New Perspective on IT Projects

I just finished reading a great article from the Harvard Business Review.  The authors of this article make a convincing case that, while IT projects are mostly successful in implementing information systems, these projects often fail in delivering value from the data.  The value of these projects is typically derived from the improved processes rather than the data generated from the new system.  Our IT projects implement information systems that are great at capturing data but the extraction and learning from this data is not a major consideration for our projects.

We must continue to invest and deliver IT projects but we need additional projects that focus on identifying the data and information needed to increase the business value from the new data generated from the information systems.  This data must must be easily accessible, support the types of information needed to make decisions, and help the managers and knowledge workers in the organization prepare to interact with the data.

Rather than simply focusing on implementing the information systems our projects should first look at what data is needed and how the resulting information can be applied to solve business problems.

RFP Red Flags and Opportunities

During class the other night I discussed the process for preparing and evaluating requests for proposals (RFP).  These RFPs are sent to potential vendor partners asking them to respond to a business need by proposing a solution they can provide to the firm.  During our class we also discussed a formal and semi-quantitative method we can use to evaluate these proposals.

In preparing for this lecture I came across an article describing several red flags when reviewing and evaluating the vendor proposals.  These red flags highlighted some important considerations for evaluating vendors and their proposals and most of them signal issues that must be addressed before accepting a proposal.  However, not all of these red flags indicate a proposal that should be rejected.

One of the red flags mentioned in the article cautioned against proposals where the vendor seeks to create a partnership with the organization to share in the profits or revenue resulting from the service provided.  While this proposal should raise awareness that more thought and planning is required if this proposal is accepted, we should not disregard these types of vendor proposals.

There is benefit to these partnership proposals.  When dealing with vendors I prefer to use the term vendor partner and this term needs to be applied as we evaluate the proposals.  We need to look at these proposals through the lens of potential partners for the firm and evaluate our perception of the vendor's ability to add value to the relationship and satisfy the scope of the proposal.  In this RFP we are not looking to simply purchase something but rather looking to establish a productive partnership.

Although partnership gainsharing models are more complex, these forms of partnerships may provide the incentive for both the vendor and the firm to take advantage of and build on each other's expertise.  The resulting outcome may produce a new innovative product, process, or service difficult replicate by other competitors and will result in a competitive advantage for the firm and increased profit margin for the vendor partner.

New Outsourcing Pricing Models

In the traditional outsourcing agreement between a firm and vendor partner, the vendor is paid based on either a fix pricing model or a time and materials model.  In the fixed pricing contract, the firm pays the vendor a predefined amount for a defined service.  This amount is set regardless of the costs incurred by the vendor.  In this model, the vendor assumes some level of risk if unknown variables exist that may increase the costs associated with providing the service.  On the other hand, the time and materials removes some risk from the vendor by basing the contract on the amount of time required to fulfill the service request as well as the cost of the materials required for fulfillment.  Each of these models are quite common and each has benefits and challenges.

Overby wrote an article describing four new models for outsourcing contracts.  These are newer models emerging designed to create new opportunities for the firm to gain greater value from the vendor partner and allow the vendor to find ways to increase its profit margin.  These four new approaches seek to capitalize on the partnership between the firm and the vendor to extract value for each party.

Gain-Sharing - In this model the vendor partner is paid based on the performance of the firm.  The vendor is compensated more as the firm realizes greater performance.  For example, a college may engage a marketing consulting partner and this vendor is paid based on any increases to the number of students enrolled during the year.

Incentive-Based Pricing - Although this model is not new, it may be increasing in use as firms try to find more ways to increase value delivered from vendor partners.  In this model, the vendor earns additional incentive compensation as they reach service target goals.  For instance, a firm may outsource telephone support with incentive pricing for hold time.  If the vendor partner is able to bring the hold time below a threshold (like one minute) the partner receives compensation beyond the base fixed or time and materials budget.

Consumption-Based Pricing - This is the pay for what you use model and very similar to your electric bill.  Using this model, the firm pays the vendor partner based on the quantity of service units provided during a period of time.  For instance, a firm may outsource payroll processing and pay the vendor partner a fixed amount for each paycheck processed.

