Evidence is growing that companies are losing significant amounts ofre losing money. But, as Dom Pancucci finds, there is no sure-fire winning formula. money due to a collective failure to manage technological change properly.
Operational efficiency can also be compromised by the lack of change controls.
Often these losses remain hidden, in particular where multiple platforms are in use - which is the case for most sizeable businesses.
In a situation where change is seen as the arch-enemy, many companies are feeling real pain.
The frequency of change within IT infrastructures will rise dramatically with the advent of widespread e-commerce in the next millennium, with even greater pressure coming to bear on delivering high-performance networked computing in an increasingly stringent and cost-effective way.
To compound this situation, there are also strong indications that users are paying more than they might need to for software products. This problem stems from the baffling complexity of most licensing agreements and punitive clauses contained within them, which are not initially understood by the buyer. Any change across the IT infrastructure represents a potential source of failure and loss, even during seemingly routine upgrades or migrating users to a new version of an operating system. Major projects carry a high-risk factor and all these issues are intensified when it comes to mergers and acquisitions.
Cost of ownership
In recent years the emphasis has been placed on developing techniques to manage the cost of IT ownership, provide highly available and resilient systems and optimise the performance of networks.
Business automation tools have been introduced, such as enterprise resource planning (ERP) suites, to provide an integrated environment for core operations.
Now solutions like enterprise application integration and customer relationship management are all the rage, where the clear requirement is that all information resources are available on a very low latency basis across an entire enterprise and even beyond.
Yet none of these approaches can reach their full potential unless a change management discipline is developed and maintained. The widespread lack of adoption of change management techniques is reflected by conclusions from the Gartner Group analyst firm, which show that as many as 70% of IT change projects fail to fully deliver expected benefits. Gartner has also gone on record to suggest that implementing a product portfolio management strategy can cut 30% of IT costs over a five-year period.
Change management itself needs complementary techniques to be fully functional, including a method for managing assets. Asset management is a primary activity based on the notion that if you cannot measure something, you cannot manage it, according to David D'Agostino, product director at Peregrine, an IT infrastructure management software maker.
He says that the twin goals are to manage any asset and to control the total cost of ownership. "During the infrastructure, life-cycle systems can be purchased, leased or taken over. Lots of changes occur, both planned and unplanned, with the key element being an ability to manage events and related information to measure a depreciation and loss of value from a system," says D'Agostino.
In fact, Peregrine considers itself to be part of an emerging market segment based on providing infrastructure resource planning, with a parallel being drawn with the ERP suites in the sense that a complete toolset is delivered - in this case to manage change over IT life cycles.
Peregrine's core product is called ServiceCenter, comprising 30 modules ranging from asset, change and configuration management tools to modules handling service-level agreements and remote-management tools for a helpdesk.
Few of the user companies encountered by Peregrine have been able to show a complete register of assets, for instance, although some organisations are much more advanced in this area, according to D'Agostino. In addition, the registers are often static, reducing their usefulness as the asset base changes constantly.
D'Agostino further reports that many customers are only now taking change management seriously in a proactive sense, rather than using it merely for problem resolution purposes.
A key issue regarding change management is software licensing, according to Andrew Muir, managing director of Isogon, which supplies auditing software for systems.
Historically, Isogon has been orientated to the mainframe, but by the end of 1999 its flagship SoftAudit product will be able for Unix, Windows NT Server and AS/400. Muir describes Isogon's business as being in the software asset management area, where actual usage is also monitored to help users prove to vendors exactly what resources are in use and by whom.
The Isogon argument is that users are often not getting the best deal for the software they buy.
"Asset management leads to an understanding of what companies actually have, and we are dealing here with an extortionate industry, where customers are caught up in licensing agreements. In some cases, if a company changes its name, it is compelled to buy the software all over again, with a new charge often being incurred if an IT department is sold off or outsourced,"says Muir.
The primary issue is to re-engineer the licensing agreement to make it responsive to change, according to Muir. A further step is to protect against being overcharged through a clear understanding of the actual usage of a product.
Yet Muir reports that almost all of Isogon's 1,000-strong worldwide customer base has discovered expensive software products in place that are not actually used. Multimillion-pound software budgets are being spent with no metrics about the usage. "Software is one of the top 10 costs faced by companies today and has very few controls where you can rein back other costs. The trick is that hardware costs are falling dramatically, but the price of software has risen by around 10%. Some vendors will kick up a fuss if confronted with this fact, but once shown, the hard evidence from customers shows they generally enter negotiations, in particular if the customer still shows a willingness to buy," explains Muir.
The problem is that users are too willing to comply with the licensing agreements, in particular as they do not have the time, dislike confrontation and suffer from the real costs of IT being hidden in the hardware-software ratio, Muir says. The software licensing agreements are also long and involved, with the various documents mostly stored separately.
Users are starting to wake up to the issues of the hidden costs of IT and want the tools to manage the situation better. One solution is to create a repository for licensing agreements where all salient documents can be held and viewed together, according to Muir. Isogon provides a desktop workbench product called Galaxy to handle this process.
Galaxy shows compliance and actual usage of a system. Ninety days before an agreement is up for renegotiation, an alert comes up with potential cost-saving information. Isogon claims that between a quarter and a third of software costs could be realistically eliminated with a careful approach.
