Executive Information Technology Consulting & Development Services offered by Steve Diamond

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!

435 Comments to “How Business Automation Projects Fail, Part 2”

  1. Allen says:

    This story only ratifies how the software industry is getting more focused and attuned towards directly impacting customer satisfaction than ever before. it has become all the more important for software to become more responsive. Test Automation for this reason has seen a sea change in its adoption levels in the recent years. Though there are multiple factors that are responsible for delivering successful test automation, the key is selecting the right approach.

  2. Jacqueline says:

    I read another similar story about the time when Yahoo! was starting, they decided to standardize on FreeBSD as the dominant platform of choice for their servers. At that time FreeBSD had a clearly better architecture and a much faster/secure networking stack. However, Linux had the bigger community in terms of developers and applications. Roll forward 10 years and Yahoo! had to go through a very expensive migration project to undo that mistake.

  3. Curtis says:

    Software application development has acquired quite significance in the present business world. Today, different organizations have different goals and have their own methods to reach them. Besides this the increased dependence on the software and web technology (not to mention mobile tech) has made it mandatory for the organization to go in for custom software application development so that specific needs of the organization are satisfactorily met.

  4. Kendrick says:

    This sounds like a classic mistake that management and ownership make. What the owner of this company did is a common mistake. Often, when you have a relationship with a vendor, your focus is more on maintaining a good rapport. And if you have a long standing relationship, you tend to trust in a vendor’s advice. But the reality is that a software vendor is always going to steer a client in a way that enables the vendor to earn the commission.

  5. Carl says:

    What is business process automation software? What kinds of business processes can be automated? Can BPA software make me coffee? – I’m happy to say I’ve found answers to each of those questions (fyi, BPA software can make coffee…theoretically). It’s an easy guess to say that business process automation comes in many forms, from literal assembly lines in the auto industry to self-service gas station pumps. But I was surprised to learn how many things are driven by software.

  6. Marjorie says:

    Thank you so much for sharing this story with everyone in the social media world, you don’t hear about this kind of stuff very much and for good reason, companies that make this mistake don’t want to have it known by the world because it is embarrassing that they would have made such a mistake in the first place. Great post and again thank you.

  7. Joan says:

    You ought to be expecting to disburse more money for your customized application packaged solution it’s also important that you use a professional developer who works to finest standards practice and who will be pleased to make available the source code to your application. There are various disadvantages and possible pitfalls to this approach. For one thing, the software can be extremely difficult and could typically contain large sections may not be utilized. Kind of what happened in this case, no?

  8. Mary says:

    Every business has unique software requirements to function effectively. Whether it’s for scheduling, accounting, or customer relationship management, software keeps operations running smoothly. While there are numerous products, you must ultimately choose between in-house developed software or commercial (out-of-the-box) packages. A company’s team of in-house developers may lack the knowledge and expertise to create sophisticated software capable of handling all the tasks you require. If you only need basic software, this probably won’t be an issue.

  9. Jeff says:

    I was just reading part one of this and they are both equally embarrassing and equally educational for other businesses. Keep up the good work you have opened a whole new world of possibilities in the software world for companies to look into. Thank you for taking the time to do this and sharing your failures with us all.

  10. Florene says:

    It’s said that timing is everything. Well it would seem that my timing is off because I currently have two clients in the throws of new software implementations, and neither one has been without challenges. For one thing, the challenges at each have been as different as their respective organizations. The main ingredient and common thread among these two implementations has been more along the line of user challenges than the technical issues of the software design or network implementation. You know how users are.

  11. Curtis says:

    Custom software program development is more expensive than pre-packed software since it requires special development process and is made for a specific cause. The customized software program is more prone to face installation problems than the usual prepackaged software program since it needs changes for correct integration and functioning within the existing IT system. Custom Software program development features its own advantages. The custom software program provider serves the IT unique needs from the clients and enables them it to provide highly personalized business choices.

  12. Roy says:

    If you are a manager in charge of upgrading or automating a complex system you should think about the problem spots in your business processes. Are staff members manually rekeying data into several systems? Using multiple spreadsheets and programs just to keep track of everyday tasks or reports? Do they have to log project management tasks into different software systems in order to actively collaborate with coworkers? These gaps in the workflow take time, reducing efficiency and productivity.

