A Practical Approach for IT Governance

Archive for April 2010

Outsourcing for SMBs

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Following the ignominious collapse of several major outsourcing deals, IT services providers and customers alike have had to revise their approach to the entire outsourcing business. The trend towards more small projects is gaining momentum, and it further reinforces the need for organizations to develop an IT governance methodology for small projects. SMB CIOs have an alternative solution in extending their resource capability using project-based sourcing. Project-based sourcing is a convenient way to balance the need for reducing costs and maintaining core competence in-house.

While outsourcing makes good sense, organizations, particularly SMBs (Small to Mid-Sized Businesses), simply maintain status quo. Either they cite lack of expertise in managing off-shore engagements or perceived quality issues to not engage in off-shoring. To a large extent, their fears are justified. Tier-1 outsourcers seek outsourcing of entire functions – not the ideal method for SMBs which seek help for specific projects.

When outsourcing the projects, the overhead gets accented as procurement and sourcing decisions have their own components of fixed costs. The lack of a well-established Service Provider network that deliver project-based offshore solutions adds to procurement costs, often negating the benefits of outsourcing. The challenges with small-project sourcing from a SMB perspective are three-fold:

  1. Management issues leading to gaps between expectations and delivery. Businesses are not adept at managing global sourcing for smaller projects.
  2. The sheer number of projects with a large pool of smaller outsourcers makes the job of connecting the “right” provider with the projects extremely challenging.
  3. Even though the IT projects are small, the procurement logistics are still time-consuming and complex.

Fortunately, web-based brokerage solutions are emerging. These solutions are built on a solid pre-credentialed Service Provider network to ensure that lower cost is not negated by poor quality. These web-based solutions benefit both the SMB as well as the Service Provider. SMBs benefit from low administrative costs and accelerated contracting. They also benefit from selecting a vendor from a pre-credentialed network. Many Tier-2 and Tier-3 offshore Service Providers have the ability to provide niche IT solutions that match SMB project needs. Having a single consolidator like UsourceIT that manages the smaller outsourcers provides an efficient mechanism to implement small-project sourcing.

Written by Subbu Murthy

April 15, 2010 at 7:02 pm

Posted in IT Governance

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The Benefits of Remote Infrastructure Management For SMBs

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Frameworks such as ITIL have developed guidelines for strategizing, designing, implementing and managing IT Infrastructure that provides best value to businesses.  While the guidelines were designed for Tier-1 firms, they are also applicable for Small to Mid-Sized Businesses.  Ignoring the Fortune 1000, there are 17000+ companies who have between 500 and 10,000 employees.  Let us call these companies Tier-2 companies.  There are probably 200,000+ companies who have more than 100 employees but less than 500.  Let us call these Tier-3 companies.  A challenge Tier-3 companies, and to some extent the Tier-2 enterprises, face is the lack of economies of scale.  If they do not have a outsourced environment, they require systems administration expertise, network management, help-desk, maintaining the server farms, and maintaining the user devices (PCs, laptops, PDAs, etc.).   One easy way to gain economies of scale is to outsource, particularly off-shoring to leverage the lower costs.

According to Stephanie Overby (CIO Magazine: Outsourcing: The Pros and Cons of Offshore Remote Infrastructure Management dated: March 18, 2008), the services that can be off-shored are:

Service % that can be off-shored
Network Services
Internal Help Desk
End-user Devices

While the degree of off-shoring can vary for each enterprise, Stephanie’s insightful article points out the need for a blended model – a combination of on-site expertise backed by Remote Infrastructure Management (RIM) services.  Cost savings are a result of three factors:

  1. Labor arbitrage,
  2. Shared services including SaaS, cloud computing, and,
  3. Shared expertise.

The best example of labor arbitrage is off-shoring.  Large outsourcers such as IBM, Infosys, and Wipro have provided these cost benefits to Tier-1 companies.  In the past five years, many Tier-2 and Tier-3 outsourcers have provided niche RIM services.   Cloud computing has helped reduce infrastructure costs.  SaaS (Software as a Service) has gained momentum helping companies pay for services actually consumed.  Shared expertise is another strong benefit as outsourcers provide a multitude of expertise that would be very costly to in-source.

Savings can be significant.  Typical savings for e-mail hosting and support can amount to over 100% , over 200% for remote server monitoring, and over 50% for applications monitoring and support.

In addition to cost savings, RIM offers a much higher level of service.  For example, outsourcers can provide 24-7 support far more economically than in-sourcing.  Another significant benefit of using outsourcers is the ability to provide higher availability of services on demand.  RIM is a proven model for managing IT Infrastructure.  In the past these benefits were limited to Tier-1 firms managing large data centers.  Recently, the growth of highly qualified and credentialed Tier-2 RIM providers makes it easy for Tier-3 enterprises to take advantage of off-shore partners.

Written by Subbu Murthy

April 15, 2010 at 7:01 pm

Posted in IT Governance

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Getting Value From Quality Assurance (QA)

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Value from failures at first appears to be an oxymoron. To a large extent, there is a sound basis for this view. There is the need for documentation, stringent processes, and audits to ensure compliance to these established Governance processes. These all add up resulting in 20-40% of the overall costs.

