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How Business Automation Projects Fail, Part 1

12 March 2009

I’m starting a short series in How Business Automation Projects Fail. This is part 1, where I’ll cover the case of an apparently simple project to install a common software package. In part 2 I write about a much more complex and expensive project.

Business Processes

Businesses run by following well defined processes. Let’s look at a wholesale distribution business as an example. Here’s a grossly simplified version of the core processes at the heart of the business:

  • An order comes in.
  • The accounting department vets the payment, issues an invoice when necessary, records the transaction, and passes the order to fulfillment department.
  • The fulfillment department picks, packs, and ships the merchandise, records the shipping transaction, and adjusts inventory quantities.
  • The buying department reviews the revised inventory records and places replenishment orders when necessary.

Process Automation

In many cases, business processes can be made more efficient by letting computers do portions of them. Say you’re a small wholesaler with an overall selling process similar to what I’ve described. You know you want to automate many parts of the process. You’d like the computer to do the accounting, keep track of the inventory, alert you when customers haven’t paid and when inventory quantities are low.

So maybe you go to your accountant and ask for advice. The accountant says “Buy QuickBooks. I’ll help you set it up,” because that’s what the accountant is familiar with. So you do.

A month later you have the software installed and mostly configured, and you start to try running sample transactions through the system. You quickly discover that there’s a big problem. QuickBooks lacks the ability to manage multiple warehouse locations (this is a hypothetical example) and you need that badly. The entire automated system is useless to you without that feature.

Failed Project Postmortem

How did this happen? Your accountant recommended a capable and familiar software package without taking the time to define your requirements completely and to compare those with the software’s capabilities. The accountant was never trained in that discipline, and neither were you.

What’s the net result? You’ve lost a month of work setting up the software, and you have to start over from square one. You still have to find or commission the right software and get it set up.

Does this little story sound far-fetched? It’s not. It happens to small and medium businesses every day. This is exactly how software projects fail, how business automation projects fail – by failing to define the requirements formally and to make sure that they will be met by the proposed solution.

In this part I’ve told about one common way that a packaged software acquisition and installation project can fail. Stay tuned for part 2, where I’ll cover a more complex project where the business commissions a custom software solution.

616 Comments to “How Business Automation Projects Fail, Part 1”

  1. Rodney says:

    For me, the start of school is a time for fresh beginnings and innovative ideas. For some, this could include a new perspective on the devices that are becoming so ubiquitous in our lives — mobile gadgets like smartphones, tablets, mp3 players, and eReaders. Schools around the country are struggling with how to deal with these gadgets — embrace them and incorporate them into the learning process? Ban them and try to keep them out of schools? Or something in between? I have been watching some videos about educators and schools who are welcoming the sea change that is mobile learning. I’ve also collected some tips and information to help you navigate these tricky waters. Will the 2013-14 school year be the one you start to go mobile in your classroom? I’m in a district that is in the process of using BYOD. The simple truth of the matter is…the country will NEVER be able to provide a device for every student, and not because of the cost of the device, but because of the cost of infrastructure, personnel to maintain, and long term sustainability. Answer this.. we have children in homeless or poor families that can afford food. Do we take away food from everyone else because there are some that don’t have the money or have parents that are not responsible? No.We as a society work to locate these children and we provide assistance to feed them. It is much easier for my district to buy 30% of the needed devices, for those students who cannot buy or have parents that are not responsible, in our schools as opposed to buying 100% of them. While BYOD is great in theory and might work at a lot of schools, being in an alternative high school I hesitate to implement this program. It is hard enough to get the students to focus on their work, but by allowing them access to all their own personal stuff, the work would never get done. Some educators and administrators have missed the point. Schools already have limited resources. Yes, BYOD limits the school’s financial liability to provide 1:1 technology; however, the video clearly states and shows that there is a continued commitment to providing for those that cannot provide for themselves. Particularly, if there were not insidious intention to cost cut and stiff John and Jane Doe little person. The schools that have resource deficiencies won’t guarantee the availability of technology to students. And I really do think this is a damn shame for public schools who are of course funded by tax paying citizens. You really believe they will “show a continued commitment” when school supplied tech. will be taken away to allow administrators to stay-in-the-black?

  2. Jonas says:

    This account of a company getting it wrong from the very start reminds me of the challenges with choosing the right financial planning software. It can be more confusing than you think. There are dozens of money-management and tax-prep software programs on the market. Some are downloads or discs that are installed on your computer. Others are web-based and house your data online. Take an online tour or download a free trial version before making a purchase.

