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Tuesday, 26 February 2013

It is a time of forced austerity in the ICT-business Pt II: reaction from a reader.

Last Saturday, I wrote an  article on the difficult times in today’s ICT-industry.

These difficulties have been mainly caused by the fact that arguably the two most important categories of principals – the central and local governments and the financial industry – both try to save money on their ICT-investments. 

They do so by 1. just spending less money on ICT-projects, 2. using less bureaucratic and (seemingly) inefficient ways of software-development, like 'scrum' and 'agile' development,  3. outsourcing work to the low-wage countries and 4. hiring (temporary or fixed) personnel from the East-European and Far Eastern low-wage countries.

These cost-saving measures by the financial industry and the government bodies make that the ICT-industry must go through massive austerity, reorganization and change programs in order to keep head above water.

Last Sunday, I received a reaction from an anonymous reader. As I found the content of this reaction very interesting, I will print it integrally and write my comments at it, where applicable.

Interesting article!
I am looking at it from the perspective of public government.

There are strong forces in Dutch politics that want to merge local governments in order to take advantages through economies of scale.

There is strong opposition from local governments but they do realise that they need to take austerity measures. One of the easiest ways to do this is through going back to core business and outsourcing non-core business activities to separate organisations. This organisation could do the same work for a number of local governments. It means costs can be cut for all local governments that participate. You see this developement in fire services, police, emergency, healthcare, environmental law enforcement (RUD), etc and also in ICT. Centralisation for economies of scale.

ICT is not necessarily core business for local government. Decission making IS. Sure, local governments base their business on steady streams of information but if this can be obtained cheaper by outsourcing they will do it. It might save local governments a good deal of money.

Very interesting comment. Especially the central government sees probably many opportunities for saving money, when using such an approach of joint software development. By joining government bodies and/or separate cities and communities together, the economies of scale can be used to make development of commonly used software easier and cheaper. When one city/community or government body has €1.5 million to spend, then ten comparable cities and government bodies would have €15 mln combinedly. This would enormously increase the possibilities of software development.

Yet, there is a catch. During my 20 year ICT-career, I noticed many times that companies and organizations that seem almost exactly the same, often differ quite much in reality. Reasons are often intangible, but very important concepts, like:
  • the environment in which the organization or company operates;
  • corporate culture and management style;
  • organization setup and 'mental' maturity-rate of the organization;
  • the sheer size of the organization: 
    • small organizations can work very successfully in an informal and fairly unorganized fashion, while large organizations often require lots of red tape to be successful. 
When organizations (in any form) are joint for software and infrastructure development, these are often the factors that can make or break such projects.

Many people know the endless discussions that can be held on the smallest details in such heterogenous environments, existing of multiple, independent organizations: discussions that start often in a good technical atmosphere, but soon end in bitter struggles for territory and battles on who’s right and who’s wrong. Often the biggest and most powerful party wins, leaving the other parties with a deep antipathy against the software to-be-developed: Not Invented Here!

Therefore the chances for success and efficiency of such joint software development should not be overestimated. The best chances are there, when a strong software house already developed a fairly complete framework of what the software should be and should do. The individual organizations can fill in the details and in the end everybody might be fairly happy.

Although such joint software development is of course a risk for many ICT consultancy companies, I’m certain that the failures still outnumber the successes, especially within  government bodies or cities/communities, where cost-efficiency and time to market play a less important role than thoroughness and completeness.

Another development that is effecting the ICT-sector and local governments over the past 5 years or so, is the infrastructure of nationaly standardised 'basis registraties'. (look at programmes like I-NUP, GEMMA, etc).

This standardisation of information infrastructure makes it much easier to outsource ICT services because all local governments have the same standardised information needs...! It's a very far reaching development! a lot less customised ICT work will be needed. Think about it...

If this proces of merging and cooperation between local governments continues in the near to midterm future inevitably this will lead to a lower demand/need in the public sector for ICT services.

Again, you are absolutely right about these standardized 'common basic administrations and registrations' as a trigger to be reckoned with for standardized software development. 

This could indeed be a very worrisome development for many, especially smaller ICT consultancy companies, who would not have the access and the financial stamina to cooperate in such development projects of this size and magnitude. 

Still, reality bites… The many ICT-failures at the local and central governments prove that standardization is not so easy and straight-forward as it sometimes seems. The Electronic Patient File (in Dutch: EPD) and the numerous other failed projects at the Dutch ministries, cities and communities and the Dutch internal revenue service prove that it is not so easy to catch reality in a standardized system.

Still, I agree with you that these developments are ongoing and that they should be incorporated in future ICT business. Foresight is the essence of government and this is especially true in the ICT industry. 

Many ICT-companies have acted and many ICT-projects have been executed at such an unbelievable level of amateurism and (I’m sorry to say this) stupidity, that it doesn’t surprise much that so many ICT-projects fail.

The winning companies will be:
  • Those companies that have the best, brightest and most intelligent people. People that find a good solution in virtually any situation. And people that have a natural entrance at the real decision-makers of companies, while avoiding the middle-management.

    Middle-management often has little real decision-making and investment power, but can be very annoying, retarding and even counter-productive in the execution of projects.

    You could say: in the ICT business, the peanuts are handed out at the middle-management and the real meat only at the top;
  • Those companies that know an important trick, system or tool that everybody has heard of and nobody else knows and / or controls at the time. While such a situation is often quite short-lived – until the hype or fashion is over or until every company knows and controls the same trick – companies can earn good money with it.
  • Those companies that can execute projects in a controlled fashion, with a relatively high success rate at any place in a predictable, fixed amount of time. The power of repeatability, instead of improvising and making the same mistakes over and over again! 
If your ICT-company doesn’t fit in in any of these three categories yet, than it is time to create a masterplan or to make a switch to another industry. One thing is sure: the time of mediocrity in the ICT-business and of promising more than you can achieve, is definitely over!

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