By HPA Senior Advisor Bob Kaplan
Why do people cycle through fad diet after fad diet when any doctor will tell you the right long-term and only sustainable approach is one that involves healthy eating and exercise? Because we want instant gratification. We want it now, and we want it to be easy. It is easier to eat a diet of junk food than to take the time and make the effort to eat a healthy diet of fresh foods and vegetables.
We know this is the wrong way, but the wrong way can be very appealing. And not just with diets and our health, but with everything. There is always a right and a wrong way – the problem is, the wrong way is also always easier, faster and requires less discipline.
When it comes to IT management, given how most CEOs prefer to focus their attention elsewhere (a problem we will come back to in another article), easier and faster is often the preferred approach to thorny issues. HPA has seen a lot of “fad diets” in IT management, and we have also seen clients look past the fads and do things the right way. Let’s take a look at just 3 examples (there are many, many more).
Best of Breed
Many companies have adopted a “best of breed” approach to application development or purchase. The logic of the management team is to let each business unit or function implement whatever application it feels is best. This works in the short term but has far greater negative impacts in the longer term. Initially, the business unit acquires a set of features it desires and does not have to change business processes. New applications are integrated with the old ones and life goes on. As time passes, application integration becomes difficult as more and more point applications are installed and need to be connected to the other historical applications. In fact, over time, the difficulty rises exponentially.
Replacing or even updating any individual application requires a heroic and costly effort to redo all the integration points. I had a banking client who over a period of 10 years amassed a portfolio of over 400 applications, and as a result, the back-end systems were a mess. The industry phrase is “spaghetti code.” The solution, which took 5 years to implement, was to develop and stick to a clearly defined enterprise architecture (EA) and develop a vendor management program that allowed technology from only 6 companies to be purchased. As you can imagine, there was prolonged political backlash and fighting over this approach. The CEO backed the CIO and forced the business units to reengineer basic processes and stick with the program. Over time, costs went down, functionality upgrades were implemented much more quickly and now, everyone takes credit for the approach (the best of all outcomes). The EA became a critical part of the lexicon at the company.
As we saw in the example above, an EA can be an important part of the solution to the best of breed problem. The concept of an enterprise architecture has been around since 1987 when the first comprehensive article appeared in the IBM Systems Journal. Companies were realizing that they needed a plan and long-term strategy for how technology would be built, acquired and implemented over time. An EA lays out how information, business processes and technology flow together and interact in the enterprise. It is intended to offer a holistic view of the enterprise. A sound EA has the following advantages:
- Facilitates communication between IT and business units
- Helps the business prioritize investments
- Makes it easier to evaluate proposed projects against long term goals
- Gives a comprehensive view of IT components to all business units.
When acquiring and installing new applications or platforms, particularly enterprise solutions like CRM or ERP, it is enticing to customize the software. Vendors make it easy to go down this path. It is highly profitable for them to do this since they can charge higher fees for downstream support, and customization really locks a customer into their platforms, which they leverage over time. Many business managers’ egos get in the way and they really believe their business and processes are unique and that customization is the only way to go.
They are wrong.
Your CRM needs are not dramatically different than the CRM needs of Salesforce’s thousands of other customers. The reports needed in your business are similar to those needed in most other businesses. Software vendors recognize that there are differences across businesses and deal with this by providing a lot of configuration options. You should definitely take advantage of all configuration options in the software. This is the right way to tailor the platform to your needs. Use all the variables and alternatives presented to you but stop there. Configuration and Customization are very different.
Customization is the technical equivalent to eating a diet of junk food. It feels good in the short term but causes your systems to become calcified in the longer term, costing you much more in terms of time, cash and risk. Ironically, most managers insist they understand, this but a superficial analysis of their systems shows significant amounts of custom code plus budget and time over runs on the implementation projects. The customization proponents are abetted by consultants who earn their livings on large installations of enterprise systems where customization boosts their profits. Their pitch is that customization is easy, they do it all the time, and that a customized system is not difficult to upgrade. These are all lies – except for the part about their doing it all the time.
I had an industrial client whose core systems ran on an SAP platform. The version being used had been obsoleted by SAP and support was going to be available for only 5 more years. HPA was brought in to help program manage the upgrade. Having insisted to us that upgrading to the new version would not be difficult, we discovered that there were over 4,000 customizations in the existing code. Each of these made upgrading to the new version more difficult and, taken as a whole, made the upgrade project a nightmare. Since many companies were upgrading at the same time, the talent to do the upgrade was somewhat scarce. Finding engineers who could understand the customizations (surprise: they had not been well documented) and put an upgrade program in place proved to be extraordinarily difficult and risky. It always is.
