IT projects are more expensive than spelled out in the “planned budget.” With an investment so large it seems that companies aren’t nearly compensated for capital outlay required to purchase the software, hardware, hire consultants, implement the system and train all the potential users of the product. It’s surprising that companies exceed their budget with the initial purchase of the software alone, which is sometimes between $10 and $15 million. The biggest problem some companies face is the “Big Bang” IT system where there is high uncertainty of the cost and successfulness of the system, but implementation is done within a year. The other problem associated with this quick implementation is the lack of planning. It seems that CIOs will try to stretch their budget by having a well-respected consultant or expert to write a letter certifying the covering of the extended cost of the project.
The lost profit Hershey and the bankruptcy of Fox Meyer Corp. illustrate the negative possibilities of a failed IT system. The companies were so anxious to get the product that they did not fully evaluate its possible impacts. It’s amazing how companies makes these mistakes because the people within the company and on the planning committee are very bright individuals and are expected to foresee some of the worst case scenarios. It’s also shocking how a whole room of intellectual individuals remains silent when presented the software by the vendors such as Peoplesoft and SAP and fail to speak up when there are inconsistencies between the company’s expectations of the product and the capabilities demonstrated by the vendor.
The benefit of being able to study and observe the failure and success of IT implementation is the opportunity for companies to change their behavior of spending and planning. I think companies are now trying to effectively plan out their IT implementation and make sure it fits in with their business strategy to avoid the issues faces by Hershey’s and Fox Meyer Corp.
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I also wonder how so many companies possessing the abilities and knowledge to make these investment decisions failed. As you pointed out, management expected these decision makers to consider worst case scenarios, but the benefits of the best case, yet highly unlikely, encouraged by sellers can be tempting. While reading this chapter, I remember wondering whether management held such decision makers accountable for future successes or failures. The great amount of risk assumed combined with their irresponsible practices convinces me accountability to the decision maker probably failed to exist. Hopefully, in the future, management will provide greater proof of a possible technology’s need from its CIO’s than a letter from a consultant or expert.
I agree that after investment disasters in the 1990’s, companies enjoy a greater opportunity to observe the successes and failures of past IT investments. However, do companies and their employees even know examples of how exuberant IT investment failed in the past? Before reading this book, I always assumed spending more will get you more, so hopefully the ideas presented in this chapter are more prevalent than I assume. Also, even after discovering failures in the past, some companies may believe such failures won’t happen to them. This “invincible” attitude could be harmful because possibilities of failure always exist. Instead, companies should always consider examples of IT investments in the past because as with many things in life, history repeats itself time and time again.
Sometimes I think history repeats itself especially in relation to the IT situation because everyone thinks their idea is more thought out than the next person and that they're too smart to make the "stupid mistakes" other companies made. To sum it up in one pharase I would say "egotistical perception" is the problem.
I think that it may be wrong that history repeats itself. Many other factors cause the new mistakes and problems. Hence, it is very important that today the company is trying to plan out its IT implementation and managers must consider it will be suitable and helpful their business in the future. If the IT implementation stands more advantage even now or in the future, it will be worth planing it out. In my opinion, we have to update our IT implementation to increase our advantage.
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