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Delivering Successful Projects: The Challenges of Commercial Complexity

November 3, 2011

“There isn’t such a thing as an IT project, they are business projects. Virtually none fail due to the technology.”

This quote, from the UK Government CIO, reflects growing understanding that it is primarily commercial and relational issues that undermine success in IT procurement. Indeed, research by the International Association for Contract and Commercial Management (IACCM) suggests that more than 70% of ‘troubled projects’ are struggling due to non-technical factors.

What goes wrong – and how can the problems be avoided?

IACCM has discovered a series of issues that appear frequently to undermine outcomes:

–   weaknesses in requirement definition

–   poor alignment between business requirements and supplier selection criteria

–   inappropriate allocations of risk and the wrong performance measurements / KPIs

–   lack of discipline in the management of change

In a world where the pace of change continues to accelerate, it is not surprising that projects are often challenged by high levels of ambiguity, uncertainty and volatility. This is hard to manage when there is a lack of alignment between functional objectives. For example, Procurement is driven by achieving the lowest price, Legal is driven by minimizing risk, and IT is concerned about achieving good outcomes.

The problems are reflected in a series of recent quotes by CIOs:

“Weaknesses in change management are typically a key factor in project failures and overruns.”

“We operate a procurement process that takes too long and prevents the interactions with suppliers that would support innovation.”

“We generally prefer to drive down the price from the supplier, rather than tackle the costs associated with waste and inefficiency. We rarely ask which would yield more, nor the extent to which our inefficiency is adding to the supplier’s costs.”

 

Achieving Improved Outcomes

The IACCM research has concluded that most organizations lack a strategy for contracting and commercial management. As a result, the CIO rarely has the necessary contracting tools at his or her disposal. This includes the timing of involvement by the people who are key to both negotiation and delivery; it extends to having the right contract structures and service levels; and it is evident in the weakness and indiscipline of change management.

To improve the quality of outcomes, the CIO community must demand more from the organization. There is a pressing need for either increased support or greater empowerment to negotiate and manage the right contracts and relationships for the type of project to be undertaken.

Rapid changes in business conditions, the volatility of market demands and the speed of innovation in technology have combined to make the life of the CIO and their staff more complicated. Adding to these factors is the growing dependence on global supply networks where cultural tradition and business practices may differ substantially from those of the domestic market. To manage this complexity demands different skills and tools from those of the past; it has placed strong emphasis on communications, transparency, negotiation skills and business acumen that have not been traditional strengths. It also requires contractual frameworks that are less about risk allocation and more about governance and management standards for handling the on-going project.

IACCM believes that the answer to these challenges is to equip IT and project staff with greater understanding of the commercial and contractual issues and solutions. With this in mind, it has coordinated the compilation of a worldwide ‘body of knowledge’ – an Operational Guide to Contract and Commercial Management.

It is perhaps surprising that this is the first work of its kind; yet its previous absence maybe explains why so many IT projects have struggled to meet their goals.

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