How Business Automation Projects Fail, Part 2
22 August 2009
In part 1 of this series I wrote about a simple case where failure to define requirements for a software purchase ended up costing the business several thousands of dollars worth of wasted effort that had to be re-done. The software purchase price was just a few hundred dollars, so it seemed okay to take shortcuts in the selection process. The resulting loss was more than anyone bargained for.
In part 2, this post, I’m writing about a much larger purchase of custom-developed software. This is a true story of a project that could have turned into a disaster. It could have sunk a new startup company before it ever got off the ground. It could have failed badly. But this one actually has a happy ending. Disaster was averted because the business owner stopped in the middle of the process to ask some key questions, and he acted on the answers.
The Background
The owner had a brand-new startup company with little more than a business plan and some funding. The plan required a unique custom developed website with a high level of complexity. Here are some of the requirements in general terms:
- A set of consumer-facing pages that could be branded with the company’s name or private labeled to business partners. In the case of private labeling, there could be differences in fuctionality.
- A set of pages and communication protocols to manage data exchange with another set of business partners.
- Very secure private communications and protected private logins for consumers and business partners.
- A complex and secure administrative back end to manage the entire enterprise.
The Steps
Here are the steps the business owner took to begin the software project:
- He prepared a Request for Proposal (RFP) that specified the requirements.
- He identified several vendors who were qualified to do the work.
- He submitted the RFP to the vendors and received proposals from them.
- He evaluated each proposal and spoke with each vendor about details.
The Problem
This was a good process as far as it went. But it came to an impasse. The owner identified one vendor that he felt comfortable working with. But the vendor’s proposed price was well over the budget that the owner could commit based on his funding. The price was about $350,000 where the budget called for a maximum of $250,000.
The owner didn’t want to throw away the work spent in establishing a rapport with the vendor, but he just couldn’t agree to the price. It would have jeopardized the entire startup.
The vendor maintained that the system they were proposing met the specifications, and for the system they were proposing their price wasn’t flexible.
They couldn’t move forward.
The Solution
Then the owner made a great decision. He decided to bring in an outside consultant to take a fresh look. That consultant happened to be me, which is how I know the details of the case.
Here’s the process I followed:
- I studied the RFP and the proposal in detail.
- I asked the owner some questions to clarify details of the requirements.
- I got on a conference call with the owner and the vendor to ask the vendor to explain how they were approaching key portions of the project and to explain why.
- I pondered all the information I had gathered.
Here’s what I concluded. The owner had requested a secure, robust, flexible system. The vendor was proposing an approach that would create an extremely secure, very robust, and supremely flexible system. It would certainly work, and work very well, but it was on the order of a Rolls Royce level solution, where a Cadillac solution would have been sufficient.
I proposed some compromises in complexity, especially in the area of flexibility, and made sure that the owner and the vendor understood the ramifications of my suggestions. They did, and they both agreed that the changes in approach were reasonable.
The vendor reworked the proposal according to my suggestions. The new price was about $200,000, a reduction of over 40% and well under the owner’s budget.
Everyone was happy. The company launched under budget and is now well established. But it could have been a total failure, all because the vendor had over-designed the solution because they hadn’t asked enough questions about the real requirements. Another victory for proper requirements planning!
Dada! Sounds a bit like a building project, where the material costs are too high because its been over designed.
David, thanks for your comment. It is a very similar situation. The software designer is much like an architect and an engineer. The architect has to listen to the client well enough to understand and specify the appropriate levels of robustness, flexibility, security, and functionality.
Hi Steve, Absolutely agree with you. Your words quite remind me of my management classes. I quite agree with you on this. In our business, we have much smaller projects, but requirements analysis forms a key part, taking up 30% of the time, and rightly so.
I think automation is a great time saver for my aspects of your business, however it can also lead to many unwanted and unforeseen problems. The key is to figure out when you should and should not automate business decisions.
I wished that clients that I deal with would be wise enough to bring in a consultant to help sort the details instead of just balking on the price and giving up. Fresh eyes. Fresh solutions.
.-= donnie@Chattanooga Web Design´s last blog ..New Dalton Hospitality Carpet Web Design =-.
I see this quite often when one company proposes an expensive solution when there is another way to do it that is often just as good but less expensive. You describe a nice example of this.
You are right Steve, the software designer is much like an architect and an engineer. The architect has to listen to the client well enough to understand and specify the appropriate levels of robustness, flexibility, security, and functionality. They also have to design everything else correctly and to specifications. The architect has a lot of responsibility.
Bringing in a consultant was a very smart idea not only can a fresh pair of eyes and ears suggest changes that you might not have thought of to get the cost down but they can also catch mistakes that might have been over looked because you have been looking at it to long.
