Go-Live Risk and Cost Overruns vs. Data Readiness

by Jodee Hale-Schmid

September 2, 2010

Authored by David Kuketz, EIM Client Partner – Southeast, Utopia, Inc.

Many IT projects do not hit their mark. How many times have you heard, “You can have it on time and on budget and have all the features working 100%, no problem!”? The reality is go-live delays and less-than-expected ROI. What if you could shorten the time and extend the ROI of your IT project?

Figure 1: Time is Money Curve

Expected breakeven point (BEP) is based on the time it takes for positive cash flows to equal the negative cash flows, cumulatively. The yellow curve does so earlier, because it passes $0 sooner and more steeply, thus the total cash expended is recovered quickly. The area under the curve is total dollars.

Expected ROI is based on the magnitude of the future cash flows, which level off, and the time to get there; again, the yellow curve gets there faster and it is higher. We like to see the curve shift up and to the left. There’s always risk it will shift down and to the right … there are many risks in complex IT projects.

By investin g in your data early in your IT planning, you will very likely avoid the risks of unknowns creeping into your new system on go-live day. So, what kinds of problems creep in?
  • Toxic legacy data dumped into new system causes same old problems as before
  • Inability to optimize vendor contracts across the enterprise
  • Inability to streamline inventory controls and spare parts across plants
  • Cannot run effective national sales and marketing campaigns
  • Mass marketing mailings still going to incorrect addresses, costing millions in postage
...and so on, depending on what business process application(s) you are implementing

And what are the implications caused by those problems?
  • Cost overruns due to extra resources deployed to resolve problems
  • Iterations and delays to go-live, increased risks of going live, unpredictable results
  • Stalling the benefits intended by the new system :: time is money
  • Delayed cash flow impact caused by the efficiencies of the new, sub-par system
  • Inefficient use of assets (your business isn’t as productive as it could have been)
  • Inefficient use of cash (working capital is tied up while the system is off-line)
  • Ratios like Return on Sales, Return on Assets, and EPS going down
  • Sub-optimal long-term performance of system :: reduce business performance
  • More cash than planned to get your system live and function :: reducing ROI
  • and more…
The incremental investment to get your data right is marginal when contrasted with the millions of dollars spent on new business process application software and computer systems, and even less significant in light of th e implications bad data can cause. Yet, that small investment can have a substantial impact on your overall IT project planning and success, and help reduce risk.

Whether you’re planning a new IT upgrade, migrating to a new ERP system, adding business intelligence, MDM or consolidating systems, don’t forget to assess your data landscape and plan for it in parallel with your IT investments. It could be a game-changer for you.



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