasters & COCO corporate collapses COSO Cadbury (1992) © Raymond Young The Emerging Demand for Business Project Audits No 2
  • 3. An emerging board level demand • Boards appear to be genuinely interested in improving their performance (Leblanc 2005) – PRO:NED have identified IT Governance as an emerging board trend. – Almost one third of UK firms include an executive with e-business responsibilities on the board (CBI, 2001). It is more than 60% in US companies • Boards are looking for guidance with respect to IT (Young and Jordan 2002) – In the next few years, E-commerce risks will be among the most important that companies will face (SRBI, 2001) – “there’s a lot of discussion by directors … [ecommerce] …the company might be left behind” … “some board members were saying we should be doing more, some less … nobody much was up the curve so the board members were all trying to figure it out”. – Most companies recognised a much higher level of risk because of the uncertainties involved and relied on external advice to validate any strategy proposed by management – … the main considerations are “the fear of the consequences of making a mistake, a fear of costing multiple times more than what anybody planned, a fear they don’t have the expertise” and the lack of successful models to guide decision making © Raymond Young The Emerging Demand for Business Project Audits No 3
  • 4. Who do directors trust for advice? • Directors recognised a need for an understanding of technology but their experience with IT people was disappointing. “With technocrats, the only three things you can be sure of are: nothing would get finished on time, it would always cost vastly more than predicted and it would never do what it was promised to do”. • Main sources of advice “I tend to be relying more on outside experts than I would normally do when assessing a project” “there is a tendency to accept the recommendations of management, which tend to echo the recommendations of the consultants …there is no thorough analytical review in the way you would have in other areas where the directors know what’s going on” “the board members I talk to are very comfortable if there is someone taking responsibility and particularly comfortable if it’s McKinsey or one of the major firms” • Recognised deficiencies in the advice “are the boards [receiving] summaries, no … it's difficult for directors to make good decisions” … “I don’t see anyone doing a consequences analysis documenting what if we don't do it and what if we do it” … “management is gathering tons of information and don't know how to present it” “for all the Standards that do exist, there is no guidance on how to go about making the decisions to implement an ecommerce strategy” © Raymond Young The Emerging Demand for Business Project Audits No 4
  • 5. IT & Project Standards vs Business Project Standards • Best Practice Standards “I have checked with ISACA and they – PMBOK, PRINCE2 agree with your conclusion about – BS15000, ITIL [lack of] supporting evidence.” – ISO/IEC 12207, ISO/IEC 12207 – ISO17799, NIST handbook • AS8015 – COBIT – “makes it sound doable” • Challenges – Under consideration for – “Little practical utility” fast-track adoption by ISO (Lyytinen 1987) • AS8016 – “no consistent impact on success” (Kraemer and King 1986) – HB280–2006 – Overemphasise technical & – ValIT project management considerations (Lucas 1975, Sauer 1999, Young 2005) – Untested against objective criteria (Checkland 1981, Strassman 1995, Young & Jordan 2005) © Raymond Young The Emerging Demand for Business Project Audits No 5
  • 6. HB280: a refocus on above average returns Project Management vs. Project Success (de Wit 1985) • project management success is less important (Baccarini 1999) • “benefits are not delivered or realised by the project manager and project team, they require the actions of operations management.” (Cooke-Davis 2002) • there is not a strong relationship between project management success and project success or between project management failure and project failure (Markus et. al. 2000) Scope of project success Scope of project management success 1 2 3 4 5 6 1 2 3 4 5 6 Initiation Planning Development Implementation Benefit Closedown © Raymond Young The Emerging Demand for Business Project Audits No 6
  • 7. HB280: Case Studies What is the most important success factor? Hypothesis T-Serv T-Media ABS Agency SkyHigh Conclusion Top management 1. support      Strong support High level 2. project planning      Inconclusive Project 3. methodologies   -   Inconclusive User 4. involvement      Inconclusive 5. Project staff      Not supported © Raymond Young The Emerging Demand for Business Project Audits No 7