  13. Bobby says:

    I believe this sort of thing happens more often than you might think. Every time a business needs to upgrade their database or web server or backend system or even when they just need to buy a new suite of office software tools, they are likely to overspend or misspend the funds that are allocated to making this type of purchase, especially if they appoint a person who has little experience using software. The person in charge of this purchase should be a person who uses the existing system.

  14. Bobby says:

    Automating data center processes may sound like a cure-all for the recession-fueled manpower gap in today’s IT departments, but that isn’t always the case, according to IT experts. Sometimes companies find that, perhaps due to recession-era budgetary constraints, they can’t afford the initial investment required to make automation work. Other times, experts say, companies embark on an automation plan, make a mistake or plan poorly, and end up getting sucked into a money pit.

  15. Roberto says:

    One way businesses can go wrong is by trying to save money by having a tech download pirated software. I’ve worked at companies where they’ve asked me, a graphic designer, to do that. There is not a single type of website where these applications are found, but they are more common from sites offering pirated goods and adult content, as well as blogs and forums. They can even sneak into advertisements on legitimate sites, usually through banner ads at the top of Web pages. I won’t sugar coat it either, they are a real pain in the processor.

  16. Gerald says:

    I don’t know if the boss kept his cool her or not but I would have been going off on this person given the opportunity to do so. I am a busy business owner and when something like this happens I have very little tolerance for it so this story went a lot better than my story would have great job, keep it up I will check back for more.

  17. Therese says:

    The blame doesn’t fall on IT administrators. Most administrators would be delighted to automate boring, repetitive, manual tasks. They’re not hamsters, happy to run around on their wheels all day doing the same thing. At least, they shouldn’t be. If your organization does have administrators who delight in boring, repetitive, manual work that could be done better and faster by one of the many computers you’ve paid for … well, hopefully you’re not paying more for those people than you would for equivalent computers.

  18. Michelle says:

    The most common reasons software automation projects fail and disappoint buyers and get people fired include: the first feature from commercial tools looks promising in marketing demos, but in most cases, commercial / off the shelf software doesn’t work for more complex applications than the demo. Quite often, it is better to custom write your software or use open source software and a very good code guru who knows that kind of scripting so that it can be customized to your needs.

  19. Andrew says:

    Testers are often faced with anxiety during manual testing of applications when they have to maintain release schedules for new software and applications. Undue stress on the testers and manual errors during testing can be avoided by automating the GUI testing process. GUI automation offers two main challenges. In order to be reliable, you require a highly sophisticated GUI automation technology. Secondly, it needs to be cost effective. In spite of the high costs of other GUI automation software, access to these controls is tedious or sometimes impossible.

  20. Ruth says:

    I am not sure I could do what the boss did here, he seems calm cool and collected when dealing with a mistake that could have cost him his business. I am the type to freak out in an instance such as this so I would have not been the best candidate to have something like this happen to me. Great post I look forward to your next one.

  21. Charles says:

    I’ve evaluated, purchased, implemented, and used over ten different email marketing and marketing automation platforms (there may be more but I’ve lost count). Right now the marketing automation industry couldn’t be hotter. I’m certainly not going to complain about the industry’s growth, but I wonder, are companies adopting automation the right way? Perhaps the belief that marketing automation just encourages bad behavior more than it creates lovable marketing, or that it’s simply a more efficient spamming engine, is a telling sign.

  22. Jose says:

    I don’t like change in the first place so having something like this happen because you tried to change something really makes me not want to change anything even more. I have not heard of something this damaging happening before but now that I have it is more frightening then it was to begin with. I hope that you will post some good news about software updates soon.

  23. Sandra says:

    I do believe that successful software test automation is possible if fundamental issues are addressed and managed. Success depends on multiple factors that require the coordination of efforts between various groups in an organization. Automated software testing is truly a different way of testing and requires adjustments to current test methods and organizational structures. However, the payback from test automation can far outweigh the costs. It’s a good lesson to learn about a scenario like this.

  24. Francis says:

    The first part of this fiasco was bad enough but for you to post the second part of this and what happened to this larger company is amazing. I can see this kind of thing happening to smaller companies but not the ones like this who are supposed to have IT guys in place for this reason alone. Great post thank you.

