Question 1. Read the case study Outsourcing Big Savings, Big Risks (Marchewka, pp. 277) Describe the risks a company might face when outsourcing a component of an IT project to a foreign company. Then, choose a technological risk and non-technological risk that you believe are important. Explain why and answer question 1.
Question 2. Read the case study ERP and Change Management at Nestl (Marchewka, pp. 374-376) and respond to the following questions:
What, from a project management perspective, could Nestl have done better in implementing SAP?
The primary lesson that Dunn says she gained from this project is No major software implementation is really about the software. Its about change management. Do you agree with her statement? Discuss why you agree or disagree.
Question 3. Describe an ethical dilemma that a project team member might face while being part of an IT project. Discuss how the project manager could aid in avoiding or resolving such a dilemma. Discuss where this dilemma falls within the PMI and ACM codes. What are the potential effects on the project should this go unresolved?
The TEXTBOOK: Information Technology Project Management, 4th Edition
Author(s): Marchewka, Jack T.
Outsourcing a component of an IT project to an overseas company introduces a number of risks which give rise to uncertainties in the project execution. The benefits derived from utilizing the low cost foreign labor may be outweighed by the costs incurred with outsourcing contracting and relegation of project control into the hands of foreign outsourcing partners. In extreme scenarios, these associated risks may result to the ineptness of the entire project schedule, disruption of service delivery to clients and loss of control over vital business processes. Some of the risks associated with foreign IT project outsourcing include.
Functional, Technological and Managerial knowledge risks
The desired degree of functional, technological, and managerial knowledge may be inadequate in foreign companies. The overseas outsourcing partners may lack the expertise, apprehension and the necessary experience in foreign outsourcing procedures. There is an inherent risk of insufficient technological selection, analysis, architecture, design, development, integration, and maintenance support. In a global context, proper project managerial knowledge may be lacking as it is important in managing resources and development and administration of project management processes.
The language, culture and beliefs wide differences from country to country is risky to IT project outsourcing Cultural risks emanate from the culture influences and biases on the IT project by the outsourcing company’s staff. The staff may lack the essential attitudes, communication skills, work ethics, selection processes, implementation motivation, team cohesion, autonomy, democratic decision making, customer-orientation, and substantive organizational behavioral.
Performance Measurement risks
In international project outsourcing, it may be challenging to accurately ascertain the project scope, cost, and time scheduled milestones. Performance measurement varies widely between two countries and may contribute to risk due to lack of standardized benchmarking, proper formulation of the project scope, accurate costing, thorough time planning and definite assurance of the performance.
Economic and political risks
Economic and political uncertainty may pose various obstacles and risks to foreign project outsourcing. Economic risk may result from volatility in inflation and exchange
rate, limitation of profits repatriation, adjustments of taxation policies and other fiscal instruments or government subsidies. On the other hand political risks may result from political instability, regularization of international trade, emergence of regional conflicts, differences in environmental laws and changes in labor regulations.
Security and data recovery risks
Data and resource security poses a major risk in global outsourcing as the trade protection and security of data is susceptible to breaches, malware and attacks due to the wide range of admittance. The involvement of outsourcing company may jeopardize the access controls, authentication processes, usage of secure protocols, data encryption keys, and security policies.
Contract deviations presents various challenges and risks to foreign project outsourcing as project management and monitoring activities are threatened by failure. The inability to properly develop and fulfill contractual agreements by the overseas outsourcing company risks all project life cycles from activity conceptualization/initiation, project planning, execution and closure.
The outsourcing company’s location may be in distant time zones and posing geographic location risks to the project. The geographic barrier may require both entities working long and odd hours on the project. This risks include; communication infrastructure failures, delays from unavailability of supporting infrastructure due to industrial, social-economic, environmental or political imbalance.
Important non-technological risk
Contractual conflicts are a major risk in IT outsourcing arising mainly from differences in objectives and interests between both outsourcing entities. It begins with substandard undertaking of due diligence and poor contract design that does not exhaust all future eventualities to lack of capacity and expertise in project management. This risk is particularly important since it jeopardizes the entire project and often leads to strained relations which ultimately degenerate to costly dispute management and litigations.
Important technological risk
Technological knowledge risks
When foreign outsourcing companies are executing an IT project, the inadequacy of technical knowledge is critical and could have an adverse impact on the project outcome. Technical knowhow risks may result in unnecessary communication infrastructure breakdowns, conflicting development standards, mismatched development tools and expensive database conversions.
Why shouldn’t managers expect people just to accept a new information management system?
Managers should be cognizant that most people perceive new information management systems as complex and involving since they would have to unlearn the previous systems methods and learn completely new tasks, programs and routines. This phenomenon of employees not immediately accepting new information management systems is known as change resistance. This is a behavioral response intended to act as a protection from the consequences of actual or imagined change. Resistance is a normal physical and psychological response to unfamiliar processes manifested as frustration or aggression brought about change initiative.
What impacts can implementing a new information management system have on the people in an organization?
Implementing a new information management system can impose abrupt changes to users in various domains such as job descriptions, interpersonal relationships, and decision-making
hierarchies and job status. There are several effects of the new information management system on the employees’ and they may vary from one individual to another. One employee might react quite favorably to the implemented change while another employee may respond with resistance. The level of change resistance often is dependent upon the individual’s level of participation towards the implementation of the new information management. Employees who are not involved in the project execution of the new information management are more likely to resist the implementation than those who were actively participated in the process.
