In Part 2 of this article, we examined the requirements for introducing Actuarial concepts into IT project management. We conclude by describing how you might go about implementing these concepts.
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The Solution
It is clear that better measurement of costs associated with large IT initiatives is needed to manage these projects more effectively. It is also clear that there is little incentive to capture the data necessary to perform the statistical analysis required for effective risk management on an operational level. This contradiction contributes to information technology’s poor reputation on delivering solutions that satisfy business requirements.
Can this situation be remedied? I believe so, but it will take some new technology and a different perspective from both the people doing the work and the people managing it. The new technology is being developed right now – a great example is the ability of the Tivo corporation to “predict” the outcome of the weekly voting on the “American Idol” television show by recording the usage patterns of their subscribers. Capture techniques such as this will be necessary to collect the data necessary for detailed risk assessments and usage patterns of spreadmarts within an enterprise.
Management personnel will need to shift risk management topics to the forefront of their philosophies and remove risk management from an anecdotal focus to one of metric analysis. Part of this shift will include contacting and retaining actuarial skills for statistical assessment or risk parameters, reducing the uncertainty in the current level of analysis. This will make decisions more effective and save the organization resources and money.
There are examples of corporate executives requiring metrics-based analysis in support of decisions, as described in Jessica Tsai’s article on predictive analytics. Unfortunately, these examples are rare enough to be called out in vendor presentations, which is a poor commentary on the presence of these measures. The presence of an actuarial staff would improve this situation greatly.
Operational personnel will need to understand their role in reducing overall risk to the organization. The easiest way to do this is to demonstrate the cost of activities such as spreadmarts and place appropriate sanctions in place for continued spreadmart use. Often, the easiest way to correct behavior is to associate the activity with a tangible financial cost. Once the habit is broken, it is unlikely to reassert itself in the organization, finally realizing the cost savings desired.
Organizational change is rarely quick or easy, but the movement toward a better way of analyzing costs will bear many benefits over the long term for enterprises looking for more effective information technology management techniques.
