 Many people assume that the IT industry has special demands in regard to project management. However, experience indicates there are more differences among companies than differences among industries. The discipline of IT project management is still in its infancy. With the advent of the Internet, IT projects from e-commerce to ERP implementations have become a high priority to almost every business. Often IT managers have a strict IT background, but as e-business evolves the requirement for hybrid business-technology project managers is inevitable. These managers require both a sophisticated understanding of IT plus essential business skills for executing projects that can achieve the expected Return on Investment.
According to a 1998 CHAOS Report by the Standish Group a full 26% of software projects are successful. Alarmingly this means 74% failed. Reasons for failure were attributed to lack of user input, unclear objectives, incomplete requirements and specifications, changing requirements and specifications and lack of planning. These project failings are clearly not unique to IT. From construction to oil and gas, projects For the purposes of this article the different approaches learned in the construction industry will be examined against those typically employed within the IT industry.
Adopting a business perspective whilst approaching an IT project is fundamental to the projects success. The business and financial experience accumulated in other industry sectors can thus benefit IT project leaders. For the purposes of this article we will therefore compare the management approach used in two different types of projects:
- An IT project for an automotive parts manufacturer
- A construction project for the same automotive parts manufacturer
There are real-world tactics from the construction industry that can be applied to the management of an internal IT project. By comparing these projects, it's clear that an internal IT department would benefit from adopting common management practices that are more typically used in outsourced projects, such as in the construction industry.
The internal IT project
The IT project we will look at is the development of a corporate intranet to allow for online procurement of materials by the company's internal software development group. It will support operations for a small automotive parts manufacturer.
Goal: The system will allow for online vendor catalogs with inventory information, order entry, purchase order tracking, and EDI with all corporate vendors.
Budget: $1.5 million
Deadline: Nine months
The construction project
The construction project involves building an expansion to house a new manufacturing line for the same auto parts maker.
Goal: To build an expansion that will support the manufacture of a key component for a new car model. The project scope includes the design of the facility, materials procurement, and construction.
Budget: $1.5 million
Deadline: Nine months
The tale of two projects
Here is an overview of how these two different projects deal with the important phases of project management:
Financial
The internal IT project: By creating the intranet, the expected cost savings for the company's purchasing activities was projected to be $600,000 the first year, and $1.2 million in subsequent years. This would result in a return-on-investment in approximately 21 months.
The construction project: The budget for the expansion was bid at $1.5 million dollars. If completed on time, the company expected to receive a contract to manufacture $12 million dollars' worth of parts annually, at a gross profit margin of $100,000 each month.
However, if the expansion wasn't completed on time, the auto parts maker would lose that lucrative contract. As a result, the auto parts maker built financial penalties into the construction contract. The construction company would have to pay $100,000/month in damages (or $5,000/day) for late completion. These penalties would be passed on in various forms to each of the project subcontractors.
Techniques the IT department should adopt? Internal corporate IT departments often have little incentive to deliver on time. Consider using contract language and cost allocation to increase incentives. In addition, evaluate and communicate the real cost of schedule delays. For outsourced projects build ensure the partners are fully motivated to deliver by including financial penalties for delays and bugs. Agree from the outset within the contract and any Service Level Agreements your exact requirements and standardize quality measurements.
Planning
The internal IT project: A committee of representatives from operations, purchasing, IT and several key vendors planned this project. The committee met almost every week for three months building a functional specification for the system. Several delays were caused by disagreements between operations and purchasing, resulting in compromises by both groups. The functional spec was delivered two weeks after the scheduled delivery date.
The construction project: The production engineers, who also designed the line the building was to contain, dictated the requirements for the expansion. These requirements were given to an architectural firm who produced construction drawings. The drawings were made available to three contractors.
Techniques the IT department should adopt? The IT department should attempt to mimic the "customer-is-king" attitude from the construction industry. Planning by committee can be very inefficient and often leads to delays. The IT department should try to lock down each stakeholder's requirements, then use a qualified design team to build the requirements and specifications, even if it means using outside resources.
Implementation
The internal IT project: The project manager broke the project into four distinct pieces, with different departments being responsible for each piece, while his own department managed the development of the largest component. Since the specifications for each component were well defined, minimal coordination was required between the departments. Because two of the departments were working simultaneously on other projects, they were late delivering their components. However, all four components were delivered four weeks after the scheduled delivery date.
The construction project: The general contractor utilized seven subcontractors to complete the project. The project manager held weekly project meetings to determine status and coordinate activities between subcontractors to ensure that they did not get in each other's way. Two of the subcontractors had problems getting materials, and were late in completing their contracts. However, with careful coordination, the project manager was able to interweave activities so that the impact was minimized.
Techniques the IT department should adopt? The project manager must be involved in every aspect of project implementation. There is no such thing as a "stand-alone" component. Everything must be coordinated. Communicate early and often, especially if competing priorities are a problem within your organization.
Quality control
The internal IT project: When the four components were integrated, the project manager realized that the interfaces to one component were incompatible with the other three. As a result, the interprocess interface had to be completely rewritten. This delayed the completion of the project by another five weeks.
Quality assurance identified 14 major bugs and 43 minor fixes. Because the original development resources had been reallocated to other projects, new developers had to be brought up to speed to deal with the problems. In this fast-track project, no time had been allocated for dealing with bugs, which further delayed the project's completion by an additional six weeks.
The construction project: The plant engineers performed an initial walk-through three weeks prior to the scheduled completion date. The resulting punch list contained 153 separate items to be addressed. The project manager distributed these to the appropriate subcontractors to be completed prior to the building turnover, at which time a final walk-through was conducted. All but 10 of these items had been addressed, and this walk-through identified 15 additional items, which were specifically detailed in the closeout documents. The owner took possession retaining 5 percent of the construction cost contingent upon completion.
Techniques the IT department should adopt? Quality assurance should be part of the project from the beginning. The earlier you identify problems, the more easily they can be dealt with without affecting the project schedule or budget. There will always be problems at completion, but having a structured way to identify them and get them resolved is critical. It's been my experience that managers of outsourced projects have more incentive to look for possible setbacks much earlier in the completion phase. The threat of financial penalties helps motivate project managers for an on-time performance. An IT department should develop similar incentives to increase the chances of meeting deadlines.
Completion
The internal IT project: The intranet was delivered 17 weeks late. As a result, the company missed an estimated $150,000 in benefit during the first year. However, the company did realize the projected returns, and the project was ultimately judged a success by the organization.
The construction project: The owner was able to start line installation immediately and begin production on schedule. The company got the contract, which ultimately contributed millions to the company's bottom line.
Conclusions
The construction world and the corporate IT worlds are obviously different, and projects will not be managed in the same ways. Go ahead and accuse me of comparing apples to oranges. However, you can learn a lot if you look at the management practices in the construction world, where successful project management literally means the difference between success and failure.
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