  3. Jason says:

    On a smaller scale, this story can be likened to what happened to many persons, including me, when Microsoft Money development and production was discontinued in June, 2009. The biggest headache for me was not only choosing a suitable personal finance software, but then having to merge (export – import) the transaction data that I had accumulated. I still haven’t settled on a viable solution, though I’ve started to try Quicken. I hope I am not wasting my time.

  4. Jonas says:

    You have made a lot of good points here and the more I read about software up dates the more scared I get about them I am not computer savvy at all and when I try to hire someone to update them for us I never trust them to do it right. I need to try out some of the questions that I have been told to ask to weed through the rip off guys.

  5. Tonia says:

    Stagnant procurement processes often kill innovation. As more companies look to build software instead of buy it off the shelf, the first process that requires improvement is the one where the contract gets signed. To avoid irrational fears, policy-driven blinders, and downright rule-bound stupidity during the procurement process for innovative technology, you have to avoid the types of mistakes, including the ones mentioned in this story, but also other common pitfalls that plague many businesses.

  6. Roger says:

    Have you ever had that ominous hunch that something bad is going to happen – and then it does? Unfortunately, this gut-wrenching feeling is far-too-familiar for small businesses facing the complexity of information technology. By its nature, IT is a confusing, expensive and forever-changing animal. Hardware and software sometimes become obsolete within months, let alone a few years. And thanks to budget restraints, many small businesses fall into lethal traps like hiring inexperienced personnel to handle their IT.

  7. Roger says:

    Because the business software market evolves so quickly, it is important to keep track of the latest software market trends so that you can utilize technology as a strategic advantage for your company. Technological and functional improvements in business software can have a big impact on how you do business. Over the past few years, Cloud software solutions has been gaining market acceptance. As far as I’m concerned, when you get down to the basic terms, the Cloud is really just a different software delivery method. I just wish they were free.

  8. Andrew says:

    The more I read on this subject, the more I have learned about Software-as-a-Service (SaaS) and how it is a viable offering to many different industries, and I can see why. It has proven to be a good method for providing fast deployment, increased security, and much more. With little technology overhead, companies can deploy the technology without much hiccup and can therefore run applications efficiently and effectively within hours. However, there are some things you need to know before diving in and deploying SaaS offerings.

  9. Rodney says:

    The I.R.S. reported that several software vendors have had errors in their e-filing applications that have omitted adding back up to $2,400 of unemployment compensation benefits as a result of differences between federal and individual income tax laws. More than 10,000 returns that have fully processed require correction. Many taxpayers are receiving a larger refund in their amount due. DOR notified vendors of the errors in their applications as they were discovered. This is either a result of a software error or vendor fleecing.

  10. Nicholas says:

    Keeping up with updates is hard enough as it is but trying to keep up with the new software that comes out and the updates to that software etc. is something that takes time and research to keep on top of. You have a great post here that shows what happens if you don’t keep on top of it as well and you have done a great job.

  11. Linda says:

    Today, independent retailers have access to point of sale systems with features comparable to large competitors. The costs of these systems are often hundreds of times less than the investment made by the large retail chains. If a retailer avoids the most common mistakes when selecting a point of sale system, they can avoid duplicating their efforts and control these costs. And if a retailer isn’t automated or is operating an out-of-date point of sale system, they may have developed inefficient procedures.

  12. Robert says:

    I don’t think you can rush the process of negotiating a large software purchase. From price, to payment terms, to contract language, to acceptable use policy, and practically every other facet of the negotiation, a large brand is certainly a worthy competitor to any vendor in all areas of deal-making. An original pact could take nearly four months from the time they start talking scope and price, bring in legal, and put ink to paper.

  13. Linda says:

    I find the software industry confusing. This industry changes so fast and so often, that it just confuses me. Although there’s a lot of inertia, the cloud and software-as-a-service (SaaS), along with several other technology trends including mobile, analytics and consumerization are profoundly changing the enterprise software landscape. The rise of cloud and the utility model represents one of the biggest shifts in the way enterprise applications are written, deployed and consumed.

  14. Larry says:

    An important aspect of patch management and your patching schedule is to understand the patch release cycles adopted by the most important software vendors. I think it is helpful for those interested in this subject to take a look at some statistics on this topic and how patch release cycles have changed over the last few years. The big players in software industry are taking security seriously. They are becoming more efficient in fixing security issues and the results are evident. Six vendors: Microsoft, Adobe, Mozilla, Apple, Oracle and Google, together released 257 security bulletins/advisories fixing 1,521 vulnerabilities in 2011.

