Change of Direction

When McKinsey & Company went looking for links between information technology spending and labour productivity gains late last year it didn't find what it expected.

There was in fact no clear link between IT spending and productivity, and indeed some industry sectors were found to have increased their pace of IT investment but"experienced stagnant or even slower productivity growth". For the banks, the picture was even worse. Although retail banks had accelerated their IT spend during the late 1990s, McKinsey found that the productivity growth had slumped back to 4.1 per cent after 1995, compared to the far healthier 5.5 per cent growth for the previous seven years.

What the research uncovered was sectors that had improved their productivity gains did so because of structural changes that had been implemented (which may or may not have been abetted by IT). And while it found"IT can be quite valuable when deployed as part of a management plan to reprogram specific core activities of a business", there really was little fundamental difference between IT's ability to influence productivity and any other form of capital spending.

Savvy CIOs have long understood that technology alone offers no silver bullets, but they also understand that effecting change is the key to delivering productivity benefits to an organisation and that judiciously selected IT can underpin that change. The challenge for management more broadly is to recognise that implementing an IT system will of itself not necessarily deliver fundamental change and benefit; rather, it must be one element in a more sweeping change process.

It is not an easy task to change the way a business operates and to implement an information system that then supports that change. Witness the birthing pains of the National Australia Bank's (NAB's) SAP integrated systems implementation, or ISI program. In February, reports emerged that the program had blown out to billy-o. The bank issued a statement saying the media reports of a $400 million overrun were wrong without ever identifying what the blowout in fact was. It did, however, confirm that it was revisiting the project's cost and scope. Whatever spin the bank tries to put on it, the ISI has been a problem child. What rings truest is the quote published by the Australian Financial Review from an insider at the bank who noted that:"It's not really an IT thing, the problem is a management one. It's internal politics and setting expectations of outcomes and deliverables which were never realistic and could never be met, and then putting management in place who had no IT or program management experience."

The villain in the piece at first glance appears to be SAP. Its software is at the heart of ISI. The software house has endured years of similar flak with one or another company suffering a significant blow-out in the cost or time taken to implement an SAP-based system and venting its spleen in the media.

Chris Bennett, chief executive officer of SAP Australia and New Zealand, remains sanguine. He says that close on half of corporate Australia runs SAP."That means that half of the packaged software implementations are SAP," he says."If there is a problem with a project then half of them will be SAP just on the law of averages. With all large projects it's not the software [that causes problems] it's the implementation." Bennett says that for any implementation to stand a chance of success it has to have buy-in from the senior level of management. It has to have an experienced project team and a raft of change agents within the business who will use the new system and become its internal advocates dragging change in their wake.

"The unstated piece is the snipers," says Bennett. He paints the picture of a big project where you might be implementing software for 10,000 users. There would be the project team, the 10 executives who have bought in to the project, and the 50 change agents within the business. Then, he says,"there will be around 50 snipers who say: Â'I'm going to retire in three years, I don't need this', and they are very senior people". Managing those snipers to ensure that they don't assassinate the project is a key issue, warns Bennett.