Recently I was interviewed by the IT Transformation Institute. Check it out at the link above. The audio version is around 30 minutes. Some great questions and thoughts from yours truly.
Please leave any feedback/comments.
Recently I was interviewed by the IT Transformation Institute. Check it out at the link above. The audio version is around 30 minutes. Some great questions and thoughts from yours truly.
Please leave any feedback/comments.
SOW, Statement of Work or Scope of work (SOW) is a formal document that captures and defines the work activities, deliverables and timeline a vendor will execute against in performance of specified work for a client. Detailed requirements and pricing are usually included in the Statement Of Work, along with standard regulatory and governance terms and conditions.
SOWs are often times very complex for the average IT Manager/Project Manager to manage, write, adhere to, or even understand. SOWs generally form the basis of a contract between the vendor and the IT organization.
Areas that are typically addressed by a SOW are as follows:
Purpose: Why are we doing this project? This is the question that the purpose statement attempts to answer.
Scope of Work: This describes roughly the work to be done in detail and specifies the hardware and software involved and the exact nature of the work to be done.
Location of Work: This describes where the work is to be performed. This also specifies the location of hardware and software and where people will meet to perform the work.
Period of Performance: This specifies the allowable time for projects, such as start and finish time, number of hours that can be billed per week or month, where work is to be performed and anything else that relates to scheduling.
Deliverables Schedule: This part lists the specific deliverables, describing what is due and when.
Applicable Standards: This describes any industry specific standards that need to be adhered to in fulfilling the contract.
Acceptance Criteria: This specifies how the buyer or receiver of goods will determine if the product or service is acceptable, what objective criteria will be used to state the work is acceptable.
Special Requirements: This specifies any special hardware or software, specialized workforce requirements, such as degrees or certifications for personnel, travel requirements, and anything else not covered in the contract specifics.
Type of Contract/Payment Schedule: The project acceptance will depend on if the budget available will be enough to cover the work required. Therefore payments breakdown whether up front or phased will be negotiated very early at this stage.
Miscellaneous: There are many items that do not form part of the main negotiations but are nonetheless very important to the project. They seem minor but being overlooked or forgotten could pose problems for the project.
My intent with this blog post is to go over some common pitfalls in SOW Management I have seen and how to deal with them.
Scope Creep/Extra Work
Once the SOW has been awarded and signed the vendor comes in for a kickoff. They are working on the project and everything is going smooth. Alas, a missed requirement! How common is that?! The vendor says not a problem we can do that…. at a cost! So now your delicate tightly managed budget will go over. Someone has to be the scapegoat. Who do we blame? How does this get fixed? The vendor will save us but at what cost?
The above scenario plays out more often than you would believe or would be led to believe. Some vendors who prey on organizations that don’t really know what they are doing (government agencies for one), bake this into their projections. Knowing that they will make serious bank later on because the SOW is incomplete, or they have the experience of previous projects and know of the projects pitfalls.
Sow how do you manage this? Early on in the writing proces make sure that you tap into resources such as research, colleagues, internal and if possible external lessons learned. Try to get as much data while writing the SOW to anticipate what will happen later in the project to include that in the SOW so it doesn’t fall into any grey areas. Make sure the person managing the SOW/Vendor knows the SOW/Contract in and out. Put in some contingency in your budgetting. Make sure you read the vendors Extra Work section and understand it.
When you end up in an extra work/scope creep scenario ensure you can negotiate with the vendor. Dont just accept the fact/cost and move on. This is what the vendor wants. The project is in mid-flight, they know you are in a bind, but dont let them see you sweat. Use whatever leverage you can to make the impact less.
Lastly, document this and document it in your lessons learned at project close out.(lessons learned will be a topic for another blog post!) This will help in the inputs of new projects to both understand how the scope creep crept in but also the experience with the vendor in these scenarios.
Remember an SOW is generally a binding agreement/contract. Some things may be missed, some people will interpret things in different ways. When it comes to Grey Area there is one main thing to keep in mind when writing the SOW, be as clear and accurate as possible. When you do come to a grey area with the vendor, negotiate and document. Again in the lessons learned.
For example, I write a simple SOW to move this carton of eggs from my Basement to my Kitchen. Vendor A says they will do it for $50. Vendor A moves the carton of eggs from the Basement to my Kitchen and invoices me $50. When I get to the kitchen to inspect the work I open the carton and some of the eggs are broken. I refuse to pay the vendor the $50 because my eggs are broken. Vendor A says you wanted us to move the carton of eggs from the Basement to your kitchen and we did that, we would like payment immediately. Who is right? Who is wrong? Why are we even debating this?