  • 8. HB280: Inconsistent criteria for success EDP Success: MIS Success: SIS Success: Technical focus User focus Organisational focus Information Quality Intention Use to use System Net Benefits Quality User Satisfaction Service Quality Delone, W. H. and McLean, E. R. (2003) The Delone and McLean Model of Information Systems Success: a ten-year update Journal of Management Information Systems, 19:4, 9-30. © Raymond Young The Emerging Demand for Business Project Audits No 8
  • 9. Average Returns (Young 2006b) 4–10x (Brynjolfsson & Hitt 1998) or ROI 30% (Garrity 1963) 30% Some OK 10-20% (Clegg et al 1997) 35% 2/3 of projects 30-40% No (Willcocks and Margetts 1994) deliver no benefits whatsoever Fail 15% (Standish 1999,2003) © Raymond Young The Emerging Demand for Business Project Audits No 9
  • 10. Above Average Returns (Young 2006b) ROI ROI 240% ROI 135% 30% OK OK Some OK Current Better Excellent Performance Performance Performance Some Cancel (68% under) (43% under) (15% cancelled) Fail No National Implication Fail additional $10.5B-$21B pa (1.6 - 3.1% GDP) © Raymond Young The Emerging Demand for Business Project Audits No 10
  • 11. HB280:2006 A better way to understand projects 2 Evaluate 1 Initiate Top Management Direct & Support Monitor 3 4 6 ICT Projects 5 Changed Operations ICT Operations Changed Business processes Business Processes © Raymond Young The Emerging Demand for Business Project Audits No 11
  • 12. HB280 are the 1. What Recommendations expected business 2. How much change benefits? is required to realise the benefits? 2 Evaluate 1 Initiate Top Management Direct & 3. Who should Support Monitor sponsor the 3 4 project? 6. Are the benefits realised? 4. Who will be 6 accountable for the ICT benefits and how will Projects 5 Changed Operations ICT Operations they be measured and rewarded? 5. Is the culture right for Changed ie how will realisation of benefits Business processes unexpected issues to beProcesses Business be measured? raised? © Raymond Young The Emerging Demand for Business Project Audits No 12
  • 13. What is Project Governance? Hard & Soft prescriptions Business Plan Champion Project Team Project Plan •PM, consultants, IT, •Operations 3.Support 4.Support 1.Initiate 2.Evaluate 5.Implement 6.Benefits Meta-structural structural Culture Sponsor Project-image Governance Structure Motivation Beliefs •Consensus •Passion •Reward Accountability •Will to change © Raymond Young The Emerging Demand for Business Project Audits No 13
  • 14. Conclusion possible indicators of the emerging demand for business project audits • Appointment of board members with IT experience • McKinsey or one of the major firms – offer project audit services – UKIIA – c.f. Jed Simms at Capability • Successful Models to guide decision making – AS8015, AS8016, ISO ? – ARC linkage grant, five collaboration partners contributing $550,000 over 3 years ($100,000 in cash) • When ‘Business projects’ enters the business jargon – ValIT vs PMBOK – When project managers realise they should not be king. – When business managers finally step up to the plate • Major negative press – an ‘James Hardie’ relating to IT c.f. API – Public sector exposure? © Raymond Young The Emerging Demand for Business Project Audits No 14
  • 15. Key References • Cooke-Davies, T. (2002). "The "real" success factors on projects." International Journal of Project Management 20: 185-190. • de Wit (1985). "Measurement of project success." International Journal of Project Management 6(3): 164-170. • Leblanc, R. and J. Gillies (2005). Inside the Boardroom: the coming revolution in corporate governance. Toronto, John Wiley and Sons. • Lucas, H. C. (1975). Why Information Systems Fail. New York, Columbia University Press. • Markus, M. L., S. Axline, et al. (2000). "Learning from adopters' experience with ERP: problems encountered and success achieved." Journal of Information Technology 15: 245-265. • SRBI (2001). The E-Frontier: New Challenges to Corporate Risk Management. New York, SRBI Study for The St. Paul Companies. • Strassmann, P. A. (1995). The Politics of Information Management. New Canaan, CT., Information Economics Press. • Young, R. (2006a). HB 280-2006 Case Studies - How Boards and Senior Management Have Governed ICT Projects to Succeed (or Fail). Sydney, Standards Australia. • Young, R. (2006b). What is the ROI for IT Project Governance? Engaging the board and top management. 2006 IT Governance International Conference, Auckland, New Zealand. • Young, R. and E. Jordan (2005). The implications of Australian ICT Governance Standards for COBIT. 2005 IT Governance International Conference, Auckland, New Zealand. • Young, R. C. and E. Jordan (2002). Lifting the Game: Board views on e-commerce risk. IFIP TG8.6 the adoption and diffusion of IT in an environment of critical change, Sydney, Pearson Publishing Service. © Raymond Young The Emerging Demand for Business Project Audits No 15
  • 16. Questions Please provide your business card for a copy of this presentation Warning: You will be “researched” © Raymond Young The Emerging Demand for Business Project Audits No 16

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