Cost Obsession - Killing your Business Transformation?

I've had the benefit of seeing many facets of business and system integrations and transformations and often I've been able to nip those emerging niggles in the bud early enough to prevent the programme drowning in apathy. 

The one that comes up again and again and again? Cost. Programmes get obsessed about cost - predominately the cost of individuals - the headcount. Lets negotiate down the cheapest resources we can because then we can have lots of them! More is better than less. 

Perfect. Lots of cheap resources. Sounds a recipe for disaster. Funny, when its written down like that, its obvious. Why then, when in a fast flowing, ever changing dynamic programme environment would it makes sense to pile in more and more resources?

Having lots of resources sends a physiological boost to the rest of the organisation - look we have lots of people, we are doing lots of work, making lots of progress. The reality is if thats the style of message which needs sent,  then the stakeholder management isn't as efficient as it should be. 

For System Integrators the rate card is the key, it is what builds you the business and clients will focus on it as a differentiator between other systems integrators. But should they? Any good SI can get you any number of bums on seats you need at your agreed rate, but is that the right thing for your programme? Circumstances change on a daily basis and your business transformation will set up the future operating model for possibly the next 10 years - should decisions really be made based on the daily cost of a programmer, analyst or tester? 

For your transformation to work you need to focus on the talents and skills of the individuals you are buying in, not the unit price of multiple resources. Your rate card will have been agreed during the procurement phase and a number of assumptions will have been made as to the level of skill and expertise required at each level, but as we all know change happens, assumptions are debunked and complexity increases 

You may then at some point require a particular resource or skill set from your SI to, for example fulfil an internal role which the project hasn't been able to resource or expertise in a functional area outside of the original scope and those 'experts' will be in high demand else where. You'll normally be drawing on the consulting divisions whose normal billing rate will be outside your agreed rate card for standard project resources.  The System Integrators will endeavour to get them involved but simple supply and demand means you may only see them on an ad-hoc basis or they may be leading a team from a distance - their value add is then reduced and progress will be slower. Work with your System Integrator as part of your project governance vendor management to ensure you get the right people, at the right time, at the right cost. 

Just doing a cost benefit analysis of an individual versus the daily burn cost of the entire project for a delay should show that obsessing over individual costs and not the overall programme will have a negative effect. Decisions have costs but they need to be factored in and weighed against the total programme - after all delays cost more than just money alone. Budget, time and scope - the impact isn't always obvious. 

So don't fall into the project trap of focusing on daily costs and not the project costs - does delaying to try and get a cheaper resource mean that your other resources are clocking up cost without making progress really the right thing for the business?

The right professional is ultimately cheaper than the wrong resource.

 Nick Hopkins has over 20 years expertise implementing IT software solutions, with over 15 years spent in outsourcing and vendor environments. Nick has worked across the world including running a software delivery centre in India for nearly 5 years. He works as a freelance project engagement specialist and outsourcing consultant. 

Previous articles include

• Projects - Getting Your House in Order
• After the Honeymoon - living with your System Integrator,
•  Engaging with your System Integrator
• How to Learn to love your System Integrator