Whose fault is it? Vendor, Client or End User ?? - Pikom

Vendor, Client or End User ??
Lam Wei Choong
weichoong@veros.us
25 October 2012

The Perfect Project
Case Study of a Failed IT Project
Cobb’s Paradox
Complexity of IT Projects
So How do we prevent failure?
What to do when project failure is imminent?
Arbitrate or Litigate?
Veros’ Recommendations in Summary

2008 CNET

Situation:
Sky wanted a "world class“ customer relationship management system at its contact centres
in Scotland
November 2000, EDS awarded Systems Integrator contract to design, build and implement on
a T&M basis
Project implementation period was estimated to be 18 months
Two years after project start, Sky subsidiary took over EDS’s role as system integrator
responsibilities
Another 6 months later, EDS pulled out completely & contract ended.
Initial baseline budget of around £48 million
Upon termination, £170 million spent on software, systems integration, infrastructure costs, &
remodeling of contact centre facilities
Sky ultimately took another six years & spent £265 million to complete the project.
Sky sued EDS in 2004 … eventually for a sum of £709 million
Case Study references: Professor June Verner Uof NSW; Bill Molloy, Partner, Teacher Stern LLP, Herbert Smith LLP IT and outsourcing e-bulletin Feb2010

SKY CLAIMED
Misrepresentaion and Deceit
EDS overstated or oversold their capabilities & unrealistically
estimated resources required; I.e. Incompetent !
EDS falsely represented that they had a proper WBS and effort / time
scoping and had reasonable grounds for believing they could and
would meet the project deadlines as set out in both the tender
response and the subsequent contract.
Negligence
EDS falsely represented that they "had a programme plan that was
achievable and the product of proper analysis and re-planning
Breach of contract
Failed to provide sufficiently experienced personnel
Failed to deliver services & documentation as per contract
Failed to exercise reasonable skill and care, or to conform with good
industry practice.
EDS DEFENCE
BSkyB did not know what it wanted from the system
and attributed overruns to undefined project scope
BSkyB's requirements "kept on emerging like
handkerchiefs from a magician's sleeve" during the
roll-out.
Furthermore, Liability to BSkyB for non-fraudulent
misrepresentation by EDS was excluded by the
entire agreement clause
EDS denied that there was indeed a representation
that it had carried out a “proper analysis” in relation
to time or had “reasonable grounds” for an opinion
that they could and would deliver within the
timescales in the EDS response.
No duty of care was owed by EDS to Sky in respect
of pre-Prime Contract representations
The entire Sky claims were "absurd and
extravagant”

Cobb’s Paradox :
“We know why (programs) fail”
“We know how to prevent their failure - ”
“So why do they still fail?”
Background
Martin Cobb –CIO, Secretariat of the Treasury Board of Canada
The Standish Group’s CHAOS University 1995
Studied the 10 most complex IT projects in 1994
All were all in trouble: eight over schedule, by an average factor of 1.6; over budget by
a factor of 1.9 and the final two were cancelled with nothing delivered.

Judgment passed on 26 January 2010
Judge Ramsey agreed with Sky’s claim of ‘misrepresentation constituted deceit’ because:
• EDS knew the representation was untrue, or was reckless as to whether it was true;
• EDS intended Sky to rely on the representation
• Sky relied on the representation to its detriment.
The court accepted Sky's argument and held EDS liable for negligent misstatement
• court also reiterated that suppliers owe customers a duty of care in relation to pre-contractual representations
Entire agreement clause does not exclude claims for negligent misrepresentation or misstatement
Court found that EDS:
• "failed properly to resource the project“; did not adhere to contractual deadlines, and ultimately made minimal progress.
• failed to exercise reasonable skill and care or conform to good industry practice.
• there was no effective project management, the planning was not properly documented
• there were insufficient technical and managerial resources.
This 7 year legal battle is the most expensive court case in the history of the IT industry
HP paid out £318 million in damages and legal costs
Case Study references: Professor June Verner Uof NSW; Bill Molloy, Partner, Teacher Stern LLP, Herbert Smith LLP IT and outsourcing e-bulletin Feb2010

