Companies are cutting back significantly this year. They're under more than usual pressure to optimize every dollar, to either stop the bleeding or start the recovery. The key to retaining business is to build /re-enforce customer loyalty. This is demonstrating that continuing with your current initiatives should not only cut their costs but also help generate additional revenue.
What's true for consultants is equally true for IT managers looking to kick-start an internal project or to keep their project funding flowing. Those who are best at proving the value of their projects will win. And when it comes to uncertain times, keeping your project off the chopping block can end up saving your future and enhancing your career. There are many ways to do this and I would like to suggest a few.
Benjamin Disraeli
Benjamin Disraeli, is reputed to have said that there are three kinds of lies: lies, damn lies, and TCO/ROI calculations for IT projects.
Clearly, no professional right-minded company will pour money into IT without a strong business case. There has to be a payback and that final payback is that the business will get something beneficial in return. Before you can be a part of this, you will have to address the issue of choosing the right metrics and presenting them well.
Calculating the true return on investment goes beyond demonstrating cost reduction or bottom-line enhancement. Those days are gone. Today's executives are no longer likely to let simplistic metrics pull the wool over their eyes, after all, presenting statistics and compiling business cases is part of their job too. You have to provide something they can sell on to their people.
ROI dismissals
As we move deeper into belt-tightening, we are seeing more and more ROI calculations being dismissed. Most ROI calculations from vendors are flawed toward magical and large returns, and most calculations from users are too simplistic and unreliable. Bottom line: accountants don't believe them and cannot use them anymore.
Though numbers can't be rejected entirely, the kind of numbers you use should vary depending on the ultimate goals of the project. Despite being a great decision-making tool, ROI is often a misleading indicator for deciding whether a project should be pursued or not.
Case Studies Testimonials
Reliable case studies showing how other organisations implemented similar projects successfully and achieved positive results, may have more credibility with cynical management teams rather than simple ROI projections. All you have to do is find the appropriate cases.
Hard or Soft?
If the project aims to reduce head count, inventory, or transaction costs, so-called hard ROI numbers may be sufficient but for projects with less measurable aims, e.g. improving the business environment or coping with service provision changes in the competitive landscape, soft ROI, e.g. the increase in growth potential or business value as a result of improved relationships, comes into play.
Thus, positively demonstrating the beneficial value of your project can prove tricky, but if you focus on added and hidden value in these areas and make a strong case, you will significantly improve the likelihood that your IT project doesn't get canned.
Helicopter views
But don't focus too narrowly on your project's niche lest you lose sight of the big picture.
IT managers always need to step back and look at the impact their project could have on the entire organisation. You need to look at the cost of lost opportunities. What are we not going to be able to do, in terms of people, hardware, software, training and other monetary issues, all because we took on this project?
Will we be able to do more of what we do well or do what we do more effectively? Will this give the company, service or product a competitive edge in the marketplace? It can't just be a cool thing to do anymore.
Business needs direct IT
The true business need meets the true ROI. If the business has asked IT for a helping hand in a project, that should be enough. If you're doing an IT project that is either not driven by the business or does not have direct bottom-line financial impact to the company, you should not be doing the project in the first place. Would you have the business or IT shop do an ROI on something as basic as an e-mail server? No one would tell you that because there is no ROI, therefore we don't need it. The business need bypasses the requirement for IT to sell an ROI back to those who requested it in the first place.
Customer loyalty
Building and re-enforcing customer satisfaction and loyalty is paramount in troubled times. Despite the cost, executives will approve high risk investments because the cost of not doing the project in terms of dissatisfied and lost customers, can be far greater than the addition of new IT capabilities. Projects that reduce customer retention costs or increase the efficiency of marketing campaigns are more likely to get a green light.
Making it real
Even the most ruthless, cost-slashing IT project can die a swift death if it's pitched in language your accountant can't understand. Be aware that everybody talks and thinks about TCO and ROI just a little differently, depending on their view. It may help to manage the differences in understanding by the creation of a glossary or terms definition, distributed to the key executives.
Language
As the PM, you are the communicator and you need to have a sound understanding of whatever language your company works in. Do they use internal rate of return, payback period, time to value? Sometimes business leaders don't always sync up to the value language of the company. If capital is involved, you need to understand the process your finance department uses to approve the budget and get it into the language they speak.
Keeping it real
Business case assumptions must be thoughtful and clearly supported in terms an accountant will understand. Include metrics on power usage, maintenance contracts, and head-count savings. These often can't clearly be seen until the next fiscal year. Accountants crave short term gains and cost-control drivers that help manage long-term planning.
If you can show payback for an IT investment over 18 months or less, even better. Accountants love to recover the cost of expensive volatile technical assets before they're fully depreciated. They know the rapid rate of obsolescence in high tech toys, the lock-in tactics and the long licensing traps.
Don't stick your neck out
Embrace Optimism when you can. All projects rely on assumptions and the associated risks. The bigger the project, the bigger the risks. The key to getting your project approved is simply to do your homework. Study, analyse and assess the risks rather than assuming the best and being surprised by the worst.
Positive risk management
Planning for a positive outcome needs implementing better risk management, plus the provision of accurate financials, supported by proven program management methodologies and earned value. Also, you will gain more oversight and control with smaller and more frequent milestones.
It's better to be transparent and realistic about everything but base your budget contingencies on sound risk management analysis and assessment. You should never presume to receive 100 percent of a project's costs initially when you don't know 100 percent of the project requirements. Manage the risks and issues as you go and adjust your expenditure according to your project plan, risk management actions and develop a positive outlook in the team. Look for positive risks; opportunities and assess them as you would a negative risk, fully.
Building a project
PMs and IT managers will find it more palatable to take a staged or phased approach when pushing ambitious projects, one that relies on shorter, clearer milestones with conditional metrics tied to future funding. If you cannot get funding for the whole project because of skepticism of deliverability or payback, ask for phased funding. Each phase can have a checkpoint where progress is measured and funding for the next phase is approved or denied. If the business isn't happy with progress or results, there is much less risk.
Messy eaters
Try scaling back and down to move forward. Keeping your project off the pig swill scrap heap may mean settling for a digestible piece of the pie instead of the whole thing. That way you don't kill the chef and you can always go back for more later.
Even a broken clock is correct twice a day!
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