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|Volume VIII, Number 1 September, 2001|
We at Chenault Systems like to keep projects straight forward and simple as possible. As mentioned in prior newsletters, we subscribe to the concept of "High Impact Consulting." This concept means that instead of the traditional consulting approach of defining a project in terms of the subject to be studied, Chenault Systems defines the project in terms of what the client is truly ready to do. High impact consulting also means achieving rapid return-on-investment successes without relatively large costs to the clients in terms of large studies, reports, or over-done systems development. Automation and streamlining is done in select areas one at a time, keeping the overall goals in mind.
In our past newsletters we have tried to emphasize the importance of building flexible systems and staying away from single solution systems from just one single vendor. The concept of enterprise resource planning (ERP) is fine as long as it is done on an incremental basis with the users and consultants working together. However, time and time again we have seen organizations settling for the one big solution with no regard to technology changes or interaction between consultant, vendors, and customers.
The following excepts are from Information Technology Project Management by Kathy Schwabe, which amplify the importance of this area in today's business world:
In 1995, the Standish Group published an often-quoted study entitled "CHAOS"1. This prestigious consulting firm surveyed 365 information technology executive managers in the U.S. who managed over 8,380 different information technology applications. As the title suggests, information technology projects were in a state of chaos. United States companies spent more than $250 billion each year in the early 1990s on information technology application development of approximately 175,000 projects. Examples of these projects included creating a new database for the state department of motor vehicles, developing a new system for car rental and hotel reservations, and implementing a client-server architecture for the banking industry. The survey found that the average cost of an information technology project for a large company was over $2.3 million; for a medium company, it was over $1.3 million; and for a small company, it was over $434,000. Their study reported that the overall success rate of information technology projects as only 16.2 percent. They defined success as meeting project goals on time and on budget. The study also found that in 1995 over 31 percent of information technology projects were canceled before completion, costing U.S. companies and government agencies over $81 billion. The authors of this study were adamant about the need for better project management in the information technology industry. They said, "Software development projects are in chaos, and we can no longer imitate the three monkeys hear no failures, see no failures, speak no failures.
In the Dallas area, there was a project with a scope that was too extensive and pretentious causing grave problems. Schwabe describes the situation admirably:
Scope creep and an overemphasis on technology for technology's sake resulted in the bankruptcy of a large pharmaceutical firm, FoxMeyer Drug. In 1994, the management approved a $65 million system to manage the company's critical operations. They did not believe in keeping things simple, however. The company spent nearly $10 million on state-of-the-art hardware and software and contracted the management of the project to a well-known (and expensive) consulting firm. The project included building an $18 million robotic warehouse, which looked like something out of a science fiction movie, according to insiders. The scope of the project kept getting bigger and more impractical. The elaborate warehouse was not ready on time, and the new system generated erroneous orders that cost FoxMeyer over $15 million in unrecovered excess shipments. In July of 1996, the company took a $34 million charge for its fourth fiscal quarter, and by August of that year, FoxMeyer filed for bankruptcy.
FoxMeyer filed a $500 million lawsuit against the large well-known consulting firm for "over selling and under performing the project", which was later settled out of court.
Ms. Schwabe illustrates the reason for our philosophy very well. Also, her book is used for instructing information systems project management, which by the way we believe to be one of the most interesting and necessary college courses pertaining to information systems.
The following is a comparison of traditional consulting to our concept of high impact consulting:
High Impact Consulting
|Define goals of project in terms of the consultant's expertise and products.||Define goals of project for client results.|
|The project's scope is determined solely by the subject to be studied, ignoring the client's readiness for change.||Match project scope to what the client is truly ready to do.|
|Proposal and scope are for one big solution.||Small rapid-cycle successes (less cost, more impact), which allow consultant and client to grow together in a relationship.|
|The project makes labor-intensive use of many consultants.||To save money, the project makes leveraged use of in-house employees and outside consultants.|
|The project entails a sharp division of responsibility between consultant and client; there is no partnership.||There is a strong partnership between consultant and client, even if the project is well defined and out-sourced to the consultant.|
We have been calling this the "prototype method" of development for years. With this method, a system is developed incrementally, with prototypes heavily reviewed by the client until the final product is produced.
How does this work? Client and consultant work out mutual responsibilities, including estimates and proposals, before any work begins. This is the best way to determine up-front if the project will work or not. After all, there is no reason to proceed if there is no agreement about how consultant and client will work together. In addition, there must be a plan on what needs to be achieved together as the external consultants team up with client employees having mutual respect for each other. The only goal is to enhance company performance. Additionally, an approach we like since we are a smaller, less known firm is to ask the prospective client to "carve out" a small project for us. This gives us a chance to prove ourselves, develop a relationship, and show good results at a relatively small cost to the client.
Planning must always be there, but we recognize that systems will evolve and cannot happen all at once. One must take this into account and respect the human aspect. The organization must absorb the new processes at a reasonable pace, or disruptive human side effects may result, which usually mean higher costs.
This process allows smaller teams of experienced consultants with the right tools to do more than legions of conventional consultants using the “conventional” approach. Smaller consulting firms, with their own web sites, e-mail, cell phones, faxes, and inexpensive hardware and software, can now easily compete with larger firms.
In addition, from the consultant’s point of view, the process is more fun because of the lower overhead and more reasonable rates. Why? The pressure to generate huge revenues and margins to support large consulting partner salaries is not there.
The May 18, 1995, issue of the Wall Street Journal had an article by Louise Lee about outsourcing data processing and development work to large consulting firms, such as the Big 5. The article correctly stressed that this could be a good idea in theory, but not always in practice. The story cites the trauma of a large organization that signed up an out-sourcing firm for the long haul. “It broke off a 10-year contract with the firm at the halfway point in 1993, concluding that it could cut costs if it brought computer operations in house.” “The firm was expensive for us,” says one manager, who estimates the company is now saving $500,000 a year.
There was another example: “Once the contracts are under way, companies also learn that breaking up is hard to do. After 25 years with the firm, Blue Shield of California concluded last year that the firm’s performance was so poor that it needed a change, but the firm could not be dumped because it knew more about the computer systems than Blue Shield itself.”
We feel the best approach is to never sign a long term contract with any consulting firm; use them from year to year or project by project. Consider smaller, medium priced “boutique” type firms for the PC based and database applications instead of the large, expensive “department store” firms indicated above. Usually, smaller consulting firms are not locked into the old mainframe thinking from years ago. In other words, smaller firms tend to use the more personable prototype approach to application development, which involves the client in the project from start to finish. Again, good communications are key to good systems development. Often times, some consulting firms will try to design everything up front, and then disappear from sight until the project is done. Misunderstandings will arise from this approach adding more costs to the client and more profit to the consulting firm via increased paper work (the old change request game). Smaller firms survive and prosper by keeping the client contented. They have no other choice.
1The Standish Group, “CHAOS” (1995) (www.standishgroup.com/chaos.html).
Another reference is Johnson, Jim, “CHAOS: the Dollar Drain of IT project Failures,” Application Development Trends (January 1995).
Quotes Worth Noting
“Both the revolutionary and the creative individual are perpetual juveniles. The revolutionary does not grow up because he cannot grow, while the creative individual cannot grow up because he keeps growing.” -- Eric Hoffer
“Much of what sophisticates loftily refer to as the "complexity" of the real world is in fact the inconsistency in their own minds.” -- Thomas Sowell
“I have made it a rule never to smoke more than one cigar at a time.” -- Mark Twain
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