Drivers of
IT Project Complexity & Failure Propensity
PROJECT TYPE
• DEVELOPMENT
• ENHANCEMENT
• COTS
• ERP / CORE BANKING
• OUTSOURCING
• BPO
• HYBRID
VENDOR ROLES
• NONE
• CONSULTANT
• APPLICATION DEVELOPER
• PRODUCT IMPLEMENTOR
• SYSTEMS INTEGRATOR
• OUTSOURCER
• CLOUD/SaaS PROVIDER
• HYBRID
• Via ON‐SHORE / OFF‐SHORE
IT PROJECT
MANAGEMENT
FUNDAMENTALS
• SCOPE
• TIME
• COST
• QUALITY
• HUMAN RESOURCE
• COMMUNICATIONS
• RISK
• PROCUREMENT
GEOGRAPHIC SPREAD
• LOCAL – SINGLE OFFICE
• LOCAL –MULTI OFFICES
• LOCAL –MULTI CITIES
• REGIONAL
–MULTI COUNTRIES
• GLOBAL
–MANY COUNTRIES
ENTERPRISE CAPABILITY
• LOCAL SME
• LOCAL LARGE ENTERPRISE
• REGIONAL MNC, LOCAL SITE
• REGIONAL MNC, HQ
• GLOBAL MNC, LOCAL SITE
• GLOBAL MNC, REGIONAL HQ
• GLOBAL MNC, GLOBAL HQ
10

1. A project is NOT any project (aka classify them
according to the drivers of IT complexity and
failure propensity)
2. Select your PMs (client and vendor) accordingly
(and appropriately)
3. Manage the Services Sourcing Life Cycle
4. It is OK to marry but please have a Prenupt !
5. Trust but Verify !

Drivers of
IT Project Complexity & Failure Propensity
PROJECT TYPE
• DEVELOPMENT
• ENHANCEMENT
• COTS
• ERP / CORE BANKING
• OUTSOURCING
• BPO
• HYBRID
VENDOR ROLES
• NONE
• CONSULTANT
• APPLICATION DEVELOPER
• PRODUCT IMPLEMENTOR
• SYSTEMS INTEGRATOR
• OUTSOURCER
• CLOUD/SaaS PROVIDER
• HYBRID
• Via ON‐SHORE / OFF‐SHORE
IT PROJECT
MANAGEMENT
FUNDAMENTALS
• SCOPE
• TIME
• COST
• QUALITY
• HUMAN RESOURCE
• COMMUNICATIONS
• RISK
• PROCUREMENT
GEOGRAPHIC SPREAD
• LOCAL – SINGLE OFFICE
• LOCAL –MULTI OFFICES
• LOCAL –MULTI CITIES
• REGIONAL
–MULTI COUNTRIES
• GLOBAL
–MANY COUNTRIES
ENTERPRISE CAPABILITY
• LOCAL SME
• LOCAL LARGE ENTERPRISE
• REGIONAL MNC, LOCAL SITE
• REGIONAL MNC, HQ
• GLOBAL MNC, LOCAL SITE
• GLOBAL MNC, REGIONAL HQ
• GLOBAL MNC, GLOBAL HQ
12

Gartner: Key Issues for Services Vendor Selection and Contracting, March 2010

Of Failed implementation, 75% of root causes can be traced to
pre‐project kick‐off stage
This is mainly due to lack of proper expectation management
and organizational readiness ( both client’s and vendor’s):
1. This is a Business Process implementation, not just technical
2. Project Scope unclear and not agreed
3. Stakeholders (Business & Vendor) not actively involved
4. Roles & Responsibilities of both parties not clearly laid out
5. Deliverables ill-defined & managed
6. No Risk & Issues Mitigation processes agreed & adhered to
7. No planned independent expert reviews & assessments

Preventing Pre‐Contracting Issues
Inadequate Business Case
poorly defined requirements
no risk analysis & mitigation (e.g. lack of adequate skills & experience)
underestimated complexity, cost and schedule
Upper Management expects more with less
Lacking Project Sponsorship & Leadership
Weak Tendering Process
pre‐RFP, RFP
poor / ill‐defined scope
criteria for Selection (POC, Technical, Business, Ts&Cs etc)
evaluation misalignment with Selection Criteria
No clearly defined (documented) expectations of Vendors
roles & responsibilities – individual, joint (between / among vendors)
accountability, measurement and monitoring
no regular reviews & assessments of vendor’s performance
Internal Politics
unclear responsibilities & accountability of End Users vs IT
differing (conflicting) Unit / Departmental Objectives / Goals
undefined risks vs (joint) rewards

Business impetus (biz case; project charter)
Project Goals
Deliverables
Functional Requirements
Processes
Non‐functional Requirements
Regulatory Requirements
Data Requirements
Interfaces
Training
Timeframe
Architectures
Geographical Coverage
Business entities
People …
AND
What is NOT in Scope !!!

