Lawyer Michael Bywell explains the pitfalls to avoid when investing in new technology
For businesses that buy IT products and services on a regular basis, the pitfalls to avoid when procuring new technology will be well known. However, for smaller organisations with less experience in buying new technology the risk of making mistakes and suffering financial damage can be quite high.
In some cases such projects may end up in court or being replayed and argued out in arbitration proceedings.
What can cause things to go wrong?
A lack of experience in IT procurement. This happens particularly where the role is performed by a finance director or controller rather than a dedicated IT director
A poor understanding of the needs and technical requirements of the business. For example, a business will sometimes not need all the features on offer
A lack of due diligence on the side of the supplier and proposed team to ensure they have the experience and expertise to do the job
A poor understanding of business processes is a frequent cause of failure. Businesses often over estimate the extent that a new computer system will be able to replicate the existing set up
Failure to specify requirements in sufficient detail
A lack of a senior company officer to champion the project
A lack of understanding of the level of internal resource that will be needed to enable the business to meet its obligations under the contract and make the project work. For example, to provide input into the specification and to participate in user acceptance testing
A lack of technical know-how could affect the ability of the business to challenge the supplier over milestones and what has been delivered. If this is identified as a problem, consider getting a consultant in to help
Poor project management can lead to "scope creep". This happens particularly where the supplier has put in a low bid and wants to make up the difference during the project
Failure to document changes properly and keep proper performance records. This makes it harder to test and challenge the supplier.
Matters can be exacerbated where there are problems on the supplier side. This could be overselling of features and benefits, a poor understanding of the customer's business, failure to press for clear requirements, willingness to submit a low bid to win the business, or a failure to insist on realistic timescales.
The result can be relationship problems, an abortive project, financial damage - on both sides - and legal proceedings.
How can you minimise the risk of things going wrong?
Ensure you are taking an informed view of what you need and how the new system will help your business. If necessary engage an experienced consultant to work alongside you
Specify your requirements in as much detail as possible from the outset and make sure that each internal department engages in the process
Take a realistic view of the time and effort that will be required by staff to meet your side of the deal
Appoint an empowered project sponsor, preferably a senior company officer who is prepared to take ownership of the project
Set realistic budgets and expectations and be wary of low bids from suppliers
Carry out due diligence on the supplier and delivery team - check that they have an established track record and can demonstrate a good understanding of the technology involved
Put in place effective contract management procedures and ensure all contract changes are documented and signed-off
Be prepared to escalate problems at an early stage and do not allow issues to fester.
By following these basic steps, you should go some way towards reducing the risk of problems in the future and safeguarding your business from financial damage as a result of an unsuccessful IT project.
Michael Bywell is partner at law firm DLA
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