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10/28/2014
09:06 AM
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IT Investments: 5 Common Mistakes

There are benefits to a new IT project, but the risks are higher than most investments. Here are five missteps to avoid.

As companies grow and their finances improve, smart management teams often look to invest in technologies that improve operations, worker productivity, and market knowledge.

Implementing new or upgraded enterprise software, cloud infrastructures, or big data reporting tools are some of the cutting-edge projects that are top of mind these days. If you haven't done a big IT project in a while, the benefits can be significant, but the risks are higher than many other types of investments.

[Digital initiatives are where the action is. Read How IT Can Spur Digital Innovation]

Here are some common mistakes you can avoid to improve your chances of benefiting from an IT investment.

Bad financials and business cases
People spend too much time building a detailed business case and associated financials that look great but have really bad assumptions. Make sure the assumptions are clear, and you understand what they are based on, e.g., cost, availability of resources, speed to implement, or level of effort.

IT projects are notorious for being over budget, so make sure you build in appropriate risk and contingency. One way to do that is "reality baselining" against similar projects internally to your organization or with industry peers that can help spot weaknesses in the expected financials or timeline.

Incomplete selection process
Taking shortcuts during the product selection process has been the death knell for many technology investments. Simple things can be lifesavers, such as making sure the major user requirements will be met, checking references, and investigating what infrastructure will be needed.

Very often a company will make an IT investment and find out a couple of months later that it missed a key requirement that needs to be augmented with other software, which could negate the benefits of the investment.

Underestimating impact of change on users
While it may make sense on paper to spend the money to implement the best software for your business, are your users going to be able to handle the change? Will it make them more productive and efficient in the short term? The long term?

It can take a lot of time and effort for a user group that has operated on the same system for a long time to be more productive on new systems; this could hurt company performance while they get up to speed. This happens quite often in divisions of large companies that are sold or divested to other owners or investors.

The new company does not have much time to decide what systems and platforms it will use going forward. It may look financially attractive to move from the big company systems to something smaller and less expensive, but many times the users can efficiently do their jobs with the current system. A new system -- while less expensive and more nimble upfront -- may impact productivity to the point that the savings are negated.

No clear understanding of technology integration
Much of today's technology can integrate with various platforms. But if you make a major investment in one area, it may cause significant impact and cost to change technologies that interface or exchange data with the new system.

Sometimes even basic dependencies get missed, such as deploying an important new piece of software and finding it doesn't support the operating systems or web browser versions that most employees use. It's critical that you understand how the technology you're investing in interrelates with technology you already have.

Logistics tail
The costs of long-term maintenance, labor availability, and frequency of upgrades can all impact the overall cost of the investment.

Quite a few vendors base product support costs on percentages of current market price, which they typically determine. What may seem modest at first may be very expensive three years from now. Vendors can be bought, sold, or change hands; the management team you buy from may not be in place a few years from now. And you may get new managers who want to "tweak" the maintenance costs or service model.

Open source software, for example, may tend to have a low upfront cost, but the labor needed to support the system over the long term could be hard to find or expensive in the future.

If your IT team is going to use an open source tool, you need to have short- and long-term alternatives mapped out if support isn't available or compatible down the road with other proprietary systems. It's vital to nail down the future costs of different alternatives as you are negotiating the upfront price.

Who wins in cloud price wars? Short answer: not IT. Enterprises don't want bare-bones IaaS for the same reasons they don't buy many $299 PCs at Wal-Mart. Providers must focus on support, not undercutting rivals. Get the Who Wins In Cloud Price Wars? issue of InformationWeek Tech Digest today (free registration required).

David McLaughlin is a well-respected advisor, technology leader, consultant, and IT performance expert with a proven track record in many aspects of technology. He has worked extensively with private equity groups, venture investors, and senior management to evaluate and ... View Full Bio
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pfretty
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pfretty,
User Rank: Ninja
11/13/2014 | 3:27:21 PM
Poor strategy
According to a recent IDG SAS survey only 14 percent of organizations acknowledge having a data management strategy in place.  It's a solid strategy that allows an organization to follow the logical steps and best practices.  It's time to start planning. 

 

Peter Fretty
nasimson
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nasimson,
User Rank: Ninja
10/31/2014 | 2:09:35 PM
very easy to overlook
> Quite a few vendors base product support costs on percentages of current market price,
> which they typically determine. What may seem modest at first may be very expensive
> three years from now. Vendors can be bought, sold, or change hands; the management
> team you buy from may not be in place a few years from now. And you may get new
> managers who want to "tweak" the maintenance costs or service model.

One of my previous organizations were badly hit by an ownership change at the vendor end. So I know how important this is, yet this is very easy to overlook. I wish I had come across this advice earlier.
nomii
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nomii,
User Rank: Ninja
10/31/2014 | 12:16:00 AM
Re: IT Investments: 5 Common Mistakes
@Shamika I believe that we need to devise a plan for training the individuals . We need to have trainer trainee concept but for that we need to have trainer with best credentials not with highest number of years under his belt.
nomii
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nomii,
User Rank: Ninja
10/31/2014 | 12:13:24 AM
Re: Planning
@Shamika agreed with you. I believe that selection is a very special process and I believe that the important thing which will follow is how to train them for the job. A person might be having best credentials but you will come to know about his working once he will be on the job and I think proper training is the best remedy in finding right person for the right job.
nomii
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nomii,
User Rank: Ninja
10/31/2014 | 12:09:44 AM
Re: Planning
@Yalananand I am not sure that companys with jump into competition with much planning and back hand understanding of what is comming next in few months or even year time. I believe that forcasting is the best that comapnys eventually are doing to cater for that. That aspect covers all mager diversions. Yes you are true that if something at such a big scale happened over night and companys did not prepared for that will eventually fail.
nomii
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nomii,
User Rank: Ninja
10/31/2014 | 12:06:08 AM
Re: Planning
@SunitaT0 I agree with your opinion to an extant but will distant my self that IT has no bigger role in planning of company future. I believe that with the latest development in the field of tech this one aspect has taken precedence over others. It has marganilized your problems and has given you a better solution with cost effective integrations.
pcharles09
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pcharles09,
User Rank: Ninja
10/30/2014 | 10:59:24 PM
Re: Planning
@yalanand,

I agree with you to a point. You have to remember that there has to be a starting point. Logistics from the traditional perspective can't always be the main concern. It must be to have a goal & execute the plan well. Then you'll have a roadmap where logistics can be used to make things more efficient.
pcharles09
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pcharles09,
User Rank: Ninja
10/30/2014 | 10:53:49 PM
Re: Planning
@Sunit10,

I agree & disagree with your statement. IT does help business but it's necessary. You cannot have success without IT nowadays.
shamika
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shamika,
User Rank: Ninja
10/30/2014 | 3:57:50 AM
Re: IT Investments: 5 Common Mistakes
I agree with you. When it comes to IT projects it is always better to perform a short term analysis. "Time" considered to be one of the main constraints for projects.
shamika
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shamika,
User Rank: Ninja
10/30/2014 | 3:55:43 AM
Re: Planning
@brain when we decide to purchase a software solution it is always better to evaluate at least 3 different systems before we finalize since it is going to cost a huge amount.
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