  15. Jonas says:

    Software vendors frequently try to ride whatever wave seems to be popular at a given time, so they respond to a relatively small group of bloggers, analysts, and press; and second, the vendors copy each other. A revolving door of personnel across the major vendors makes this copying almost unavoidable: executives often leave one vendor for another, sometimes even returning to the original company. All of which creates homogeneity in marketing messages, product positioning, and use of language across the enterprise software industry.

  16. James says:

    The IT world is a tough business to be in and my son is going to school to join that work force in just a few short months. I am afraid that the school hasn’t taught him what he really needs to know in order to be successful at this. This is a scary thing to have happen and I hope and pray it doesn’t happen to him. Thank you for posting.

  17. Nicholas says:

    James, it is a scary thing to have happen and depending on the type of school your son is taking I am sure he will know more about this stuff then even he thinks he does. He has to remember though that this stuff changes so rapidly that he has to stay on top of the updates or it won’t matter how much schooling he has he will miss the mark.

  18. Jim says:

    What’s in store for business intelligence in 2014? In some respects, 2014 will echo themes heard in 2013, but the message is getting louder when it comes to visual data discovery, cloud, and mobile. Big data also will continue to garner attention, but people will take a pragmatic approach to adoption. Simplicity, meanwhile, will experience a second coming. Visual data discovery took center stage in 2013, with specialty vendors growing rapidly, and mega vendors (SAP, IBM, Microsoft, Oracle, MicroStrategy, stagnating.

  19. Scott says:

    The most common problem why things like these happen is because customers don’t Know What They Want. This is often true because much of development has to do with technology that’s beyond the customer’s knowledge. In terms of Web design, understanding the customer’s mission, vision, goals, and other important parts of the project. In software development especially large and complex software with many interfaces requirements don’t always affect customers. Requirements often focus on the back-end, processing and system interfaces. This is over marketing’s head.

  20. Juan says:

    The way I see it, choosing the right software vendor is just as important to the success of your company as putting a solid marketing plan into place. After all, the software package that your company uses will play a big factor in the efficiency of your staff, and will have a direct impact on your ability to provide your customers with up-to-the-minute information and services. If you invest in a software package that is filled with glitchesor crashes on a regular basisthen your staff is going to be at a large disadvantage.

  21. Janet says:

    This is a very touchy subject, I have some friends that this has happened to and it cost them a lot of money so when they hear of some body else having this issue as well I can actually say it makes them made. They have started a blog speaking out against this kind of deliberate software sabotage and I have to admit it is doing really well.

  22. Filiberto says:

    When you’re using enterprise software to help run your organization, the software vendor becomes a key ally – and the right relationship may be as important as features or price. Perhaps not surprisingly, good management software has been hard to find. YMCAs and JCCs are a small niche market with complex needs, some unique requirements, and cost-conscious customers. In the late 1980s and early 1990s, several vendors developed good software for YMCAs – but few YMCAs invested and the vendors moved on.

  23. Arthur says:

    If anyone would be honest, from the technically ignorant to the most tech-savvy geek, they would admit that nearly every piece of business software that you have used over the last few years is confusing, poorly designed and, more often than not, makes you want to do something to your computer that would turn you into a viral clip on YouTube. But why is it the status quo to have disjointed and downright ugly software that cripples our productivity? I blame the software vendors, most of whom are more interested in making a commission while pretending to care about your business efficiency.

  24. Helen says:

    I can see how easy it is for a major software upgrade / purchase to go wrong. It can get even more complicated when there is a merger or when a company buys out a competitor. Like what happened when HCA Holdings, Inc. declared that it inked a deal to buy PatientKeeper, a leading software and mobile applications provider that enables physicians easy access and work with patients’ information. Following that announcement, the stock gained 1.44% and closed at $73.12 with 0.14 million shares exchanging hands over last few trading sessions. Lucky for them it went over without a hitch.

  25. William says:

    Unfortunately for many users – quite a lot. All too often products look nice and slick and intuitive during the demo and sales cycle, but once you buy and implement them you find they are difficult and expensive to maintain and getting them to do what you saw in the demo is much more difficult than expected. Or you find that what was easy to implement in the beginning, turns out to be quite the headache when you need to change something in the system.

