IT spending among financial institutions is expected to increase 4 percent by the end of 2011 and then another 4.6 percent in 2012, $53.5 billion and $55.9 billion respectfully. By any standard, that is healthy.
One has to wonder if these numbers are based on initial assessments or are cost overruns included in the estimates? What about the added expense of project delays? The additional expenditures can be staggering.
“Few companies hit time or budget goals” with new IT initiatives according to The Economist Intelligence Unit. A July 2011 study reports that over the past two years, only 20 percent of projects were delivered on budget and only 17 percent were implemented on time among a large sample of financial institutions. Such overages seem intolerable in an environment of late where the majority of increased profits have come from expense reductions.
“IT projects are now so big, and they touch so many aspects of an organization, that they pose a new singular risk,” according to Harvard Business Review. In September 2011, the magazine reported on the largest global study ever of IT change initiatives. Projects in the study averaged an additional 27 percent in cost with one in six projects exceeding outlays by 200%, and schedule overruns of 70 percent. These big losers are termed “black swans.”
Fortunately, there is hope. Emirates Bank, which merged with the National Bank of Dubai during a major IT undertaking, listed two main project objectives - “avoid mission creep and to go live as soon as possible.” Because of the merger, the project scope doubled. Still, managers exceeded costs by only 18 percent and missed the schedule by a mere 7 percent, quite a success story. The keys to success are adaptable and recommended:
- Stick to the schedule – don’t allow anything, including a merger, to deter strict adherence to the timeline
- Resist changes to the project scope – finish the work at hand before adding new initiatives that will certainly cause delays
- Break the project into discrete modules – easier to manage and assign to separate teams
- Assemble the right team – consider the IT expertise from within the institution as well as outside experts and vendors
- Prevent turnover – keep the team together by not reassigning or redirecting the attention of individual members
- This is business – keeping in mind this is not an IT initiative will correctly focus on expected outcomes
- Focus on a single target – the bulls eye being the go live date, which is what really matters
As a service and software provider for financial institutions, MST staff members can attest to the practicality of the list above. Implementing these seven practices for an MST product or any other IT initiative is a great New Year’s Resolution.
Sources
Why Your IT Project May Be Riskier Than You Think, page 23-25, Harvard Business Review, September 2011
Success Story: How One Company Nailed A Tricky IT Project, page 24, Harvard Business Review, September, 2011
Proactive Response: How mature financial services firms deal with troubled projects, The Economist Intelligence Unit, July 2011
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