There is a train of thought that suggests that business leaders should embrace failure: the great innovators are the ones that rise above a few missteps, not the ones too timid to take a risk.
But IT leaders have a curious relationship with failure. Too often IT is castigated for project overruns, and stereotyped as a money-squandering, repeat offender.
It has led to a situation where some IT leaders have become reluctant to pull the plug on projects that they know are not going to deliver business value, said Paul Williams, IT governance adviser at risk consultancy Protiviti. “Nobody wants to be associated with a failure,” he suggested. “But cancelling IT projects should actually be seen as a sign of good governance. The money can usually be spent elsewhere.”
When projects do go awry, there can often be a seemingly attractive scapegoat: the IT supplier. In most cases, disputes go through a series of escalation procedures, however in extreme cases where there is an absolute breakdown in the relationship, contractual niceties go by the wayside and full-scale hostilities ensue.
Nevertheless, taking an IT supplier to court is the nuclear option, the fallout from which can be a career killer.
But that is the unhappy situation facing business leaders at energy giant
Centrica, where the aftermath of a malfunctioning customer billing system at its
British Gas unit resulted in huge losses, rampant customer churn and swathes of
complaints.
The IT system called Project Jupiter was initiated in 2002, when Centrica
first engaged Accenture. The £317m system was intended to integrate British
Gas’s electricity and gas billing system. It was supposed to be capable of
logging 250,000 meter readings and generating 200,000 bills a day.
However, problems soon emerged. Instead of generating the £397m savings that Centrica had anticipated, Project Jupiter is blamed for losing the energy firm thousands of customers.
Emergency renegotiations in March 2006 were supposed to have got the project back on track. But by February 2007, bosses at Centrica were so exacerbated by the on-going problems that they informed Accenture that they believed the IT consultancy group to be in breach of contract.
Centrica is now seeking £128m in damages relating to losses it has suffered as a result of the system’s failure. Needless to say, Accenture denies responsibility for the system’s failings. Those damages pall in comparison with the £709m in damages BSkyB is seeking in its dispute with EDS over a malfunctioning CRM system. BSkyB’s legal costs are estimated to be close to £30m in the two years it has taken to get to court.
Breach of contract
Even given the sizeable legal fees involved, lawyers regard court cases as the worst possible outcome, insisted Justin Harrington, a partner specialising in technology at law firm Morgan Cole. Before any lawyer can advise a client to instigate legal proceedings, there has to have been a clear breach of the contract, he explained. “IT contracts are notoriously complex and so proving there has been a clear breach is difficult,” he said.
Resorting to legal action is definitely the last resort, said John Buscher, director of CIO services at outsourcing consultancy TPI. If no one wants to be associated with a failure, those associated with expensive court cases are usually notable for the brevity of their tenure, he said.
One of the root causes of problems in IT relationships is that too little attention is paid to governance and service management at the outset, said Buscher. Procurement teams tie down the financial agreements, but neglect the relationships that need to be established to oversee the day-to-day management of the contract.
And given that all big IT projects are likely to go awry, renegotiations are common, allowing both sides to readjust their expectations. In the worst cases, conflict resolution procedures can relieve mounting pressures as problems arise, Buscher said.
Another successful tactic is for clients to ask for a change in account
manager. “When projects get into difficulties, it’s easy for it to turn
personal,” he added.
Other alternatives include the option to enter arbitration or mediation, noted
Morgan Cole’s Harrington. Public sector organisations frequently favour
arbitration as it avoids the unpleasant glare of publicity that is generated by
a court case, he added.
But as the British Gas-Accenture case demonstrates, escalation procedures are far from foolproof. In some cases, disputes just become more entrenched and the sides more polarised.
This might simply reflect the culture of the organisations involved, said Harrington. Some business leaders prefer IT contracts to contain fine-grained details on service levels that can subsequently be used to threaten suppliers; others prefer contracts that are so flexible it is hard to distinguish what is and what is not included. Sometimes clashes are virtually contracted in at the outset.