  25. Francis says:

    This is a mantra of any consultant worth his or her salt: Before you select a system, define your requirements. This is true with membership management software. Many non-profits make an earnest attempt to do this… and end up with a lot of wasted time and effort. Why? Because most such lists fall prey to three common mistakes like the one(s) mentioned in this cautionary tale. Good thing there was an IT consultant like Steve available to them.

  26. Carl says:

    Distribution systems have traditionally not involved much automation. Distribution equipment, once installed on feeders, was expected to function autonomously with only occasional manual setting changes. Capacitor bank switches might switch on or off based on local signals, such as time of day or current. After a local fault condition, reclosers would attempt reclosing a set number of times before locking out. Lateral fuses would blow if the current became too high. I believe that’s how Hoover Damm once functioned.

  27. Mary says:

    I am so sorry that this happened to this company, we are so busy these days trying to make a business a success that we forget to look for those that are looking to deter us from doing that. We don’t always have time to look over everyone’s shoulder to make sure they are doing what they are supposed to do but that seems to be what it takes these days.

  28. Roy says:

    Most people think of requirements definition as a one-time activity within a software project. In fact, there are at least two key points when requirements should be defined. Failure to recognize these points can lead to trouble. Perhaps the most often missed point is feasibility analysis. Whether it’s explicit or not, and regardless of the methodology used, every project has a feasibility analysis phase, which should include important requirements definition. When done poorly, as so often happens, the project is almost certainly destined to fail.

  29. Karin says:

    Software development is probably one of the biggest expenses your company faces. To make things worse, development money is often wasted on things that don’t provide any benefit to your product or company. You can minimize even the worst mistakes by being smart and proactive. I don’t think there is such a thing as a magic elixir to make software development inexpensive – hiring trained professionals isn’t cheap in any industry. And you can’t always trust a software vendor because vendors are out to make a sale.

  30. Louis says:

    The more I hear about bigger companies having these kinds of problems the more it helps me realize that the mistakes made while building our company are the things that are teaching us what not to do. This happened to us but we are just starting out so it was easy to fix if this had happened at a later date like here it would have been catastrophic.

  31. John says:

    I can not tell you how scary it is to have this fear of something like this happening to your place if employment and you are the guy that was in charge to make sure something like this didn’t happen. I feel for the people behind the scenes here because they are tearing themselves up over this I am sure. Thank you for sharing this difficult time with us.

  32. Karen says:

    The market for HR management system (HRMS) software is another niche which is undeniably crowded. From industry giants to new start-ups to vertical market solutions to niche specialists, given the breadth of offerings within this technology space, the choice alone can be overwhelming. Add to that the confusion that countless organizations face about how to select an HRMS software product, and the result is often an overly-complicated and mistake-ridden process. This is another mine-field buyers need to travel through.

  33. Kendrick says:

    Like the universe, the enterprise software marketplace is expanding rapidly. More and more vendors are entering the market, often with a growing range of solutions to create a confusing array of purchase options for corporate buyers. And it’s not about to get any easier for those tasked with purchasing enterprise software systems, with reports that spending on ERP you can expect that it will continue to attract a steady stream of new vendors looking to capitalize on what they see as easy money.

  34. Debra says:

    I don’t know about the setup of the system described in this story, but I do know that it is quite common for open source systems to have Cloud hosting options and be implemented with that environment in mind. Cloud/SaaS describes software that is designed for multiple simultaneous groups of end users (multi-tenanted’ to use the terminology) and typically delivered to users via Cloud hosting providers (e.g. Amazon). It has no relationship upon the license used by the vendor.

  35. Michelle says:

    Wow I read part one of this and thought that was bad enough after reading this part I am sure that this business owner now has a person in place within the company that can do this sort of work. I would’nt trust this type of work to an outside company ever again if I were him and I am having a hard time thinking about doing this within our company now.

  36. Debra says:

    Often times, clients know the solution to their problems. They just need someone to boldly go where they are uncomfortable treading. When you start working as a consultant, you won’t be working 100% on the work you love to do. Plan on 1/3 new business development, 1/3 administrative work, and 1/3 doing the real work. The more help you can get with the first two, the more time you will have for the last third.

  37. Todd says:

    The last 15 years has seen a lot many mega-hit successes in the field of eCommerce ( Amazon, eBay, Fancy, Etsy etc. ). The world has totally changed to a mobile shopping environment with millions of folks purchasing their everyday needs over the internet. In particular the concept of Multi vendor shopping cart has become a real interesting phenomenon and it has enabled millions of sellers across the world to port their goods online and start selling instantly and effortlessly.

