Key Issues, Trends and Risks in IT Procurement

1. Key Issues, Trendsand Risksin IT Procurement Presented By Beverley Sinclair

2. Overview The current IT environment IT project key issues, trends and risks Strategies/key messages that demonstrate to potential customers that your company and team are the lowest risk in a high-risk environment

3. Changing Times • Period of rapid change • Government and industry are radically reforming business practices through several initiatives including Business Process Reengineering (BPR), Total Quality Management, learning organization culture adoption • DoD has cancelled Military Standards that for many decades governed how the military-industrial complex worked.

4. Changing Times (cont’d) This is not a temporary aberration caused by a radical fringe. The changes are mainstream, sweeping, real, and here to stay.

5. Change is the New Paradigm

6. Why the Changes? • These changes result from and introduce a new world order • We are entering a period of experimentation, uncertainty and confusion as we try to invent, understand, and cope with new ways of doing business.

7. Everything is being challenged. Nothing is remaining the same.

8. US DoD Initiatives • Current reforms are a continuation of a long struggle to find better ways to do business • Admiral Perry has issued direction statements which move the requirements for industry from compliance to military quality standards towards certification against the international quality standards (ISO 9000 series)

9. Merging Military and Commercial Acquisitions • In the USA, there is a drive towards a single process national industrial base to achieve: • unimpeded access to the best emerging technologies; • single process facilities; • rapid process and product improvements; • high quality through international commercial standards; and • economies of scale.

10. Merging Military and Commercial Acquisitions (cont’d) • The Canadian Department of National Defence is showing signs of following in the same direction.

11. So What is Replacing Military Standards? • How will DoD be certain that a company will do a good job? By looking much more closely at each company’s track record.

12. Increasing Importance of Past Performance • In the past, proposal were evaluated on the basis of its merits without considering previous performance. • Today, past performance is worth 50% in USAF Acquisition Reform projects! Past Performance (technical, cost, schedule) Proposal Merit Proposal Risk

13. Cost as an Independent Variable (CAIV) • In the past, cost was a dependent variable • Performance at whatever cost • Unit price and schedule adjusted to achieve performance COST Affordable PERFORMANCE Acceptable

14. What Does This Mean to Contractors? • Government and Military can no longer afford to pay for the last few % of performance • Cost, schedule and performance are all subject to trade-offs • Affordability is a key requirement in future acquisitions

15. What Does This Mean to Contractors? • Wastage and rework is no longer acceptable or affordable • Wastage and rework are major elements of RISK that must be tracked, measured and managed for elimination

16. IT Industry Trends • Government-Industry partnering (cooperation, not control, and shared risk) • Integrated, co-located team includes all functional disciplines • Project Managers have the authority to get the job done • Concurrent Engineering—electronic capture of team design effort

17. IT Industry Trends (cont’d) • Users are part of the team—involvement in design trade-offs • Common management toolset across government-industry team • Performance measurement—cost/schedule and technical • Reward good performance with incentives

18. Govenment and Military will involve industry earlier in the acquisition cycle. • Performing market analysis to learn what is possible before picking an acquisition strategy • Conducting pre-solicitation conferences to obtain input from industry • Issuing a draft copy of the SOR or RFP and ask for comments • Conducting common-sense trade-offs to balance performance, cost and schedule In other words, Government and Military are paying more attention to getting their needs understood.

19. What We’ll Be Seeing More Of... • Most Products will be Commercial and Non-Developmental Products. • Design and development will be solicited only when it is unavoidable

20. What We’ll Be Seeing More Of... (cont’d) • Standards will be Selected and Tailored • Premature application of military standards and specifications will be avoided • Overspecification will also be avoided. References will be tailored • Incrementally-scaled requirements-specification-solution cycle in an iterative approach (Spiral Model), using Rapid Prototypying, Rapid Application Development with ‘requirements to solution’ traceability and measurable, expected results management

21. What We’ll Be Seeing More Of... (cont’d) • Emphasis on complete solutions, faster delivery

22. What We’ll Be Seeing More Of... (cont’d) • Evaluation of Bids • Clear information will be provided explaining the source selection criteria so that these may be used in bidders’ trade-off decisions • Rules for serious consideration of alternative proposals will be provided • Proprietary data will be protected, maintaining competitive advantage • Winners will be selected on the basis of best value, not the lowest price

23. What We’ll Be Seeing More Of... (cont’d) • Pre-Contract Negotiations • Government and DoD will work with contractor to determine how tasks can be simplified; the number of deliverable documents can be reduced, the specifications relaxed, and the management approach streamlined.

