A large number of significant IT projects are carried out by third parties. Many are less than stellar successes. Some take too long, cost too much or are abandoned before completion. Others are completed successfully by the vendor, but fail to deliver the expected outcome. While the rate of IT project failures is too high, outsourced projects suffer increased risks. When organizations give responsibility to a third party they too often abdicate many of the responsibilities that they should retain.


Challenges Affect a Broad Range of Initiatives

Consider the development of a new software application or the construction of a new datacenter. The organization has a need for expanded capability. But it does not have the internal expertise or capacity to carry out such a project. So IT management assigns responsibility for the project to a professional firm who is expected (and hopefully formally contracted) to do the work. Once the supplier has been selected and a contract signed, two factors will affect the likelihood of success. First, adequate attention paid to vendor management will directly improve the quality, timing and cost of the vendor's contribution. But equally important, success depends on adequate attention paid to preparing the organization for the required business and technical transformation.


The Business-IT-Vendor Partnership

All projects have a significant impact on the organization. Application development or implementation projects achieve their objectives only if the impacted business units actively participate in finalizing specifications, plan for process changes for their activities, train their staff and test the system. Even pure technology changes, such as the implementation of a new Storage Area Network (SAN), impact IT, and can also impact the business if the transition to the new SAN disrupts business activities because it is inappropriately scheduled or is poorly deployed.

All IT projects impact the IT organization because IT has the responsibility for ongoing operation of the systems or technology after the project is complete. And, of course, the vendor has the responsibility for successfully completing each project phase on time.

Projects are successful when the business units, IT and the vendor are actively involved in the total project. Organizations that limit the scope of a project to what the vendor is to do usually experience problems, even if the vendor completes their work perfectly. All projects, then, especially outsourced ones, should be defined and managed from a holistic perspective. A CRM project, for example, must be defined as the total deployment of CRM in the organization, not just as the work to be done by the contracted development firm. A project that involves the business must have committed business resources allocated to it. Otherwise it will likely fail to achieve fully the business unit's expected benefits.


Plan Your Work and Work Your Plan

Successful projects are planned. A specific progression of tasks is described in advance. The completion of each task is anticipated and verified.

It may be appropriate to have a vendor create the plan, including the business and IT activities, but a published plan is essential. The plan must be realistic, or else the number of variances and resulting adjustments and excuses will cause internal staff to lose interest. Abdication will accelerate. It must be possible to verify which tasks have been completed, or assessing progress becomes a matter of faith rather than fact. Therefore, a successful plan must be comprehensive, visible, and realistic and trackable.


Manage the Project, Don't Be Passive

Some very large contracted projects, costing many millions of dollars, fail. In many cases the failure is discovered only at the end of the project. Millions of dollars are wasted and expected benefits lost because no one on the client side was actively managing the project. Typically, the vendor is blamed for the failure.

In too many contracted projects, the project management is abdicated to the vendor. Clearly, the vendor must plan and manage their part of the project. But the organization must plan and manage the overall initiative and ensure that the vendor, as well as the impacted business units, is doing their part. Investment in at least a part-time project manager is money well-spent.


Recommendations

Avoid the temptation to abdicate all responsibility to the vendor when contracting major projects to external parties. Take the following steps to increase the likelihood of project success:

1. Assign an internal project manager. Assign a qualified staff member to actively manage the overall project. The responsibility need not be full-time, but must be considered significant. Without focused project management, consider any non-trivial project to be high risk.

2. When business units are impacted, involve them in a Steering Committee. Ensure that the business and IT are actively involved and accountable. Without representation on a Steering Committee, business unit management may neglect their role in the project. IT may not be ready to implement and operate a new system or technology. If the business and IT are not actively involved, they will not be prepared. Any new application or technology will become a negative disruption rather than an improvement.

3. Ensure that the project plan includes all activities involving the business, not just the vendor or IT. A successful project plan is comprehensive. It should incorporate all key stages of the business or technical transformation. Without it, success will be a lucky accident.

4. Establish clear milestones with the vendor and the business and monitor progress. Ensure that progress can be confirmed. Avoid surprises by establishing clear deliverables for each key project event.

5. Deal with vendor and business issues immediately. Identify all major project issues. Do not accept assurances that things will work out; expect specific corrective action from the vendor, IT and the business participants.


Bottom Line

When major projects are contracted to external parties, effective vendor management is essential. But it is not enough. Recognize the importance of organizational readiness when initiating projects. Ensure success by having an internal project manager actively manage both the vendor and the organization.