This week is the anniversary of the fall of the Lehman Brothers and the financial crisis. The media has been giving a lot of coverage on it. One of the most popular topics is about the compensation scheme of the top banking executives in the States. Before the crisis, they were given huge annual bonuses based on the profits earned by their banks for the year. This has encouraged a short term view and risk taking within the industry. Currently, proposals are given to implement the Clawback scheme where the bonus earned in the current year is to be distributed in a number of years.

I think this spirit of the idea is also applicable for the IT industry. For the last few decades, IT improvement initiatives are usually packaged as a transaction between the buyer and the seller. The seller will help the buyer to deliver the required solution based on the requirements provided. At the end of the project, the seller will receive a monetary reward for the services provided. The buyer can optionally choose to continue the thread-thin relationship by signing up for a maintenance contract with the seller.

However, there are some weaknesses with this model to both the buyers and sellers at different stages of the project.  The underlying reason is because of the one-time payment as a transaction.

Beginning of the project

For the buyer, they will need to incur a large sum of money upfront to “invest” in the IT solution that can help the company. This result in a lot of time and effort spent to justify for the “investment” and to manage the project.

For the sellers, they will to ensure the profitability of the business. Therefore their pricing may limit themselves to the bigger players who can afford, and leaving out a large majority of smaller players untapped. They have to spend more time and money on marketing and sales to clinch new projects.

During the project

As the project progresses, we will see more weaknesses showing up with more changes in the requirements popping up.  Because the project is a one-off project, there is a tendency to scope the project as big as possible to enjoy the economy of scale and larger revenue. However this increases the complexity of the project as it is very difficult to gather 100% of the requirements upfront.

Therefore new change requests will definitely arises during the midst of the project. The buyer will try to get the sellers to do more without busting the budget whereas the sellers will try to charge back from the extra work to be done. In an effort to meet the schedule and cost constraints, some projects will suffer from a buggy system or a system that is difficult to use and maintain. In some extreme scenarios, there are a lot of unhappiness generated and losses incurred at both sides.

End of the project

Once the system is implemented, the end users will be sent for the training. However from then on, new end users will be trained on the job basis by those people who have been trained. Little or no additional training will be given for new features added subsequently. As a result, we hear illogical stories from end users like this. “You need to resize this window before you click this button, otherwise the system will crash”. End users will start developing their unorthodox ways of using the systems which limit the benefits of the original design of the system. It is like spending hundreds of thousands buying a sports car and putting it to waste by filling it up with diesels instead of petrol.

And as the world is getting more and more dynamic nowadays, we see more changes in the business rules and processes. The end users will devise new ways of using the system like overloading the original features of the system.

For the buyers, they are losing the productivity due to additional distraction of their staff and system failure due to incorrect usage.  After a few years, they will realize that the system is not delivering its purposes and they have to spend money to invest in another brand new system. In fact this is a common sight in the industry where money is being wasted on migration to new systems every few years.

For the sellers, they are losing the opportunity to provide their assistance to their valued customers for additional revenue. They get bad publicity when people blog or comment their systems are lousy just because the end users are not aware of certain features or correct way of usage.  If their solutions are truly helping their customers to earn more money, I believe it will be much easier to justify for a better reward.

So is there a better way?

I am sure that a lot of IT professionals will agree with the points that I have stated. In fact, some of them have come up with other pricing models to address these weaknesses. One of which is the Software as a Service (SaaS) pricing model that is popularized by Salesforce.com. Rather than to pay a huge sum of money to invest in IT solutions, companies can now enjoy the benefits of the IT solutions immediately by paying for monthly usage fees.  This provides a consistent flow of the revenue to the service providers and lowers the barriers to entry for the IT adoption. We should extend the idea of the SaaS from hosted applications to on-site implementations.

In additional to that, we should create the additional role of the Solution Specialists. These experts will visit the end users on a regular basis to coach them on the best way to use the systems and identify any new needs or changes required. They will also update the management of the companies on the best practices from other companies and latest innovation in the market that might be applicable to them. And because the companies are paying on a subscription model, there is incentive for the service providers to continue to refine the system to retain the customers.