24. INDUSTRY ... GOVERNMENT ... Involves Industry Early Performance-oriented Requirements Few Military Standards & Specifications Prepares Statement of Objectives Prepares Preliminary WBS Eliminates Non-value Added CDRLs Eliminates Massive Paper Flow Bid Selection – Value For Money Helps With Program Definition Prepares System Specification Works to Commercial Standards Prepares Statement of Work Uses Integration Master Plan Shares Commercial Format Data Establishes Electronic Process Attractive Best and Final Offer Business Process Changes (1995)

25. Traditional Reformed Measure 3 Years 1,000 Pages Many 5,000 Pages 265 Items 80 People 7 Years 1 Years 100 Pages Few 250 Pages 20 Items 40 People 5 Years Time Req’t Stated to Contract Let RFP Size Military Standards & Specifications Proposal Size Data Items Government Program Office Size Time Contract Let to Initial Fielding Reformed Acquistion – Shorter, Simpler, Faster

26. Trends in IT Projects • Integrated product teams • Rapid movement towards ISO 9000 Certification • Adoption of ‘best practices’ • Recognition of usefulness and adoption of standards for Software Quality – utilization of metrics models

27. Trends in IT Projects (cont’d) • Movement toward individual professionalism in terms of membership in professional organizations and associated practice Certifications, particularly with respect to Software

28. Fact: • Research shows that only 9% of large software projects come in on-time and on-budget • WHY????

29. Study* Findings • Projects were classified into three resolution types: • Type 1, Project Success • Type 2, Project Challenged • Type 3, Project Impaired Type 1: Project Success 16.2% Type 2: Project Challenged 52.7% Type 3: Project Impaired 31.1% * The Standish Group “Charting the Seas of IT”, 1994

30. Failure Statistics • Only 9% of projects in large companies were successful • 16.2% of medium and 28% of small companies were successful • 61.5% of all large company projects were challenged compared to 46.7% for medium and 28% for small companies • Most projects, 37.1%, were impaired and subsequently cancelled in medium companies compared to 29.5% in large companies and 24.6% in small companies

31. The Reasons? • Restarts • Cost Overruns • Time Overruns • Content Deficiencies • But these items are just the effects, not the root causes. The real reasons include • poorly or incompletely defined requirements • poor or inflexible design • deficiencies in communication

32. % of Responses Project Challenged Factors 12.8% 12.3% 11.8% 7.5% 7.0% 6.4% 5.9% 5.3% 4.3% 3.7% 23.0% 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Lack of User Input Incomplete Req’ts and Specs Changing Req’ts and Specs Lack of Executive Support Technology Incompetence Lack of Resources Unrealistic Expectations Unclear Objectives Unrealistic Time Frames New Technology Other What Makes an IT Project Fail?

33. % of Responses Project Impaired Factors 13.1% 12.4% 10.6% 9.9% 9.3% 8.7% 8.1% 7.5% 6.2% 4.3% 9.9% Incomplete Requirements Lack of User Involvement Lack of Resources Unrealistic Expectations Lack of Executive Support Changing Req’ts and Specs Lack of Planning Didn’t Need it Any Longer Lack of IT Management Technology Illiteracy Other 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. What Makes an IT Project Fail? (cont’d)

34. % of Responses Project Success Factors 15.9% 13.9% 13.0% 9.6% 8.2% 7.7% 7.2% 5.3% 2.9% 2.4% 13.9% 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. User Involvement Executive Management Support Clear Statement of Requirements Proper Planning Realistic Expectations Smaller Project Milestones Competent Staff Ownership Clear Vision and Objectives Hard-working, Focused Staff Other What Does It Take for an IT Project to Succeed?

35. Than 5 Years Ago Than 10 Years Ago 27% 21% 11% 19% 22% Significantly More Failures Somewhat More Failures No Change Somewhat Fewer Failures Significantly Fewer Failures 17% 29% 23% 23% 8% And If That’s Not Bad Enough... • A high percentage of executive managers believe that there are more project failures now than five years ago and ten years ago. This despite the fact that technology has had time to mature!

36. Why is there so much Failure ? • Complexity • Continuity • Change

37. Project Complexity • Project • Contracting • Teaming arrangement • Requirements • Constraints • Proposed solution

38. Project Continuity • Project direction • Project team • Project personnel

39. Needless to Say, Customersare Nervous!

40. You Don’t Want to Just Win the Business You Want to Keep and Grow the Business

41. Critical Success Factors • To win business, you need to demonstrate to the customer how you will • minimize degree and measure of wastage • minimize degree and measure of rework • manage requirements and expectations • standardize to common business practices and views

42. You Need to Demonstrate Your Awareness of the Risks Associated with IT Projects, as well as your Ingenuity, Experience and Quality Practices

43. To Produce a Winning Proposal that Delivers... • Demonstrate to your client that you have the lowest risk, highest value solution/team • Adaptability is the strategy for optimizing a business to change • the technique or methodology to meet this strategy is the adoption of a Learning Organization culture

44. To Produce a Winning Proposal that Delivers... (cont’d) • The theme then for winning proposals (i.e. winning the business - making the business a win), not just getting a signed contract, is • demonstrable maturity and capability of the team/company • individual professionalism and independently recognized credentials of the team/company members