Unfortunately, there are no short-cuts. Toolsets, templates and reuse help reduce the overhead burden, but the cost and schedule impact of QA is felt. Small to Mid-Sized Businesses (SMBs) feel this pinch even more due to lack of established governance practices. In some cases, SMBs may actually forgo QA entailing significant risks or give lip-service to QA. These strategies seldom work. A better approach is to accept QA as a given and get the most out of these expenditures. Adopting these practices and customizing them to match the specific organizations technology environment will significantly reduce risk and improve quality. An example of getting more out of QA is developing process and project metrics. These metrics provide a sound base for planning future IT investments.

Even if an organization adopts QA practices, older systems may not be compliant. One solution is to train the maintenance team in reverse engineering the system to document the core business rules and risks. This will help develop designs that mitigate the risks and construct validation protocols to verify proper functionality of the system. Reverse engineering is a sound technique to help improve product quality. With the maintenance requirements fluctuating, it also helps optimal use of IT resources.

Written by Subbu Murthy

April 15, 2010 at 6:59 pm

Posted in IT Governance

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IT Project Considerations

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When considering IT Projects solutions, the key drivers are to spend sufficient time understanding the needs. In fact, the very first question would be to assess if the business strategies are well established, and equally important, to assess whether the business processes and assumptions that drive the perceived need for the new IT Project are valid. It is well known that a technology solution cannot fix an ailing business process, in fact, it will only make it worse. This is important when considering an upgrade to an IT system; if the issue is the business process, fix the process before embarking upon an upgrade. Before embarking on the IT system upgrade, it is imperative to assess the risks. Risks are both intrinsic (internal operations, sales, marketing, finance, HR) and extrinsic (how they impact your customers and supply chain). For enterprises also desiring to upgrade their IT system, they must assess the existing software and really scrutinize whether the upgrade is going to bring the benefits that are desired. For example, one question to ask is whether a few customizations or enhancements or bolt-ins to the current software satisfy a majority of the requirements.

Assuming that there is a need for an IT Project or an upgrade exists, we need to assess the true life cycle costs, benefits and risks of the upgrade. It should be pointed out that the life cycle technology costs are but a fraction of the overall costs; the cost of implementing the change across the organization can be daunting. A healthy bout of skepticism on the true benefits should be entertained. More than 50% of IT implementations according to researchers have failed to yield the promised benefits.

Once the needs and benefits are established, from an IT Governance point of view, the mandate for an IT Project must come from the top and have complete support and cooperation of all key stake-holders. Most IT Projects should be driven not by IT driven but by the business. Selecting the appropriate vendor is a complex task. It is best to use a systematic process of selecting the best vendor for the project. Simply attending vendor presentations is not adequate since vendors attempt to change your business needs to meet their tool features.

Implementation of an IT system, is significantly more complex. Most recommend an incremental approach as opposed to the big-bang to mitigate risk. Again, the critical aspect is having the business units manage the deployment, with IT just playing the role of a facilitator.

Written by Subbu Murthy

April 15, 2010 at 6:57 pm

IT Governance for SMBs

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IT Governance helps align IT activities to best meet an enterprise’s business requirements. Most Governance methodologies start with alignment at the top. This is a reasonable approach for all organizations where the traditional involvement of board-level executives in IT issues was to defer all key decisions to the company’s IT professionals. IT governance helps facilitate decision making across all stakeholders. This prevents IT from independently making and later being held solely responsible for poor decisions.

From an IT Governance standpoint, Small to Mid-Sized Businesses (SMBs) differ from the larger firms in two important aspects:  One, they are more nimble and need flexibility, and second, they tend to focus on shorter-term issues.  For SMBs, the guiding principle is to deliver value to the business without injecting onerous controls that stifle productivity.   To achieve it, the IT Governance framework should provide complete transparency on IT activities and make it simple for users to make, monitor and prioritize IT requests.  In order to achieve transparency, SMBs will need to establish controls and processes to deliver quality technology solutions on time and within allocated budgets.  From a management perspective, it is critical to effectively allocate and track resources and costs.

Sudoku puzzles teach an important lesson in project management, that we almost forget: there are fixed costs associated with every project.  In Sudoku, there are different levels of complexity: from the very easy to the excruciatingly difficult ones.  While the time taken is correlated with difficulty, it is not linear.  No matter how easy the puzzle, it takes a finite amount of time to simply fill the puzzle.  This is also true for any project.  Initial project reviews, user-buy in, planning, resource allocation, project briefing, and de-briefing after the project is completed all have a “fixed cost” component to it. While it is impossible or even desirable to eliminate the fixed costs, it will be helpful to streamline the project management process to develop efficiencies.

These guidelines help in reducing the fixed costs associated with projects:

  1. Develop a simplified project management methodology (PM-Lite).
  2. Use simple workflows (automated workflows add more benefits) using a portal approach to oversee these “small projects”.
  3. If you outsource these projects, use a set of pre-screened and pre-credentialed vendors who are specifically suited for delivering small projects.  This is discussed in more detail in this blog.
  4. Set limits on the number of deliverables (such as 5 to 7).
  5. Keep the distance between each deliverable small (time and technical relationship).
  6. Set simple success criteria such as 10% within each deliverable’s costs and schedule as green, between 10% and 25% as yellow, and more than 25% variance as red.

These simple guidelines should not be construed as one shoe fits all.  For example, risk management, compatibility with enterprise architecture, adherence to standards, and other project management principles also apply, but they should not become onerous and increase the fixed costs of a project.

Written by Subbu Murthy

April 15, 2010 at 6:50 pm

Posted in IT Governance

Tagged with ,