Identifying Risk in Projects
Projects have always carried high levels of risk. The explosion in "Internet" projects, or projects in which an IT solution is integrated to the Internet, has further increased this risk because the Internet channel not only alters customer behavior and expectations for service but also dramatically increases the exposure of the organization.
This has been excerpted from On-line, On-time, On-budget: Titanic Lessons for the e-business Executive.
Internet Projects Take Project Risk to a New Level
The E's that require the most attention in an Internet project, because they typically carry the greatest risk and uncertainty, are these:
Expectation: The evolution of the Internet and its emergence as a predominant channel has shifted the expectations and behavior of customers and partners. Customers are quick to jump to a competitor if the service is not right. With many choices available, "don't waste my time" is becoming a predominant need. Untangling yourself from any organization that provides a service is very easy with the Internet channel, as new services are available at the click of a switch.
Exposure: An organization's back-end business operations are typically complex and understood by few. In fact, with most of the focus on the customer and the related customer operations, back-end operations are afterthoughts that do not share the same kind of funding. One of the biggest mistakes organization make when they start to move their operations online is they expose their inner workings to potentially millions of customers, partners, and suppliers around the world. For example, the window exposes information sourced from a relatively forgotten server and puts it under the focus of the Internet microscope, all unbeknownst to the organization. This sets up dependencies and expectations in scenarios the architects never envisaged. So if a high level of availability is not built-in, the hidden costs are racked up when an outage does occur.
For Internet or e-business projects
The following section provides some insights into the risks of these projectsat the project outset. This means looking beyond the end of the project into the online operation, something that most projects fail to consider carefully. It requires examining the key steps to take in the stages of an Internet project to increase the probability of success and deliver a better project and, ultimately, online operation.
The challenge of Internet projects
Much has been written about IT projects and the notoriously high project failure rates. The landmark Standish Group CHAOS reports from 1994, 1996, and 1998 helped bring this to the attention of organizations by revealing that only 25% of all IT projects finish on time, on budget, and with all the features and functions originally specified. (Source: "Chaos, a Recipe for Success," Standish Group, 1998.)
More recently, the Internet has further exasperated these projects in the following ways, categorized by the ten E's:
1) Encompassing: No longer are new systems the domain of one line of business; the whole organization is affected. The Internet drives the integration of systems, the interdependency of data and functions, and a single view of the customer. All the lines of business need to pay attention to the Internet project. It is impossible to be successful and stay in demarcated silos. There is a need to look at the whole value chain.
2) Expectation: The Internet changes the expectations and behavior of customers and partners as they acclimatize to a 24-by-7 online operation and online access through intranets, extranets, the Internet, or portals. Fickle and savvy online customers readily "click" over to competitive service providers when organizations fail to deliver the basics through the Internet. The potential loss of customer loyalty and revenue is enormous.
3) Exposure: As an organization moves its operations online to the Internet, it becomes exposed. Most people are very aware of hackers and cyber attacks. But a lesser understood consequence is the exposure of the inner workings of the back-end business operations to potentially millions of customers, partners, and suppliers around the world. Outages have become horrendously expensive and highly visible (a large Internet e-tailer like Amazon loses $1,500 per minute; an airline reservation system like Sabre, $36,000 per minute). One disaster can hit the newspapers and undermine customer/consumer confidence overnight. Continuous business service availability is a major competitive advantage and a service differentiator.
4) Erratic and varying conditions: The Internet is continually changing, and this impacts the online operation. Organizations that fail to provide adequate, highly responsive, stable business services that are capable of withstanding the onslaught of weekly changes required will lose demanding customers to a competitor. The Internet project requires a flexible change environment that can rapidly propagate these ongoing changes. Web site downtime cost UK businesses more than 500 million pounds in 2001 and will cost them even more in 2002. (Source: "Web Site Downtime Costs," Yankee Group Report commissioned for Worldport, March 20, 2002.)
5) Evolution: The Internet online operation has to rapidly evolve with the demands of a changing competitive environment. The site will date quickly without an evolutionary strategy in place.
6) End point: The Internet project never really ends as it goes online into operation. The lack of a clear end point presents a challenge, as organizations need to regularly readjust their investment models.
7) Effort: The Internet project requires significant effort--from requirements gathering to construction to testing to implementation. Improving the availability of services after the project is in production is expensive, time-consuming, and painful. 43% of U.S. businesses never reopen after a disaster. Another 29% close within two years. (Source: "Can Your Website Afford a Day Off?" Hurwitz Group, Inc., February 2001). Organizations need to ensure that their Internet projects effectively deliver the online requirements and meet customer demands in the first place.
8) Expenditure: The Internet project requires careful investments to match risk mitigation strategies against the exposure. Investments need to be well-targeted and focused at protecting the most vulnerable areas of the online operation. A fundamental oversight is to invest in just the technology--hardware and software--at the expense of processes and organization. Nearly 50% of operations groups do not have the core processes in place to effectively support e-business initiatives at the time of implementation. (Source: "E-Business Efforts Neglect IT Operation Involvement," META Group, May 2001).