To avoid grey area like this be more specific, add specifics to the acceptance criteria. In the SOW write in the acceptance criteria that all eggs must make it to the destination unharmed. Of course now the vendor may charge more since more than likely they would have to inspect the eggs in the basement, be more careful in transport, and reinspect at the kitchen.
This will be a living blog post with updates as I think of them, experience them or garner feedback/comments.
For more information on writing an SOW check out this great post from PMHUT which was inspiration and a source of content for this post.
This blog post is about the value of IT Certifications nowadays. Are some IT certifications more valuable than others? Are some even necessary if you have enough experience? Would you hire someone with a certification and no experience over someone with 3-5 years experience?
I personally am not biased as a hiring manager to any certifications. I look over someones resume and the body of work before bringing them in for an interview. I have met many “PAPER” MCSEs, PMPs, A+ certified techs. I had an employee that was “MCSE certified” in Windows 2003 and could not create a login script. I had an employee who was “PMP” certified and could not create a project financial forecast. Of course I inherited these employees and strengthened their weaknesses through trainings, books, and working/coaching sessions.
When I am hiring an FTE, the certification may give them an edge and a foot in the door, but i will usually fish them out during the interview process. I have actually had better experience hiring technical employees who are studying for the certification rather than already have the certification.( In two cases I have hired great engineers who were studying for their respective certifications. One who was studying for CCNA and was set on achieving CCIE. He turned out to be a great Network Engineer and to this day is phenomenal, having a very successful and fruitful career. The other was studying for his MCSE and was able to deploy both SCCM and Exchange 2007 in our environment, he went on to finish his certification and is now working for Avanade.) Yet the interview is where I can weed out the candidates who while certified may not actually be competent for the role I am hiring for.
Once a hiring manager or recruiter has a bad experience with one person certified that is incompetent at the job, they generally frown down on certifications in the future. I knew one manager who said “I think people with certifications have too much time on their hands!”. Obviously, he was burned in the past by certified candidates and thus had a dislike for them, thinking they have enough time to study for tests but no real world experience performing system administration, managing projects or developing applications. (MCSE, PMP, MCSD)
So the question is are certifications valuable in IT? I feel they have their place, but more as a stamp to validate ones acquired experience. I believe organizations can make the certifications stronger like the PMP (Project Management Professional) from PMI by requiring prerequisites such as Training, Years of experience and validation of that experience. This way recruiters and hiring managers can feel confident in keyword searches for certain certifications in their talent acquisitions. Of course, the recruiters and hiring managers shouldn’t lose out on quality talent by only searching for certified individuals, but when you are battling with hundreds of qualified candidates for a position wouldn’t it be better to have a well respected IT certification as a differentiator?
Don’t worry, stay tuned! A later blog post will deal with Degrees, and possibly Degrees vs Experience… So much to blog about in talent acquisition from an IT hiring managers perspective.
Until then, thanks for reading!
Welcome to my second blog post. In this post I would like to discuss Outsourcing and Insourcing at a high level and when it makes sense to explore either or. Future blog posts may delve into my views/experiences with each and lessons learned from each.
Outsourcing usually comes with a negative connotation. Lost jobs, heartless organization, greed. You also get the stigma of Offshoring which is really outsourcing a business function to another country. (The typical stereotype being India, further perpetuated by a show called Outsourced on NBC a few years back). Yet, outsourcing is sometimes a necessary part of an organizations ability to not only increase value but to deliver that/those business function(s) better, more efficiently and yes cheaper to the bottom line.
Insourcing is the cessation by a company of contracting a business function and the commencement of performing it internally. Yet in most cases it is no longer the exact same function or performed the exact same way as initially outsourced.
Here are some cases I have noticed the last couple of years where it would make sense to Outsource. In two organizations I have dealt with they have radically changed an information system or systems. For example changing from a Novell environment to a Microsoft environment, or migrating from Lotus Notes to Microsoft Exchange for email. In both cases, the operational functions of the legacy systems were done in house, the migration work was being performed by a contractor company that specializes in these migrations. And in both cases I ran into the problem where the current staff that supported the legacy system and would subsequently support the operations of the new system were not engaged and enthusiastic about the change. In both cases these staff members did not embrace the upcoming change and instead sabotaged the migrations. Staff members did not absorb the training giving to them or were so used to supporting the outgoing systems they could not embrace the new system. Novell administrators that cant create simple GPOs in Active Directory, Lotus Administrators that cannot resolve a Distribution List error or duplicate contacts in Exchange, Novell staff that cannot push patches to servers/workstations with WSUS or SCCM, etc etc. At this point it would probably make more sense to either replace the staff entirely with new staff or outsource the business function from a purely support/service delivery aspect. Bringing in an organization with the skillset to take over the business function could also garner cost savings with the replacement of the staff that let time pass them by, but in the above cases it would mostly be to support the new future systems that will drive the business for years to come.