The project case study you described seems very complex. I witnessed a similar cautionary tale when I worked as a web developer for an entrepreneur who started a company to develop a kiosk that would deliver long distance and internet services for third world countries. As you can imagine, the software development was complicated. He burned through a significant amount of cash as complications continued to arise with the development. It wasn’t until he began to ask key questions, was he able to stop the bleeding and get a handle on the situation. The company went defunct, but he is now redeemed with another tech related venture.
I think it is vitally important for consultants in any field to provide informative content on their web sites, even if the information is basic. This web site does just that by offering information that makes sense and also demonstrates the consultants training and provides examples of how a trained and experienced consultant can shift a client’s thinking which could reveal oversights in a project. The larger the project is or the more moving parts it has, the more it makes sense to deploy a consultant to avoid wasting vital funds.
This was a good lesson to be learned. It sounds like the business owner was really on top of things, and it’s a good thing or it would have cost him a lot of money. The lesson I see in this article is if you are a business owner don’t just set back with something this important and let someone else make the decisions. Have enough knowledge about the subject to know when to stop them and regroup.
great post, i think it is a goal of most businesses to automate as much as they can without sacrificing a human feel. It is a fine line i think and if you overdo it, you will notice right away.
Part two was just as good as part one, they were both equally informative and you pointed out some very crucial mistakes that were made and how to avoid doing that yourself. It shows that you really put a lot of time into this post and a lot of thought, great job.
It sounds like to me that the software designer needed to listen to the customer so that they could create a software that would meet the functionality that the customer wanted and the security they need. This kind of software could save the business tons of time and money if it is done right, automation is a great tool and can serve the company well if they know how to use it properly and the software is created to fit their needs.
It sounds like to me that the project planner didn’t know enough about this project to make educated decisions that would save the company in the long run. It is a good thing that business owner stepped in when he did or his entire company could have been at risk. Next time hire a project planner that knows what they are doing. Or as a business owner do it yourself so that you know it is right. This kind of project is to valuable and expensive to leave to just anybody. Great job posting this so that other business owners don’t make the same mistake.
This post was very informative, both part one and part two, I hope that business owners will pay special attention to what happened in this story and hopefully not make the mistakes that these companies did. You did an excellent job with your content on this blog and I sincerely hope that you will continue to bring this kind of thing to the attention of us business owners in the future.
This post was very informative, both part one and part two, I hope that business owners will pay special attention to what happened in this story and hopefully not make the mistakes that these companies did. You did an excellent job with your content on this blog and I sincerely hope that you will continue to bring this kind of thing to the attention of us business owners in the future.
It is really to bad that the project planner didn’t know enough about this project to make at least an educated decision that would have saved the company in the long run. It was a good thing that the business owner stepped in when he did or his entire company could have been at risk. I hope the next time they hire a project planner that knows what they are doing. Or maybe do it yourself as the business owner so that you know it is right. This kind of project is way to important and expensive to leave to just anybody.
correct Steve, the software designer is much like an architect and an engineer. The architect has to listen to the client well enough to understand and specify the appropriate levels of robustness, flexibility, security, and functionality. They also have to design everything else correctly and to specifications. The architect has a lot of responsibility.
This was a very close call for that company. Next time maybe they will take the time to do the research to get the proper software. It sounds like this was just negligence on the part of the business owner and I bet he won’t let it happen again. It was interesting to read this and I am glad that you shared it with us.
It sounds like to me that the business owner knew what to ask for but didn’t know enough about what he was asking for to determine that it could in fact be tweeked to fit both of their needs. You did a great job telling this story and a great job helping them. I hope that you continue to post helpful information like this so us business owners can stay out of trouble.
So in short if the company that was giving the proposed price would have gone back to the drawing board they could have found out that all he had to do was make the flexibility a little less flexible and the business owner wouldn’t have had to call a consultant right? This didn’t seem that difficult and if the business owner knew more about what he was asking it wouldn’t have come to this.
After over ten years of working in the web development field and using a myriad of software programs to do all kinds of tasks, I tend believe that there is no one software program that can be all things to any company or any complex project or process. Where one program will fall short, another will take up the slack and be more efficient in another area. That’s why I don’t believe in purchasing one software to handle everything. However, a software bundle can be viable. This can either be a mesh of programs from different companies, but which are compatible with the import and export of data. Or it can be one company which makes several programs for different integrated tasks. A case and point is Adobe and how they have created the Creative Suite made up of some 10 programs each specializing in a different area of production.
If you are a business owner or the entrepreneur who is providing the funding for the business, you need to ask the hard questions first and save the professional courtesies for later, after you have seen some success. By asking the hard questions, I mean making the kind of inquiries that the talent or service providers / contractors might take offense to because it implies from the very beginning of the project that you don’t quite trust in their ability. Some programmers or technicians can be quite defensive if you ask questions that make them have to prove themselves or prove that they have solutions and contingency plans. Some contractors / programmers on the other hand think that the customer is just being difficult and pessimistic. But if you have ever been burned before, it is your right as the customer to be wary.