  26. Erin says:

    Cloud-hosted solutions frequently tout the phrase “minimal capital outlay which can be deceptive based on what your expenses are for an on-premise solution and what they entail. Unless you are outsourcing every company function to the cloud, it’s likely that you will still have to maintain some or part of a legacy system. It’s true that if you were starting from scratch – buying hardware, paying for the operating systems licensing fees, hiring a tech person, etc. – then “renting space in the cloud makes sense.

  27. Filiberto says:

    Changing software can be a scary thing to have to do if you are the one having to make the decision which is best for an entire company. I have a hard time just updating my antivirus so I can only imagine how bad the pressure and stress would be of supporting an entire company. Keep up the good work this is a great post.

  28. Patrick says:

    Computers can be such a pain in the rear sometimes I just want to slam my fist through the screen or throw it out the window, but when something like this happens I can guess that the person responsible would also like to do these things. Software upgrades and hardware upgrades can be equally as challenging and I feel for you.

  29. Sarah says:

    My software vendor has around 130 customers, with around 25% of those being hosted. In addition, their product is marketed under an OEM agreement, which uses Personality extensively in the Healthcare space. Right now the current trend in small to mid-market applications is moving toward multi-tenant SaaS; however High Line still sees demand for their on-premises solution. They are also a strong candidate for those who wish to have more control and/or customizations over their implementations than would be possible in the multi-tenant SaaS environment.

  30. Harry says:

    Sometimes, it’s better to buy a software company than to deal with a vendor. That’s what happened when ShipWorks became the second shipping software vendor to be bought by Stamps (dot) com in the past few months. Stamps acquired ShipStation earlier this year. They paid $22 million in cash and will operate ShipWorks as an independent, wholly owned subsidiary led by the existing management team. ShipWorks software is used by more than 50 online sales and marketplace systems. The software also offers such features as sending e-mail notifications, updating online order status and generating reports.

  31. Vernon says:

    Perhaps it’s because of complex issues with software upgrades that Java is by orders of magnitude the most popular and versatile software on earth. There are over 10 million Java software developers in the world today writing software applications that run on desk top computers, lap tops, tablets, enterprise servers, and even cloud based platforms. Each of these devices can be enabled to run Java applications through the installation of the Java Virtual Machine (JVM) software. And just to be clear, there is the programming language Java and then there is the software (the JVM) that actually runs those applications written in Java.

  32. Nicholas says:

    Though it’s been around for quite some time, in the past, businesses had been skeptical of adopting open source solutions due to concerns about safety, perceived lack of support and simply because that wasn’t the way things were done. But these days, open source solutions are becoming increasingly popular as decision makers realize that they stack up stronglyif not betterthan their proprietary counterparts and often cost considerably less, if anything at all. And in that sense, the world of the old school vendor is changing.

  33. Christine says:

    How do you choose the right software (or app) for your organization? How do you sort through the marketing and sales hype? And how can you tell which vendor will be with you for the long haul and which will disappear after the sale? I suppose these are just some of the questions the company in this story as well as IT executives face when evaluating technology solutions to business problems. It’s not an easy issue to tackle and I don’t wish that responsibility on anyone, especially if the budget is large.

  34. Nicholas says:

    I don’t know how the poor guys working on computers all the time can keep track of this stuff and all the upgrades and updates to the software on a weekly sometimes daily basis. It is no wonder they mess up sometimes it isn’t all their fault but the people that keep putting out the updates that don’t bother to communicate that part of it that messes things up.

  35. Adam says:

    According to a recent survey, more than half of large companies and a third of SMBs are avoiding cloud adoption. The reason is simple: companies of all sizes are not convinced the cloud is secure. Concerns about security are not only not decreasing; they’re increasing. The recent icloud hacking which exposed so many celebrity photos didn’t help ease any fears about security either. No matter how users feel about security, cloud computing is only going to grow. Cloud computing will be the bulk of new IT-related spending, which follows the growth of mobile technologies.

  36. Kirk says:

    New players are entering the enterprise software market and restricting the reach of the mega-vendors. But what do we mean by a mega-vendor? A Mega-Vendor is defined as a software company who has one or more of the following characteristics: Is public listed and under great pressure to demonstrate share holder value – whatever the cost. It can also be categorized because they are acquisitive to make up for their lack of in-house innovation and agility.

  37. Francis says:

    Nice presentation. I believe 2015 will be the year when brands get back to using email marketing more aggressively. With the start of the smartphone era and responsive email and web designs there is no reason for brands to overlook email marketing. The US economy heavily influences business spending for software products. The success of software companies depends on technical expertise and effective marketing. Small software companies compete mainly by targeting niche markets or developing new technology. Many small companies form alliances with larger ones to market their products.

