How to manage the risk of a technology overhaul

Posted on Apr 2016

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Implementing a new IT system or technology platform, when managed successfully, can deliver huge benefits for an organisation. Sky Betting and Gaming, for example, cited the impact of investment in its technology and mobile platforms as key drivers behind a 36% rise in revenue from July 2014 to June 2015.

How can you ensure that systems change has a positive impact on your business? Getting the selection and procurement process right is crucial. We’ve outlined the key steps to help keep your organisation on track.

Define whether change is necessary

Firstly, it's important to establish whether you really need to change systems. What do you hope to achieve with the implementation of a new system? Are you sure that it can’t be done by using the current system? By making changes to the current system, perhaps by adding bolt-ons to improve functionality, or by driving an improved performance from the supplier, you may be able to inject it with a new lease of life.

It’s also important to consider where you are in your investment life cycle. If you’re backed by private equity and looking to exit within two years, for example, a major systems change at the current time will not be ideal.

It can be beneficial to invest in external advice before committing to a technology or systems overhaul. From their position as an outsider, with no political agenda, an independent consultant will be able to give valuable, objective advice as to whether change is required or other options are available.

Technology vs business process change?

Once you’re convinced that a change is required then your next step is to identify the likely business impact. A technology change, such as upgrading to the latest version of Microsoft Windows, should be relatively straightforward, assuming that your existing business processes are efficient. However, where your business processes are inefficient or the current system is inhibiting operational performance then it is likely that the change will have wider business implications.

In order to begin it’s essential to gather as much information as possible on existing business processes, information flows and stakeholders.

Define your requirements

There are then three types of requirement that need to be considered:

1. Functional – what does the system need to do?

2. Non-functional – what kind of environment does the new system have to operate in? What response times do you expect from the new system? How will it be backed-up? If it does go down how long can you live without it? Who will be using the new system? What security do you need to protect the system?

3. Technical – will the new system be on premise or hosted in the cloud? What are the interfaces it needs to work with both inside and outside the organisation?

In addition, it will be essential to be clear about the desired business benefits from the new system.

What stakeholder commitment is required?

It’s vitally important to get stakeholder buy in. Senior management can be resistant to change; it’s going to cost money and disrupt the business. But a successful business change programme has to be driven from the top, the CEO needs to be a leading sponsor.

Committing in-house resources to a project when staff are already busy can prove a challenge. There is a tendency to devolve responsibility to the supplier. However, it’s important that an organisation sets aside sufficient time to be involved throughout the system selection and implementation processes. This extends to communication – internal communication is essential if people are to get on board with the project.

Also key to the success of a system implementation is identifying someone (either within the business or externally) with responsibility for the management of change to business processes. Less business process change will be required if the preference is for an off-the-shelf system.

Who’s typically involved in the selection of a new system?

You can implement the best business system in the world from a technical point of view but if no-one within your organisation uses it then you’ve wasted both time and money. It’s essential to get ownership and sponsorship from senior management in order to drive through the change and make sure that all staff are bought in. Each project will be different, but typically there should be representation from the senior level of the board, the IT department, key stakeholders and heads of departments from each line of business.

RFP and due diligence

With analysis completed and support from senior management secured, the next step is to put together a request for proposal (RFP), which defines what you want from a supplier. It is vital to get agreement at this stage on the requirement specification – if there’s no clear definition on what is needed it will be impossible to compare suppliers’ proposals on a like for like basis and there is a very high risk that the delivered system will not be fit for purpose.

Send the RFP to a number of potential suppliers and assess their responses using a weighted scorecard. This should ensure that the relative merits of each proposal are made clear.

Once you have identified a short-list of potential systems and their suppliers the next prerequisite is to carry out some due diligence:

  • Where else have the suppliers implemented the same system, particularly in other organisations in your industry? Has it been a positive experience for those organisations?
  • Ask to see a demonstration of the system so you’re clear on how it works.
  • What contract terms are on offer, including payment terms and what is the implementation plan?
  • What role will the supplier play in the project? Will they provide an experienced project manager? Find out who this will be. What role do they expect your organisation to play?

The contract needs to be in your interests. Ideally you want to write the contract, not the supplier. Link the contract to the requirements specification. Base it around the implementation plan, not the supply of software. Payments should be aligned with the delivery of the requirements. A well-constructed contract that commits the supplier to delivering your requirements will significantly de-risk the implementation and the possibility of differences of opinion with the supplier further down the line.

Budget

It also helps to budget realistically. If costs begin to creep up it can be tempting to cut corners, thus affecting the overall success of the project. In addition to the cost of the new system, it’s important to factor in other potential costs, including potential upgrades to IT infrastructure, the decommissioning of existing systems, integration with other systems and external professional services. The budget should include a contingency of at least 10% but ideally 20% to allow for unexpected costs in the implementation phase.

Implementation

An effective governance structure should include a Project Board, with key stakeholders that meet at least monthly. A project manager should be appointed from within your organisation, and one of their responsibilities will be to manage the supplier relationship. Project set-up is vital and should include defining the overall plan and resource requirements. Don’t forget about activities such as data cleansing and migration, user acceptance and training. The control environment should include processes for reporting, risk and change management.

Communication is key throughout the whole process, from early stage planning to implementation and beyond. It’s very easy to purchase a new system but extremely difficult to make it work. Effective communication throughout the organisation and with suppliers will mitigate against potential disruption.

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