Why might people be resistant to a new information management system?
People are resistant to a new information management system due to;
1) Unfounded fears and imagined threats
This is the inherent belief that the new information management system might take away something of value to them such as job security, data access rights, job status and economic loss.
2) Ignorance and lack of trust
People might resist new information management system due to their ignorance on the implications of the implemented change. The lack of trust between managers and employees may result in the belief that the associated risks to change outweigh the benefits.
3) Low tolerance for change (Inertia)
Some individuals perceive change as a threat rather than potentially rewarding. IT employees may resist the new information management system out of fear or reluctance to develop the new skills and aptitudes that they may be required to acquire.
4) Change management methods
Most people resist this change out of the impression that the change process was not well managed and they lack confidence in the new information management system capabilities.
How might people demonstrate this resistance?
People may demonstrate resistance in two main ways;
1) Active resistance
This is open opposition of the effected change through activities such as being critical, complaining openly, facts distortion, change blocking, and spreading hearsay, fault finding, worker protests and new systems sabotage.
2) Passive resistance
This a rather indirect resistance demonstrated through activities such as verbal agreement without implementing changes, indirect subverting of change processes, withholding information that may assist or support the change and ultimate job resignation.
What can the project team and the organization do to help people accept and adjust to the a new information management system
For an effective implementation of the new information management system, the project team may perform the following activities to enhance acceptance.
1) Early Communication.
Managers tend to underestimate how disruptive system change can be to employees. Early and effective communication begins to prepare the employees for change in good time.
2) Regular Communication
The project team needs to as candid as possible and communicate consistently on the current occurrences while consistently seeking employee feedback and concerns along the way. This significantly prepares them for changes involving their areas of expertise.
3) Explain the need for change
It is important for the employees to be aware of why the new information management system is necessary and how the change will impact them both positively and negatively.
4) Ensure management buy-in
The team should ensure that the decision makers are also well informed of the changes and are supportive of the implementation of a new information management system.
5) Give adequate training
Apart from effective communications, practical training should be conducted throughout the implementation phase to ensure an efficient transition.
What, from a project management perspective, could Nestlé have done better in implementing SAP?
The result of Nestle ERP implementation was successful due to the achieved gains of system centralization, business process reorganization and the amount of savings garnered in the short while since the ERP rollout. However by examining their experiences, there exist a number of particulars that Nestlé have done better in implementing SAP.
First, for a successful project implementation, the right personnel ought to be consulted and involved from the onset of the project initiation and conceptualization through to the last stage of project closure. Nestle failed to involve some of the key personnel who would later be involved in the ERP project execution and they resulted in a partial halting of the rollout and a redesign of their business processes (Marchewka, 2009).
Nestle could have adequately defined the project goals before formulating a timeline for the implementation of the SAP ERP unlike what the initial implementation team did by fixing the deadline for four of the modules to Y2K. Project managers should allocate adequate time for project implementations and cater for unforeseen contingencies rather than try and fit the project time lines with specific rigid boundaries.
The employees involved in the Nestle ERP rollout and indeed all end-users should have received adequate training before and during the actual SAP implementation. Staff training is crucial for any project and more so software installation. This is particularly important since employees using the system regularly need to be aware of the new business process as well as the system capabilities and usage (Marchewka, 2009).
Nestle should have first evaluated the business process re-engineering requirements and eventualities before beginning on the ERP implementation. Prior to the commencement of the ERP implementation would have been an opportunity to re-engineer business processes while taking time to consider either the complete redesigning of the business processes or adopting of best practices throughout all divisions of the organization(Marchewka, 2009).
Finally, Nestlé’s SAP implementation team needed to obtain an across the board buy-in for the ERP project. They should have emphasized on securing the support for the project by end-users who are used to the old systems and the processes. This would have improved on the project morale and eradicated the staff turnover troubles.
The primary lesson that Dunn says she gained from this project is “No major software implementation is really about the software. It’s about change management.” Do you agree with her statement? Discuss why you agree or disagree.
Software implementation such an ERP installation is a huge and complex project. A company like Nestle might have the necessary resource establishment such as time, human resource, finances and technology but still be unable to implement the software change in a successful manner. This is largely due to factors like poor corporate governance and user resistance to change among others.
Any software change involves more than just software installation rather it is a complete business process reorganization that cannot be effectively achieved without a comprehensive change management plan. The underlying factor to a successful software implementation is therefore the ability of the project implementation team to plan for and manage the change that is tied to the transition process. The change management plan ensures that from the commencement of the business processes re-engineering, the management communicates clearly to the staff of the organization who are key players in the software implementation that they are cared for and their needs would be adequately addressed (Marchewka, 2009).
However, it is totally unlikely that change management planning can cater for every contingency in software rollout projects which involves a combination of vast distinct data sources, business process re-engineering and an extensive number of end users and stations. The driving factor towards success of the change therefore becomes the implementation of proper project management techniques to minimize risk for project failure and reduce the probability for project delays and budget overshoot.
Marchewka, J. T. (2009). Information technology project management: Providing measurable organizational value. Hoboken, NJ: Wiley.