Risk transfer in IT transformation contracts is a myth

If your organisation is planning an IT transformation to increase the flexibility and effectiveness of your systems, you are probably overwhelmed by requirements, enterprise solutions and integration options.  Successful delivery of large IT programmes is not getting any easier, and organisations that outsource the IT aspects by wrapping their demands into a large, fixed-price contract often experience challenges and an outcome which falls short of expectations.  In the PA/Harvey Nash CIO survey, 75% of respondents stated that their IT delivery projects were challenged by poorly defined scope, 30% found that the business expectations were not met and nearly 20% found that the business case was no longer valid. 

One response to these failure rates is to put more effort into defining requirements and letting a big fixed price contract to “transfer risk” to the supplier.  But we question that approach, if everything can be defined perfectly up-front, why are three quarters of projects impacted by poor scope control?  Does contracting in full for a large IT transformation make sense in a dynamic environment where one in five projects delivers a solution that is no longer relevant?

There is a solution.  Modern Agile delivery methods provide a structure to deal with change.  Risk and delivery of business benefit are split into discrete phases, providing a structured re-prioritisation mechanism.  Agile approaches have been used in smaller delivery teams for years, and are business-as-usual in high technology and start-up organisations where goal keeps changing.  Your organisation may operate in a more stable environment, but must still adapt to unexpected moves by regulators, customers and competitors.  Agile techniques can be applied to large transformation projects, and when used in the right way, can offer a higher chance of business success compared to traditional long-term fixed-price deals. 

How can you use techniques proven on smaller Agile projects to succeed with a larger IT transformation project?

• Deliver early and often – force suppliers (and your own organisation) to demonstrate success frequently.  Work to a structure which requires early delivery so that infeasible or poorly designed projects can be cancelled or re-focussed early, before they become ‘runaway’ projects.  

• Prioritise ruthlessly – large projects often have a huge ‘kitchen sink’ of requirements because business users don’t believe they will get another chance.  Projects must be ruthless: commit only to the absolute must-haves in the first release and make it clear that any ‘should haves’ will be done later, if the business case still stacks up.

• Maintain a competitive supplier landscape – suppliers engage in gouging behaviour when they know the customer has little choice but to use them for a new piece of work.  Gouging behaviour can be deterred by short term focus on benefits delivery and strong quality mechanisms so that it is possible to bring in another supplier at short notice. 

PA recently helped a client adopt agile practices to help reduce project risk and deal with uncertainty. The PA team stabilised one of the regulator’s largest programmes, using our pragmatic approach to iterative development to transform it from the highest risk on the portfolio to one of the client’s best performing programmes.

To find out how PA can help you deliver successful agile projects, contact us now.