Closer to home, when HPA was upgrading its CRM a few years ago, the firm’s founder Sumeet Goel chatted with me about their upcoming migration to Salesforce. He was lamenting the time and cost required to implement it, especially given the “required” modifications to Salesforce in order for it to work with HPA’s processes. I urged him to consider that if Salesforce had successfully implemented their solution with literally thousands of other businesses and had improved it over time, it just might be the case that perhaps HPA was the one that needed to change. That its unique processes might not actually be a good thing. And perhaps using Salesforce out of the box, with its configuration options might be the best thing in the long run – HPA’s processes might be the issue, not Salesforce. Sumeet took that to heart and HPA changed its internal processes, reporting, and metrics to match Salesforce’s options. The company has benefitted greatly since.
Reengineering business process to be able to use out-of-the-box solutions is generally the right way to go. Similar to moving away from a best of breed approach, refusing to customize will lead to political battles. It takes a strong CEO and CIO to force the right approach on the organization.
Configuration and Customization are very different beasts. Chose the right “C” and you’ll sleep much better at night.
IT governance can be defined as the processes and approaches used to make key decisions regarding how IT resources are allocated, managed, and monitored. The keys to a good governance system are clarity, transparency and discipline. It is difficult to stick with a good governance system, and as with customization, it is easy to find excuses for doing things the wrong way. The questions HPA asks when reviewing IT governance are:
- Are the rules well known and understood? (clarity)
- Are the management processes well defined, executed well and monitored effectively? (transparency)
- Is the system respected, or is it circumvented when it suits? (discipline)
Many clients who believe they have a sound governance system in place are surprised at the result of a little analysis. It turns out it is easier to not have clear rules, to have metrics that look good but mean little, and to go around the process to “get things done.”
A health care client (and others) described their IT project management committee to us. It was a group of business managers from across the company who met on a monthly basis to review the status of major IT projects underway. While this sounds good, it turns out the committee was strictly a pro forma group. They received the traditional red, yellow, green tracking report, asked each month why the red and yellow projects were not green, and felt they were doing their job. There were no consequences to being off-track, and everyone knew it.
This is the easy and wrong way to govern projects. The right way takes much more time, effort and involvement. All projects hit roadblocks, uncover issues that were not contemplated when the project was approved, or find that market or business conditions have changed. A project management committee should be the place to uncover and discuss these issues, propose alternatives and make decisions regarding the future of a project. This requires real metrics, transparency, and an involved group of executives. I’ve seen a few committees that operate in this fashion, but not many. They are highly effective.
Discipline is perhaps the most difficult thing to maintain in IT governance. In a media client of mine, projects were always late, and promised functionality underdelivered. On paper, the company had a good governance system for approving and funding projects. However, everyone in the company knew that the plan was obsolete as soon as it was approved because the operating culture was for managers to go to a friend in IT to get things done. There were always dozens of off-the book activities being worked on. Furthermore, the CEO felt he had the right to drop new requirements into the hopper without any consideration of how resources were to be reorganized. In other words, there was no discipline. It was difficult to fix this situation since it involved a major change in culture and a behavior change on the part of the CEO. Ultimately, the company redesigned the project management selection process, implemented new metrics which made transparent when projects were added or deleted, and required any changes proposed to include a resource reallocation analysis. Just shining a light on the changes with the new metrics created a significant change in behavior.
Are you on a fad diet or a long-term health plan? What can you do to assess if you are managing IT the right way or the wrong way? Consider these questions:
- Do you have a well thought out enterprise architecture that can be easily explained by senior business managers? If not, you will likely drift toward a best of breed approach.
- Do some analytic work and quantify how much customization has been done on your core systems. You will likely be surprised. Develop an approach for eliminating or at least reducing customization over time. System upgrades should not be customized.
- Is your governance system functioning well or is it governance in name only? Do your metrics create transparency or obfuscate what is happening? Do you have a technology committee of the board? If not, why?
These questions may be difficult to answer, but the value in answering them is high and will set you on the path to doing things the right way.
Bob Kaplan is an HPA Senior Advisor with over 35 years of experience as a senior executive and management consultant. A former Managing Partner at BCG and Senior Partner at McKinsey, Bob currently counsels CEOs and other senior executives on strategy and organizational issues, primarily within the technology, media, financial services, and utility sectors. Bob has held senior executive positions such as acting CEO and acting CTO for multiple companies, including: Motif Inc., ITM Software, Silicon Valley Bank, Netliant, and Alibris. He holds an MBA from the Stanford Graduate School of Business and a BA from Yale University.