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Manning Charles &

Associates Limited

Learning from ‘Failure’


or
‘A Tale of Three Projects’
Some observations from personal
experience
Peter M Salmon, C.A.
26 June 2009
Manning Charles &
Associates Limited

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

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Manning Charles &
Associates Limited

Governance Model – ISO 38500

Source-ISO 38500

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IT Governance Principles

1. Responsibility
2. Strategy
3. Acquisition
4. Performance
5. Conformance
6. Human Behavior
Source:ISO 38500

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Peter M Salmon & Manning Charles & Associates Ltd
Manning Charles &
Associates Limited

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

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Peter M Salmon & Manning Charles & Associates Ltd
Manning Charles &
Associates Limited

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
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Peter M Salmon & Manning Charles & Associates Ltd
Manning Charles &
Associates Limited

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

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Peter M Salmon & Manning Charles & Associates Ltd
Manning Charles &
Associates Limited

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

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Manning Charles &
Associates Limited

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

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Peter M Salmon & Manning Charles & Associates Ltd
Manning Charles &
Associates Limited

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

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Peter M Salmon & Manning Charles & Associates Ltd
Manning Charles &
Associates Limited

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

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Manning Charles &
Associates Limited

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

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Manning Charles &
Associates Limited

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.

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Manning Charles &
Associates Limited

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

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Peter M Salmon & Manning Charles & Associates Ltd
Manning Charles &
Associates Limited

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.

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Peter M Salmon & Manning Charles & Associates Ltd
Manning Charles &
Associates Limited

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.

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Peter M Salmon & Manning Charles & Associates Ltd
Manning Charles &
Associates Limited

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.

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Peter M Salmon & Manning Charles & Associates Ltd
Manning Charles &
Associates Limited

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.

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Peter M Salmon & Manning Charles & Associates Ltd

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