  38. Charles says:

    I was reading some comments on part one of this terrible situation and realized that not very many people stop to think about both sides of this story here. What was the business owner asking of this vendor in the first place did he want the best for a less then best price? You can’t always look at the vendor and point the accusing finger only at them.

  39. Tonia says:

    If you have been put in charge of selecting a software package to manage your organization’s Web site, chances are your budget is tight, the deadline is looming and the options are dizzying. You know that the sales representatives for any number of commercial vendors would be willing to get you set up quickly. You have also heard that open source applications can provide a solution cheaply–or for free. Either way, 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.

  40. Marcus says:

    I have read about this a lot and the more I do the angrier I get about the way the people were treated here. I understand the back maintenance fees and others fees that come up as you gt into something like this because it is like working on a car the deeper you go the more problems you find but a set price by the customer is a set price.

  41. Debra says:

    If there’s one area of sales and marketing technology that’s en vogue for 2014, it’s hands-down the marketing automation software industry. While those in the B2B software marketing space might think marketing automation is old news, that’s because we’re actually the early adopters of this massive market that’s just beginning its growth trajectory. The marketing automation stats we’ve uncovered show that there’s plenty of room for expansion, and that the industry is prime for even more growth and attention in the coming year, as new industries and B2C companies jump on board.

  42. Charles says:

    Total efficiency often is a state that is difficult to attain; but once a company and its processes are streamlined within a loop of continuous improvement, it has proven significant to both the company and its customers. This problem that this company had sounds complex, but it’s a good thing they hired a good consultant to rectify their issues with their software and their overall process. This story was quite interesting to me.

  43. Sandra says:

    It was certainly a close call for this company, how did they figure out in the first place that something was wrong with what the other company was doing? I have read about this many times and I don’t know that I would be able to recognize what was going on like they did here. Thank you for sharing this terrible business failure with us.

  44. John says:

    The fact that you were willing to share your failures with the rest of the world here in this blog shows that you care about the fellow man trying to make a business run and you don’t want to see them get taken advantage of as well as others. Thank you for doing this and letting us learn from your mistakes instead of making them ourselves.

  45. Joan says:

    I am a lawyer and I have to say if a client told me this happened to them I would have to work real hard to find out if I had a case for suing that company that did this. There is no reason to take advantage of a company that way just to make a few bucks, you can’t tell me that being in this business you aren’t already making plenty.

  46. Bobby says:

    I know from my limited experience that the selection of business software can be a difficult task. You need to efficiently gather the key criteria important to your organization, determine the best software vendor to fit that criteria, and then rally everyone together during the implementation to have a successful project. But, with a very confusing software vendor market (vendor mergers, new products, new technologies, and vendor marketing hype) finding that best solution can become quite a challenge.

  47. Tonya says:

    I am not sure how much it cost this company to make the mistakes the made and to rectify them, not to mention the cost to consult the IT expert. I only know about app development and I can say that features that bump an app into the $100,000 range include a branded and highly tuned user experience, and integration that leverages your existing enterprise capabilities. For real-time integration, mobile device management (MDM) and mobile application management (MAM) infrastructure, you enter the $150,000+ category.

  48. Sandra says:

    What I can tell you is that marketing automation isn’t good for your business, or it’s hard to manage and can get you into troubleand while there will always be freak, one-off examples that give TMZ a run for their money, marketing automation is inherently great for your business. There are just some things you cannot automate. Just because we live in the computer age doesn’t mean we have to put every facet of business and life on autopilot.

  49. Patricia says:

    I can’t believe that someone in the business of helping people would do this to a company, how do you get your reputation built up as a quality company if you are trying to rip people off this way. I appreciate the fact that you have left this out there because this has helped me as I am sure it has helped numerous other people as well.

  50. John says:

    I am so glad that you have posted what happened to this company, I am hoping that this will keep this from happening to other companies but I also am hoping that this will prevent that company from going on to do it again to another company down the road. Very disturbing and interesting blog post thank you for doing this.

Leave a Reply

CommentLuv badge
Login with Facebook:

Relevant, interesting comments are rewarded with DoFollow and KeywordLuv. Enter YourName@YourKeywords in the Name field to take advantage.