  38. Richard says:

    I consider the initial decision that this company made to be the number one mistake because it embodies so many errors. First, it assumes that industry peers are qualified to make good software selection decisions. Second, it excludes knowledge of how your peers made their selection, what their criteria was, their budget constraints, user needs and so on. Last, it fails to consider your own unique requirements and differences. If only the person in charge of buying had did his due diligence, it could have saved time and money.

  39. Jimmy says:

    When you have the funding, sometimes it’s better to merge with an experienced company rather than deal with software vendors on your own. Case and point: Backblaze launched in a big way in Japan recently. They have partnered with Sourcenext to offer our unlimited online backup service to the Japanese market. The founder and CEO of Sourcenext, came to the US a couple months ago and said that his technical people scour the world for the best products to bring to the Japanese market. In 2010, they picked Evernote (one of my favorite services) to bring to Japan. This year they picked Backblaze online backup as a must-have for Japan.

  40. Robert says:

    Why is this something so easy to do and so hard to fix? I am so tired of reading this posts about what you shouldn’t do as far as your software etc. and then I find out that is what the IT guy has done after all and we are having to fix it by spending a lot of money and time on it when it took him about 1 hour to mess it up.

  41. Gerald says:

    I know of a worse software failure story than the cautionary tale told here. It happened with the rollout of a new student records system for Los Angeles schools was problematic at just about every level, according to a consultant’s report. No one was responsible for pulling together the various aspects of the complex project. The help desk wasn’t ready. There were not enough people, not enough answers and not sufficient updates as the situation evolved day to day.

  42. Bart says:

    It is very clear that open source software applications are becoming an increasingly viable alternative to vendor provided commercial software. Still and all, you have to figure out how to compare open source applications to vendors’ commercial offerings. You also have to explain to your boss what the risks, benefits and implications of each option are–and everyone you talk to has a different take. Worst of all, you don’t even know where to start.

  43. Christine says:

    For many years the debate has been whether open source is a better choice than proprietary. Today, it is not a question of either / or, but rather which is right for a specific business need. Concerns about security have largely disappeared – it’s all about the power of the capabilities. The greatest barrier is lack of knowledge as to how the open source model works. With increasing awareness, fear is fading and as experience of using open source products from major vendors grows, IT leaders need to look long and hard before deciding open source is not for them.

  44. Bobby says:

    My son went to school to learn all this stuff to work on computers and he is still nervous to install a new software sometimes because ugly things can happen when you don’t do it right. You have to be very good at this stuff or you end up in trouble and looking for a quick fix and there isn’t any such thing. Keep up the good work you have done here.

  45. Patrick says:

    I worked for a company a few years back that didn’t have any software in place to speak of and when we implemented it I had to go back a couple of years to input the information that we needed and that caused a large problem later on. I can understand that this is a difficult thing to do now and I don’t envy the person that has to do this at all.

  46. Calvin says:

    Software can be as confusing as buying a new car and the options they throw at you in the paperwork. I am not great with computers so I would have to find someone that I could trust to do this sort of work for me otherwise it would never get upgraded and I would be using a computer from the dinosaur age. Great post and so much truth to all of this.

  47. John says:

    I’m glad that today, independent retailers have access to point of sale systems with features comparable to large competitors. The costs of these systems are often hundreds of times less than the investment made by the large retail chains. If a retailer isn’t automated or is operating an out-of-date point of sale system, they may have developed inefficient procedures. Every process in the business (e.g. purchasing, receiving, transfers, etc.) should be noted and worked through in the point of sale software during the demonstration phase.

  48. Richard says:

    Automation anything can fail when you are talking about business or otherwise so I understand the fear of messing things up when you upgrade your software. I have done that and it is a horrible experience. Keep up the good work you have a great blog here and I have seen many on this subject and I have to say this is a great blog post.

  49. Francis says:

    Business automation is something that I have failed at for sometime now because I didn’t bother to take any courses that would show me how to do what I needed to do. This is a very interesting and I am certain that there will be more talk about this subject at a later date. I will save this page so that I can return later to find out.

  50. Bobby says:

    The fully automation of some companies was a good idea and it has made things easier by leaps and bounds but I have to admit that the update of such systems can sometimes be a problem and it takes a lot of time and difficulty to accomplish it. Great post thank you for sharing your work with us. I hope to see some more of your work in the future.

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