Yet the situation remains a potential minefield, where large companies are prepared to proceed as they are and avoid all the problems that can occur from having a confrontation with a supplier.
While change management is an essential part of the IT department's toolset to manage the real estate, technology represents only one part of the equation, according to Bill Rome, managing principal at IBM Global Services.
IBM operates what it calls a business transformation service, which also considers change as being necessarily implemented at the business process, and cultural levels as well. Rome says that the organisational and business changes are often ignored as yet another system is deployed for the user base.
Change can either be seen as a threat or a process enabling a company to move forward, according to Rome. And a primary point of recognition is that organisations must change over time, hence the accent on business transformation that predicates the attitude that change must be embraced to be used to a positive effect. In addition to business transformation, there are two other key areas on which IBM is focusing when it comes to tackling IT change - e-business and total systems management. Rome describes IBM as a company that has been remodelled on these lines, taking the e-business opportunity by using the Internet to deal with its suppliers.
Mergers and acquisitions are the hotspots when any consideration is given to IT change management issues. Rome believes that the people and cultural factors cause the problems in this respect, not processes. Without a strong people focus during a merger - where the transition and benefits are explained clearly - resistance will come from the employees.
Reluctance to change
People are reluctant to change if they do not see the point. Unless these doubts are assuaged, it will not matter if a new system is installed after a merger, or perceived best-of-breed technologies retained - a company will not see the benefits.
IBM also offers partial outsourcing services to user organisations to assist in change management, in particular where additional resources need to be added to a company's core competencies. This is handled under the total systems management banner, where elements of the IT infrastructure are taken over.
There is plenty of evidence, including testimony from leading analyst firms, that users no longer favour the total outsourcing option. A managed partnership is the way forward here, according to Rome, where the outsourcing service provider carries any burden due to lack of resources and leaves the customer free to focus on key business elements. Yet end-user business skills remain an important factor and appropriate training needs to be administered, or a recipe for failure is being concocted, in Rome's view.
Communicating with end users is an important part of managing change, although even the companies doing the best work in change management are failing to get their point across to staff, according to Brian Sutton, principal consultant at QA Training. Sutton sees tools to automate change management processes always having a key role to play - in particular for planning and control tasks - but they can provide a false sense of security.
Creating the right sense of readiness, willingness and purpose among the people is essential to bring them along with the change process. To assist in this process, QA Training has developed an innovative board game called Chanj, which takes groups of people responsible for managing change projects through a simulated exercise that gets as close as possible to mirroring real-world circumstances.
Yet all the automation of processes and the type of simulation provided by techniques like Chanj cannot guarantee success, as human beings remain the X factor.
There is no sure-fire winning formula. Managing IT change will remain one of the more arduous challenges facing IT departments. For many the hidden cost and inefficiency factor will only be exposed when it comes to competing in e-commerce, or getting systems like ERP and customer relationship management to deliver on their potential. Only a rigorous and relentless approach to facing change and turning it into a transformative process seems to be the way forward.
- Protek is a technology supplier traditionally associated with network management, but it has been building up an interest in the telecoms area over the past two years. This led to the acquisition of two companies - the Boldon James messaging system supplier and Nera International, a Norwegian company active in the telecoms market.
- Yet the major task initially was the full integration of Protek and Boldon James into a new company, to be called Protek Boldon James, according to George Fyffe, corporate services director at the company. Pulling the two separate businesses together had to be handled delicately, according to Fyffe. It involved finding a middle ground between the Protek orientation towards services and Boldon James's heritage as a development company.
In addition, Protek was in the process of qualifying for ISO company accreditation and Boldon James was brought into this process. In fact, the combined company achieved ISO compliance in last April.
- Fyffe reports that building trust at an infrastructural level between the organisations was crucial to success. This included providing a central ISO team, which delegated tasks to people at a local level. This meant that the company pulled together as a whole, with an element of local control maintained.
Ongoing changes are being experienced as the companies fully merge, which will also involve a relocation of the corporate headquarters to Crewe.
Fyffe reports that only two people have left over the past year, due to career development reasons rather than dissatisfaction, so he claims a virtually zero attrition rate.
PLAYING THE CHANJ GAME
- QA Training has recently developed a new approach to preparing project teams to work through IT change management exercises, taking the form of a board game called Chanj. The goal is to explore how to plan and execute IT changes and deal with problems.
- Chanj has three phases. The first part does not actually involve playing the game as such. Up to 16 people can play and teams of four as usually defined when the full number of players take part. To kick-off they have to select from 24 generic change actions which are relevant to the situation faced. With an allocation of 750 spending points maximum, the teams can only get up to eight of the modules, and these should be chosen based on their connected value. It is at this stage that it becomes apparent that teams are taking a strategic or tactical approach, or a blend of the two.
- Phase two involves moving around the first side of the board based on dice throws, with a free start allowed. The squares have angels, demons, money bags and change symbols on them and where the counter lands determines the fortune of the teams. Benefits, hindrances and the ability to buy change modules derive from which squares are landed on. Demon and angel cards are picked up where relevant. Up to nine goes on the board are permitted.
- After this phase, the board is turned over to reveal a snakes and ladders format. Change cards come into play here, sometimes undermining the best-laid plans of a team, such as a sponsor being fired, or providing a benefit.
Once a winner has emerged, the pattern of the game and its outcomes are discussed in depth.
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