I guess the cases above could be deemed strategic outsourcing. There is also a case for strategic insourcing.
Lets face the facts, most organizations outsource to save cold hard cash. The enhanced delivery spiel wont sell to a CFO or Board of Directors, but saving 25% in OpEx?? Do pray tell…
When taking into account all costs associated with housing an IT function, one must take into account the loaded costs of FTE (Full time employees/equivalent). These costs include: Salary, Paid Time Off, Holidays, Bonuses, Healthcare, Training, 401K/Pension, Payroll Taxes. An employee who’s salary is $50,000/yr can cost an organization $90,000+/yr in loaded cost. You need managers/supervisors/directors to manage/supervise/direct these employees. You end up with a hypothetical $1MM a year cost to support said business function and out goes the RFP/RFI to a bunch of companies that can reduce this cost and save you money, while delivering a better service. HR is happy because its less benefits they have to administer, CFO is happy because its saving the organization money, and your customers are happy because the support levels have improved. You have signed a 5 yr agreement with a company to outsource the business function @ $750,000/year with a 3% Increase annually. You have just saved the organization ~$250K annually. (your bonus will look lovely!). For this blog post lets say that the contract is written very well with little to no “grey area” (I have a great blog post coming up on SOW/Contract writing and pitfall avoidance) .
Everything is running great for the next 5 years, IT Kings (fictitious name of the outsourced service provider) has been phenomenal. Its contract renewal time, through the course of those 5 years you have virtualized the server farms, reduced your physical server footprint from 250 to 45, saved money in electricity and cooling costs, etc etc. In a nutshell, your environment is much different from 5 yrs prior. It is technology (Moore’s Law) after all.
The world around you has changed as well. Healthcare reform, Affordable Care act debates (Obamacare), taxes, Recession, high unemployment, no pay raises/bonuses, etc etc.
Back to contract renewal time, After 5 years your paying IT Kings ~$870,000 now, they want a 5% increase and 3% escalators or they just want to renew the contract @ its current rate with the 3% escalators for another 5 years. It matters not really for this example. ( I’ll do another blog post on vendor negotiations at a later date. Wow so many topics coming to mind I should have started a blog sooner!) The easy thing for the IT exec is classic “if it isn’t broke dont fix it” and just renew the contract. Well this is where I feel the opportunity to Insource presents itself.
I had a CIO years back I respectfully disagreed with. It was a year from contract renewal for our outsourced provider that managed the Helpdesk, System Administrations and Desktop functions. She directed me to not bother writing a new SOW and go through the RFP process because they were “Cheap”, having bid much lower, 4 years previously during the RFP, than all the others. I told her I beg to differ and since we still have 10 months we should investigate if outsourcing is still cost effective. Of course, I got trumped and we ended up renewing but in my free time ( I barely have any at all lol) i still did an analysis to see if my hunch was spot on.
Here are the results of that analysis (omitting the organization and actual names)
Information Gathered for Analysis
Organizational Benefits Reform have reduced loaded cost of an employee (higher employee contributions, copays, cheaper healthcare options, elimination of vacation carryover, scaled back PTO, etc.)
Services Staffing Model (Proposed)
Help Desk-$755K Base Salary, $1,060,000 loaded cost
Desktop Support-$714K Base Salary, $1,000,000 loaded cost
Systems Administration-$1,070K Base Salary, $1,500,000 loaded cost
Hardware Procurement- $90K Base Salary, $135,000 loaded cost
1 FTE IT Hardware buyer Under Financial Management group $90K
Dedicated support staff to business units- $242K Base Salary, $340,000 loaded cost
3 FTEs-System Admin ($95K), Dedicated Support ($52K), System Admin ($95K)
41 FTE= $3,695,000- Total Labor Services
3 FTE= $340,000- Dedicated
Service Desk Software= $150,000
Lets add in $400K for Implementation Costs (project management, recruiting, onboarding, training etc.) for a total year one cost of $4,535,000 to insource the business function that would cost us $6,700,000 to keep outsourced. Thats over $2 Million in savings (even more after year 1), to essentially keep the same staff (converting them from contractors to FTEs of the organization) performing the same functions. Now this was a high level analysis, but it does show that even investing some money into further investigation of the insourcing of the business function is well warranted. I took an Assumption of 40% on top of base salary for taxes, benefits, etc.