Conclusion

We will be able to create a win-win relationship between the buyers and the sellers by changing the reward model for IT projects. Instead of treating IT solutions as a commodity that can be traded in transaction, we should look at it as a service or utility. In this case, the cost of implementation can be lower. The payment will also be tied to the value and contribution to the business over the long term. This will encourage the sellers to align their solutions to the business. For the sellers, they will be able to have a larger and consistent flow of revenue. This is what a real business partnership should be.

While the world is recovering slowly from the global financial recession, we are hit with the impending threat of the H1N1 flu virus (also known as Swine Flu). Although the source is known to be from the remote Mexico, there are reports on a few cases of infection in Asia.

I believe that we are in a much better position now as compared to the SARS period. This is because the alert was raised early and we have accumulated a lot of practical experience from the SARS episode. Nevertheless, we should look at how other organizations are tackling this challenge and relook on the current business continuity measures.

Many companies are playing it safe by restricting travel to the infected countries and also exploring ways to enable employees to work from home should they are suspected of infection. Some of them have set up alternative office sites to continue their operations in case their current office building is placed under quarantine.

I see our solutions (Confluence & JIRA) would be useful in extending these business continuity strategies. I will list down 3 scenarios to explain how they can help.

Scenario 1: An employee has fallen sick and is unable to do work. Another colleague is assigned to take over his duties but he does not know what are his outstanding tasks and the latest development on the tasks.

Scenario 2: The employee is assigned to take over a project but all the files are stored in the laptop of the patient who is in the hospital.

Scenario 3: There is a case of infection in the current office building. The entire building is under quarantine.  Nobody is allowed to enter the building to do work until disinfection cleaning is done.

 
Lastly, I wish everyone good health and hope that this will get over soon.  Do check out the tips given by the Singapore government.

CIPD together with ACAS has released an official guide for businesses to get through the recession. There are a few points that I would like to highlight.

Think long term
A lot of businesses are exploring aggressively to cut down on their operating costs. There are a variety of measures by

• cutting jobs
• terminating improvement projects
• insourcing
• using cheaper solutions and products

While these may help to bring down the cost at the moment, it might not benefit the organization over the long run. 

• Talents and experts that took time and money to be trained are being lost together with precious domain knowledge. Bad publicity also results in lower trust by the clients.
• Forsaking opportunities to achieve efficiency and additional potential revenue
• Higher expense – Forsaking the opportunity to get the job done by the experts at a cheaper rates 
• Lower service/product quality. Additional expenses to customize the solution or manual workaround. The worst scenario is to spend extra money to migrate the solution in future. 
• Incurring unnecessary (indirect) expenses – It is possible that an effort to reduce software licensing costs could result in huge, additional expenses during  the migration to another cheaper system.

It is important to find a good and low cost solution which is scalable with additional investments when possible.

Maintain employee engagement
We always say that employees are the ones who make a difference to the company. At this time, there is a need to boost the morale and keeping them engaged. It is also necessary to set a clear sense of direction from the top management. I once heard a management story highlighting how good intention can end up wrongly executed –

The top management said cut unnecessary cost. The middle management said cut manpower cost. The employee told his wife “I got cut”.

Therefore it is essential to set up a platform for the top management to communicate their plans down to the line workers.

Develop a strategy for redundancy so it’s there when you need it
A lot of companies have put in plans to handle the redundancies through hiring of contract workers and outsourcing to external vendors. However, they may have missed the crux when there are cases where companies have to retain the contract staff and retrench the permanent staff.  There are also occurrences where  the dependence with the vendor has grown so high that it is almost impossible to switch to another cheaper vendor.

Even though the jobs have been outsourced, there remains an important and urgent need for companies to capture the essential knowledge within the organization. This is possible by setting up a collaboration site (Confluence) or issue tracking list (Jira) to capture information that are important to the organization.

Have you implemented these strategies in your organization?