9) Environmental complexity: IT infrastructures are vast and complex, and they are growing beyond what humans can possibly manage. The interacting applications, data interdependencies, and common services make pinpointing failures more difficult. According to Gartner research, people or process failures directly cause 80% of mission-critical application service downtime. The complexity of today's IT infrastructures and applications makes managing these systems to very high levels of availability enormously difficult. (Source: "Making Smart Investments to Reduce Unplanned Downtime," Gartner Research, June 2001). The Internet project needs to consider this in the early stages.
10) Expensive to fix: The Internet project needs to get it right the first time, as rectifying problems later, once in operation, can be very expensive. Most Internet projects don't look beyond the implementation. However, the repercussions of the project and the impact on online operations remain with an organization for many years. With one financial institution, serious problems were not unearthed until "year-end processing," a full nine months after implementation.
The following section provides some insights into the risks of these projectsat the project outset. This means looking beyond the end of the project into the online operation, something that most projects fail to consider carefully. It requires examining the key steps to take in the stages of an Internet project to increase the probability of success and deliver a better project and, ultimately, online operation.
The challenge of Internet projects
Much has been written about IT projects and the notoriously high project failure rates. The landmark Standish Group CHAOS reports from 1994, 1996, and 1998 helped bring this to the attention of organizations by revealing that only 25% of all IT projects finish on time, on budget, and with all the features and functions originally specified. (Source: "Chaos, a Recipe for Success," Standish Group, 1998.)
More recently, the Internet has further exasperated these projects in the following ways, categorized by the ten E's:
1) Encompassing: No longer are new systems the domain of one line of business; the whole organization is affected. The Internet drives the integration of systems, the interdependency of data and functions, and a single view of the customer. All the lines of business need to pay attention to the Internet project. It is impossible to be successful and stay in demarcated silos. There is a need to look at the whole value chain.
2) Expectation: The Internet changes the expectations and behavior of customers and partners as they acclimatize to a 24-by-7 online operation and online access through intranets, extranets, the Internet, or portals. Fickle and savvy online customers readily "click" over to competitive service providers when organizations fail to deliver the basics through the Internet. The potential loss of customer loyalty and revenue is enormous.
3) Exposure: As an organization moves its operations online to the Internet, it becomes exposed. Most people are very aware of hackers and cyber attacks. But a lesser understood consequence is the exposure of the inner workings of the back-end business operations to potentially millions of customers, partners, and suppliers around the world. Outages have become horrendously expensive and highly visible (a large Internet e-tailer like Amazon loses $1,500 per minute; an airline reservation system like Sabre, $36,000 per minute). One disaster can hit the newspapers and undermine customer/consumer confidence overnight. Continuous business service availability is a major competitive advantage and a service differentiator.
4) Erratic and varying conditions: The Internet is continually changing, and this impacts the online operation. Organizations that fail to provide adequate, highly responsive, stable business services that are capable of withstanding the onslaught of weekly changes required will lose demanding customers to a competitor. The Internet project requires a flexible change environment that can rapidly propagate these ongoing changes. Web site downtime cost UK businesses more than 500 million pounds in 2001 and will cost them even more in 2002. (Source: "Web Site Downtime Costs," Yankee Group Report commissioned for Worldport, March 20, 2002.)
5) Evolution: The Internet online operation has to rapidly evolve with the demands of a changing competitive environment. The site will date quickly without an evolutionary strategy in place.
6) End point: The Internet project never really ends as it goes online into operation. The lack of a clear end point presents a challenge, as organizations need to regularly readjust their investment models.
7) Effort: The Internet project requires significant effort--from requirements gathering to construction to testing to implementation. Improving the availability of services after the project is in production is expensive, time-consuming, and painful. 43% of U.S. businesses never reopen after a disaster. Another 29% close within two years. (Source: "Can Your Website Afford a Day Off?" Hurwitz Group, Inc., February 2001). Organizations need to ensure that their Internet projects effectively deliver the online requirements and meet customer demands in the first place.
8) Expenditure: The Internet project requires careful investments to match risk mitigation strategies against the exposure. Investments need to be well-targeted and focused at protecting the most vulnerable areas of the online operation. A fundamental oversight is to invest in just the technology--hardware and software--at the expense of processes and organization. Nearly 50% of operations groups do not have the core processes in place to effectively support e-business initiatives at the time of implementation. (Source: "E-Business Efforts Neglect IT Operation Involvement," META Group, May 2001).
9) Environmental complexity: IT infrastructures are vast and complex, and they are growing beyond what humans can possibly manage. The interacting applications, data interdependencies, and common services make pinpointing failures more difficult. According to Gartner research, people or process failures directly cause 80% of mission-critical application service downtime. The complexity of today's IT infrastructures and applications makes managing these systems to very high levels of availability enormously difficult. (Source: "Making Smart Investments to Reduce Unplanned Downtime," Gartner Research, June 2001). The Internet project needs to consider this in the early stages.
10) Expensive to fix: The Internet project needs to get it right the first time, as rectifying problems later, once in operation, can be very expensive. Most Internet projects don't look beyond the implementation. However, the repercussions of the project and the impact on online operations remain with an organization for many years. With one financial institution, serious problems were not unearthed until "year-end processing," a full nine months after implementation.