Tuesday, March 21, 2006

Overdoing IT - again

There are too many ways that people go overboard on IT, and it becomes dysfuncitional. Some of the more pedestrian examples are people who don't know a language (even if it's their native language) and are overreliant on spelling checkers. They will proudly deliver documents that are full of "there" when it should be "their" and vice versa. We all know the symptoms. Recently I was confronted by a translation job where I saw the same at a higher level, and on the corporate level, executives who are suffering from Math and IT phobia pay through the nose to shod their companies with "respectable" software like SAP at a price that would sink most businesses. It makes good conversation on the golfcourse, for everyone thinks they know what they're talking about, and the approving slaps on the shoulder follow, but many businesses suffer from a strategic misalignment of IT.

By the same token the current spate of outsourcing of IT all too often serves to hide incompetence, and dress it up in a halo of cost savings, and "contributions to the bottom line," when the real story is a strategic misalignment. For if companies truly understood the strategic value of IT, they would not put it too far out of their reach - which is not to say that certain parts of development cannot be productively outsourced, but the opportunity is far more limited and surgical in nature than current trends indicate.

Last year I had the opportunity to meet with Michael Hugos, formerly CIO at a distribution coop, who clearly has done a remarkable job there, and has at the same time become a best-selling author at John Wiley with his book on Supply Chain Management, modestly titled "Essentials of Supply Chain Management" (now in a second edition John Wiley & Sons, 2006).
In a recent conversation he expressed to me his eagerness at competing against any company that implements SAP. However, they are becoming harder to find, for the drive to conformity, in particular in public companies makes the pressure to conform to the norm almost too much to bear, and being a public company in the US in that sense is almost a recipe for disaster. Announce a deal with SAP and your stock will go up. What CEO could resist that, particularly if he is compensated with lots of options?

The whole experience brought to mind the fiasco at Pitney Bowes when they implemented SAP, at a time when there were still the big five accounting/IT consulting firms, and they went through four of the five, firing all of them but the last one, realizing they were running out of options to implement it successfully. I became instrumental in bringing in another consulting firm to try and save the day by actually managing the communication between PB management and the implementers, and keeping an eye on strategic alignment as far as possible.

As soon as we got involved - even at the proposal stage - interesting issues of strategic alignment began to surface, and it became apparent that one of the problems of the implementation was in the fact that Pitney Bowes' business model is based on leasing, and the SAP model did not accomodate that, so everything had to be customized. Hence the last proposal from #5 of the big five was for a $300 million implementation budget. A few years later the job was apparently completed successfully "below budget," as I heard. So they likely got away by reflecting only $299 million of the cost explicitly on the books, but the disastrous inefficiencies that no doubt resulted will be paid for over and over and over again for years.

The next brilliant management move then is to outsource the maintenance of the disaster, so that no-one actually ever has to have the intellectual honesty and courage to look at the disaster for what it is, and to do something that actually benefits the business. When in between you meet a business which really understands IT, and leverages it to the max, that is like a breath of fresh air. On the whole however, it seems as though the consumer trends of buying "boxed" software, has all but overwhelmed the capabilities of most managements for sound decision making in this area. As Mike Hugos observed in our conversation, at that point only too often a CIO ends up getting fired, and it's like a cab driver who gets stiffed on his tip for delivering the person to the wrong address, even if it was the passenger who gave the wrong information in the first place. Actual strategic alignment of IT with the business was the promise of the CIO position, but except for the exceptions that confirm the rule, it is yet to be realized. But we're spending a fortune on IT in the name of progress!!!

We also keep fooling ourselves that we're creating economic value with all the presumed productivity that results from this IT spending. Cheered on by Alan Greenspan and the backup chorus at Business Week (See a recent front page article on "Why the Economy Is A Lot Stronger Than You Think" BW Feb13, 2006), which is full of the type of delusional self-congratulatory nonsense about creating value in the "knowledge economy," which created the dot-com bubble and bust, and which now presumably is applied to the US economy as a whole. These are the kinds of musings of slightly deluded folk with pink-colored glasses, who really want us to believe that you can replace substance with arbitrary value that is created only courtesy of revising the standards after the fact. This is a process akin to social promotion in schools, that results in functional illiterates with highschool diplomas.

Oh well, enough for today. More about my translation fiasco in a later post.

Copyright © 2006 Rogier F. van Vlissingen. All rights reserved.

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