1. What are the root causes of the IT Project(s) that did not meet End User
expectations and / or Project Charter and / or Business Case?
2. What are the strengths and weaknesses in the current pool of project managers?
3. What are key End-User expectations not met currently?
4. What is the impact of cultural differences on the outcome of our IT Projects?
5. What profiles of Project Manager are required for different classes of IT Projects?
6. What are the developmental needs to meet current and future Project
projected requirements?

1. Hope … that you have a good Prenupt (i.e. a good contract) !
2. Seriously – two concurrent issues must be answered and activities initiated :
i. Where do you stand Contractually ?
ii. Where do you stand Project-wise?
3. Reality - while IT experts are not lawyers, Lawyers cannot possibly provide a
proper recommendation without an independent expert project assessment
4. Be prepared for the worst – in more ways than ONE !
5. Arbitrate or Litigate?
Answer: look into your Prenupt! But ….
6. Hang tight and Be prepared for a loooooong roller-coaster ride !!

1. What are the key contractual (and pre-contractual) requirements and
deliverables?
2. Where is the Project on each of these key requirements, deliverables?
3. For major issues discovered - ascertain root causes.
4. Whose fault or which party (parties) is more at fault ?
5. Can they be remedied? I.e. can the project be salvaged – effort, time, cost
and risks
6. What are the immediate steps to prepare for possible arbitration or
litigation? War-room !

• What exactly is Independence ?
• How about separating roles and
responsibilities?
• Different incentives; more control with
direct contracting vs main contractor with
sub‐contractors?

1. Assess and know which of your business-critical projects belong to the extra-complex
and super-risky category (use Veros complexity template) to single out for special care
and attention.
2. Do you have the right Project Manager(s) for the right Project?
3. Plan for (anti-) Failure !
a. Seek (independent) advice and monitor (assessments) for proper sourcing procurement
b. Engage experienced (IT savvy) lawyers to prepare (if possible) earthquake-proof contracts
c. Do not be penny-wise and pound foolish – better to try and be healthy rather than rely on being
able to find a good doctor
4. Trust but verify : periodic outside assessments of your consultants, software providers
and / or systems integrator (i.e. audit your auditors)
5. Legal and IT experts must be a team!
6. Documentation, documentation … documentation!
GOOD LUCK !!

Veros Consulting is a boutique information technology and management consulting
firm that specializes in:
IT Audit & Review
IT Project Failure Analysis , Prevention & Recovery
IT Dispute Resolution
e-Financial Services Strategy & Implementation
Complex Project Management
Program Office setup and management

More than thirty two years in the Information Technology industry with 20 years of executive
management experience across countries in the Asia Pacific (including Japan) region.
Insights and Experiences primarily in:
•Financial Services
•Public Sector (e-Government)
Also has a broad background in many functional areas of IT including:
•Highly Complex Project and Program Management
•Management Consulting & Systems Integration
•Applications Development
•Software Package Selection & Implementation
•Quality Assurance & Risk Management
On the business front, has diverse experiences including:
•IT Audit and Dispute Resolution
•M&A Integration
•Organizational Transformation
•Contracts & Negotiations
•Troubled Systems Integration Projects / Critical Situation Management
Positions Held include:
•General Manager, Consulting & Systems Integration, Financial Services Sector, IBM Asia Pacific region
•Managing Partner, IBM Global Business Services (GBS), ASEAN/South Asia region
•Managing Principal, Mergers & Acquisitions , Financial Services Sector, IBM Asia Pacific region
•IBM Asia Pacific Leader, Applications Management Services (Outsourcing)
•General Manager, IBM China (East Region)
•Director of Operations, Financial Services Sector, IBM Asia Pacific region
•Adjunct faculty, Singapore Management University’s Masters in IT (Financial & Services) program

Vendor, Client , End User ??
Lam Wei Choong
weichoong@veros.us
25 October 2012