The Cost of Inaction

Often times when working with a third party vendor or consultant, companies consider cost above all other factors, regardless of the services that will be rendered or the products being purchased. The bottom line figure is what drives budgets and can make or break a project. If a company needs to negotiate price due to constraints (or perceived lack of value), there are items that consistently take a hit: services and hardware.

As a safe guard, companies institute policies against making technology-related purchasing decision without first receiving internal approval from a CIO or technology director. From an operational perspective, there is a lot of merit to standardizing on server hardware, for example. So, when given the choice to purchase a new server to run a specific piece of software or provide a server on their own, many choose to look solely at the bottom line and opt to work with their internal teams to provide a machine (whether physical or virtual). It’s an easy way to cut costs on the surface. But what is the total impact of making a decision to remove an item (such as a server) when the time comes to negotiate contracts and pricing? These intrinsic costs are easy to overlook.

Consultants are often hired when the company feels it needs assistance in delivering on a solution that it cannot provide on its own within a given time frame or set of expectations. When the scope of work is discussed at the front of the engagement, the items that are added to the statement of work should reflect the requirements for delivering the services and products involved in the project. Do decisions that involve trimming the cost as it relates to a delivering on the project make sense? Negotiating is expected, but explicitly going with a homegrown roll-your-own approach can prove questionable, especially given the nature of a consulting engagement.

Consider the cost of ownership when a business decides to provide its own server hardware as part of a project but fails to work internally to deliver it. IT doesn’t see the project as a priority and instead places the item on an ‘action list.’ Months go by and dates are missed. Internal communication is poor or nonexistent, and the timelines for the project are delayed. Management gets anxious. The project slips into jeopardy. (The lack of alignment that exists within information technology and the business is another topic entirely. When the IT operation fails to listen to what its constituents actually need, everything loses focus and nothing ever appears to get finished.)

On the other hand, having walked in those shoes for many years, I understand the decision. There’s an inherent point of pride for being able to deliver on a task, especially as it relates to a key responsibility of the department within an organization. It’s when decisions are made without regard for the greater success of the project, when egos get in the way, or when decisions are made in a bubble that really causes chaos. Unfortunately, this is a well-known scenario for how projects often become derailed and or fail.

As not all solutions are fixed price solutions, the cost of time and materials can impact the decision to green light a project or table it for a later time. Changes to a project’s scope or list of hardware items that need to be incorporated typically result in a change request and additional cost. Those costs can make or break a project. In project management, there are three critical factors, each of which weighs heavily on the overall success of a project:

Time v. Cost v. Quality

So, if a project needs to be delivered early, one of the other two factors needs to give: either pay more or receive a product that potentially doesn’t contain all of the bells and whistles that was scoped. Inversely, cutting costs can cause a project to either come in late or lack a certain quality.

The real question is in my mind however is, “What is the cost of inaction?”

FundFive

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