I read part one of this saga a couple of days ago and I have to tell you that part two was just as informative and put together just as well as part one. Both of them have been true eye openers and learning experiences that I hope to avoid now that I have read your posts. Thank you so much for the information you have provided.
This just goes to show you that you have to be precise when you are telling people what you want and you have to know the language so they understand completely. This didn’t seem that difficult and if the business owner knew more about what he was asking it wouldn’t have come to this.
That is the problem with undertaking a relatively inexpensive tech project. Because of the small budget, there isn’t a sense of urgency or enough fear on the part of the project manager, unless the project manager is the owner whose using his own money to fund the business. There just isn’t that sense of potential monumental failure. But make no mistake, if you are careless in your spending of small amounts of money, those small fails can accrue and lead to the death of the company.
I started to look through Mr. Diamond’s web site portfolio. Until now, I didn’t know he was a developer of web sites. I noticed that each web site looks completely different from a layout stand point. This would indicate to me that he does a good job of extensively customizing the layout and structure of each web site. I wonder if he uses any sort of template platform such as Word Press or any other content management system.
In today’s world of smart phone application development, there are probably many cases of entrepreneurs who have good ideas for developing an application, but little to no experience with application development. So they decide to go into a project depending completely on app developers to inform them about the time and cost expenditures. This could and probably does prove to be a pitfall for many who decide to take on a development project, a subject completely foreign to them.
Actually when it comes to handling our busines or managing it then we must not rely on the cheap or quick shorcut kind of softwares.Choose the business ideas very carefully and then only rely on any reliable software .
Wow, it is a good thing the business owner knew enough to stand his ground and bring someone like you in to look at the problem. It is surprising that the people that created the software weren’t willing to go back, ask some more questions about just how flexible it had to be etc. no offence to you but this really could have been resolved if they had done that.
Wow, it is a good thing the business owner knew enough to stand his ground and bring someone like you in to look at the problem. It is surprising that the people that created the software weren’t willing to go back, ask some more questions about just how flexible it had to be etc. no offence to you but this really could have been resolved if they had done that.
This was a rather simple answer to their standoff wasn’t it? Can you honestly say that you could see someone saying sorry we aren’t flexible on our price when you are talking that much money? I just don’t see it nor do I see a business owner not being a little bit flexible on his requirements. I’m just saying this could have all been prevented I think.
I think this is a very interesting problem and the fact that the software people would be flexible on their price is a bit out of character I think. I work for a firm like that and if they were willing to pay me that much to do their program then I would set down myself and see where we could cut corners if need be. It’s a good thing that they brought you in.
After reading your blog I would say it is a good thing that the business owner knew what he was doing when he started asking questions and it is a really good thing that he knew enough to bring in a consultant that could help him out. Otherwise they would have spent thousands of dollars to get someone in there to fix it and the employee would be without a job.
You are right this was not as simple a problem as part one was, this could have ended the company before they even got started if he had agreed to go outside his budget and the software wasn’t what he needed after all. It is a good thing that someone like your self was available to come in and save the day and that the business owner knew enough to say no.
Although I am sure this was very embarrassing for the business owner I am glad that you shared it with us because I was very close to doing the same thing and you have prevented that. Thank you for the information and the heads up I couldn’t even afford as much as this company owner did.
It sort of sounds like the custom software developer took some liberties when they found out that the business owner only knew so much about the requirements he was asking for. The business owner needed to consult with someone before they got to the software developer to make sure he knew what he was asking for before they ever got started.
Most companies are affected by the quality of the software because the organization’s viability depends on it. And most software-related tools and methods claim to assess or improve software quality in some way. So a consultant must question what is meant by software quality. A good definition must measures quality in a meaningful way. Managers need to know how the quality that is built in can affect the product’s use after delivery and if the investment of time and resources reap higher profits or larger market share.
Companies and countries continue to invest a great deal of time, money, and effort in improving software quality. But we should try to determine if these national initiatives have directly affected and improved software quality. The answer may depend on how you approach quality improvement. Some companies take a product-based approach, while others focus on process; both strategies have led to awards for overall product quality. No matter how good the software, it must function for your purposes.
This is just amazing, I am not sure what they were thinking when they put something like this in the hands of someone that didn’t really know what they were doing. It is really too bad that the project planner didn’t know enough about this project to make at least an educated decision that would have saved the company in the long run. Thank you for sharing this scary story with us.
If the business owner hadn’t stepped in when he did his entire company could have been at risk. I hope the next time they hire a project planner that knows what they are doing. This kind of project is way to important and expensive to leave to just anybody. If you don’t have anyone in the company that has the talent to do this then outsource it so you know it is done right.