Shared Risk-Reward - This is a true partnership model where both the firm and the vendor develop a new product or service and each benefits from the new offering.  For instance, an automobile manufacturer could partner with a supplier to jointly develop a new technology for car batteries and each would share in the profit for sales of the battery or automobile.

I am currently consulting for a local Catholic diocese to negotiate a shared risk-reward outsourcing model with on of its vendors.  This new form of agreement has the potential to create fantastic value for both the diocese as well as the vendor.  This model requires some creative thinking, trust between the partners, a long-term strategy, and a willingness to try a new approach.

It is exciting to see these new outsourcing models.  These have a potential to foster great collaboration between these partners, increase the performance for each, and provide new innovations by building upon the strengths of each partner.

Explaining Cloud Computing

In my class next week I plan to discuss cloud computing options.  Cloud computing is not new but unfortunately, the terminology associated with cloud computing has not yet been consistently applied.  In previous years I noticed the students struggling to understand the different cloud computing options based on the inconsistent terminology used in publications.

The textbook we use in this class defines cloud computing as a type of Internet-delivered service, application, and capacity infrastructure provided by third-party providers (Pearlson & Saunders, 2013).  This description gives our students a good general description and the authors go into greater detail in the chapter but the students are not exposed to an overall view of cloud computing.

As I noted in a earlier post, I'm pretty excited about using ontology diagrams as a form of knowledge visualization.  So I thought I would use this approach to help my students.  In order to help better explain cloud computing to my students I'm going to use a diagram to depict the forms of cloud computing (converting tacit knowledge into explicit knowledge for the creation of tacit knowledge).

Below is a brief mind map I created to explain cloud computing.

I hope to use this mind map in class to help the students categorize the forms of cloud computing and work with them do provide examples of each of these types of cloud computing.  With this better understanding we will be able to discuss the benefits and challenges of this infrastructure option.

New Diagramming Tool - LucidChart

Tonight in my MBA course I'm planning to discuss business processes and their role in information systems design.  During our class we will learn how to develop and read process flow diagrams to map business processes and their interactions with information systems.

In order to practice process flow diagrams our students need to have access to a software tool that supports process flows.  I typically use Microsoft Visio for my process flows but I can't be certain all of the students will have access to this software.  I needed to find equivalent software for the students to use.

This past weekend I found an online software service that offers functionality similar to Visio.  The software is LucidChart (https://www.lucidchart.com/).  While the software may not cover exactly all of the same functions as Visio, it comes pretty close.  I found the software very easy to use and I'm hopefully they will too.

New Use for Ontologies

Today I presented at the 2013 Taxonomy Boot Camp in Washington DC.  My presentation, Ontology Diagrams for Successful Knowledge Capture and Transfer, covered the use of ontologies as a means to understand and communicate a new topic.  Using an ontology engineering approach I discussed how ontology diagrams are effective in developing knowledge and sharing this knowledge.  In this approach, the ontology is used as a method for learning rather than as an end product.

During the conference I learned a lot about the importance of taxonomies in organizing information in knowledge management applications.  It was a good conference and I now know a lot about the issues of developing and maintaining a formal enterprise-wide taxonomy.  I also realized I do a little taxonomy work when I work on data models.

Ethical Decision Making for Project Managers

Someone recently posted a comment to my last blog post about the top 20 topics in IT.  This person pointed out the importance of ethics as a topic and how ethics related to many of the topics I listed.  This is correct, ethics is an important topic within the IT field as well as most (if not all) other fields.

Today I came across an ethical decision making framework published by the Project Management Institute.  This framework is used to define a process to help project managers make decisions when confronted with dilemma.  The framework is provided to help project managers act in a manner consistent with the Code of Ethics and Professional Conduct.  Although the framework is published in the context of project management, it can also be applied to other professions where ethical decision making is needed.

The PMI framework is very similar to other ethical decision frameworks I have seen in that it encourages decision makers to identify and evaluate potential decisions.  However, there is one step I see missing from this framework.  The decision maker must also reflect back on a decision to evaluate the results of the decision.  This reflection serves as a feedback loop to better improve decision making in the future.  Without the reflective feedback loop we may end up repeating poor decisions.