The big assumption in the above model is the SAME service at cheaper costs. I would go as far as saying BETTER service at cheaper costs by insourcing. “How is that Will?”- you might ask. Didn’t I just say outsourcing is better service at cheaper costs. Well Lets examine that shall we…
As a disclaimer, obviously one size does not fit all. Thats why there are times when it makes sense to insource and times when it makes sense to outsource.
In the above scenario saving $2 Million a year just makes sense to insource, the savings is one thing but what you can do with that money is another. Updating infrastructure with less TCO (total cost of ownership/operations) for one and investing in BPI (Business Process Improvements) is another. These two independently or combined can lead to further cost savings and IT transformation.
The rationale for outsourcing is cost savings combined with better service delivery. The key here is to baseline what you have in terms of systems, infrastructure and human resources. Once you have that in hand you can make the case for outsourcing the function or keeping it inside. In the previous scenarios, the environments dramatically changed, as most IT environments would in 4-5yrs.
The same goes for insourcing after the business function has been outsourced for years. You have to re-baseline what those systems are, what is the infrastructure in place now as opposed to at the time of outsourcing, and what is the skillset necessary to run the business function. If after doing this analysis you realize you can bring it back in house you should. Such as in the above scenario.
Nevertheless, the organization above renewed the outsourcing contract. The CIO did not want to be bothered with changing what she perceived as not “being broke”.
Now when you take a look at my analysis and apply it to the Outsourced Service Providers costs of doing business, Imagine the profit margin there. Laughing all the way to the bank.
The moral of this blog post is there are times to outsource and there are times to insource. Do yourself, the organizational stakeholders and your customers a favor by investing in the analysis behind making the decision to do either or. $2Million can go a long way and fund some great projects, the previous CIO did a disservice to her organization by not at least investigating insourcing the function back before getting into another 5 year contract.
To quote the CIO of GM Randy Mott who recently started a large insourcing initiative:
“Insourcing presented the optimum flexibility, as we would control the what and how of IT delivery, with the ability to change it as necessary without striking a new agreement”
Let me know your thoughts or examples of business cases for insourcing or outsourcing.
“Measure twice, cut once,” is one of my favorite sayings. Obviously it is a great rule for a carpenter. Cut the wood improperly and the piece is ruined. It’s faster to double-check than to make a mistake.
But this saying is excellent to follow in other parts of life, at home, school or work. I like to instill this thought of double checking, to all my employees. It really is a pet peeve of mine as well. In reality it is common sense but too many times I encounter simple mistakes. Simple, Costly Mistakes.
One employee did not double check an invoice against previously paid invoices and the payment schedule in the SOW, thus leading to a double payment to the vendor of over $100K.
Another employee did not validate an electronic inventory of computers that needed to be replaced because they exceeded the retention age threshold with the end users to see if A) they were still needed and/or B) was the electronic inventory accurate. Instead he went ahead and placed the order for these ~$8,000 Mac Pros costing the organization $160,000 in inventory, because 20 machines had already been replaced or were actually MacBooks. Sr management didn’t double check either and everyone is still too embarrassed about the blunder at last check the inventory is still sitting in a stock room unused.
Too many times in IT there are simple mistakes that have costly outcomes. In terms of IT projects or projects in general the measure twice process should be ensuring that accurate thorough requirements are captured early on in the projects life cycle, to avoid scope creep later on that leads to increased costs, dissatisfied stakeholders/sponsors and extended timelines.
Years ago I consulted on an Exchange Migration for a managed service provider and his client. I gathered all documentation, spoke to the MSP, spoke to the customer and asked very detailed questions. After the migration I delivered a run book with everything I did but more importantly I ran through every possible scenario the customer would experience day 1 and mitigated every issue/concern, thoroughly tested and retested. The MSP told me the customer was very satisfied and experienced no issues post migration. He also told me that was the first time he has ever had a migration run so smoothly and such a high customer satisfaction result. There were no issues day 1 and everyone was happy. We were able to bill the client and our margins were very high since our projections of week 1 support were overstated.
How did i do it? It was simple really, I measured twice, cut once.
Let me know of any embarrassing or costly tales of simple mistakes in IT that were costly but could have easily been avoidable if the time was taking to double check.
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