1 The IT Outsourcing Risks Sources Of Risk 2 Software Development Problems
Range of Intervention Theory
Prevention Treatment and Maintenance
Planning Development and Use
Cost of Intervention
3 The Importance of Risk Management
Risk management is the art and science of identifying analyzing and responding to risk throughout the life of a project and in the best interests of meeting project objectives.
Risk management is often overlooked in projects but it can help improve project success by helping select good projects determining project scope and developing realistic estimates.
4 Benefits from Software Risk Management Practices Kulik Peter and Catherine Weber Software Risk Management Practices 2001 KLCI Research Group (August 2001). 5 Project Risk Management Processes
Risk management planning Deciding how to approach and plan the risk management activities for the project.
Risk identification Determining which risks are likely to affect a project and documenting the characteristics of each.
Qualitative risk analysis Prioritizing risks based on their probability and impact of occurrence.
6 Project Risk Management Processes (contd)
Quantitative risk analysis Numerically estimating the effects of risks on project objectives.
Risk response planning Taking steps to enhance opportunities and reduce threats to meeting project objectives.
Risk monitoring and control Monitoring identified and residual risks identifying new risks carrying out risk response plans and evaluating the effectiveness of risk strategies throughout the life of the project.
7 Risk Management Planning
The main output of risk management planning is a risk management plana plan that documents the procedures for managing risk throughout a project.
The project team should review project documents and understand the organizations and the sponsors approaches to risk.
The level of detail will vary with the needs of the project.
8 Table 11-2. Topics Addressed in a Risk Management Plan
Roles and responsibilities
Budget and schedule
Risk probability and impact
9 Contingency and Fallback Plans Contingency Reserves
Contingency plans are predefined actions that the project team will take if an identified risk event occurs.
Fallback plans are developed for risks that have a high impact on meeting project objectives and are put into effect if attempts to reduce the risk are not effective.
Contingency reserves or allowances are provisions held by the project sponsor or organization to reduce the risk of cost or schedule overruns to an acceptable level.
10 Common risk factors for IT Projects
Lack of top management commitment to the project
Failure to gain user commitment
Misunderstanding the requirement
Lack of adequate user involvement
Failure to manage end user expectation
Changing scope and objectives
Lack of required knowledge/skill in the project personnel
Insufficient / inappropriate staffing
Conflict between user departments
11 Information Technology Success Potential Scoring Sheet 12 Broad Categories of Risk
13 Risk Breakdown Structure
A risk breakdown structure is a hierarchy of potential risk categories for a project.
Similar to a work breakdown structure but used to identify and categorize risks.
Risk identification is the process of understanding what potential events might hurt or enhance a particular project.
Risk identification tools and techniques include
Brainstorming is a technique by which a group attempts to generate ideas or find a solution for a specific problem by amassing ideas spontaneously and without judgment.
An experienced facilitator should run the brainstorming session.
Be careful not to overuse or misuse brainstorming.
Interviewing is a fact-finding technique for collecting information in face-to-face phone e-mail or instant-messaging discussions.
Interviewing people with similar project experience is an important tool for identifying potential risks.
18 SWOT Analysis
SWOT analysis (strengths weaknesses opportunities and threats) can also be used during risk identification.
Helps identify the broad negative and positive risks that apply to a project.
19 Risk Register
The main output of the risk identification process is a list of identified risks and other information needed to begin creating a risk register.
A risk register is
A document that contains the results of various risk management processes and that is often displayed in a table or spreadsheet format.
A tool for documenting potential risk events and related information.
Risk events refer to specific uncertain events that may occur to the detriment or enhancement of the project.
20 Risk Register Contents
An identification number for each risk event.
A rank for each risk event.
The name of each risk event.
A description of each risk event.
The category under which each risk event falls.
The root cause of each risk.
21 Risk Register Contents (contd)
Triggers for each risk triggers are indicators or symptoms of actual risk events.
Potential responses to each risk.
The risk owner or person who will own or take responsibility for each risk.
The probability and impact of each risk occurring.
The status of each risk.
22 Table 11-5. Sample Risk Register/Risk Analysis
Project severity expectation (1-10) impact (1-10)
When should risk analysis be formed
Is not a time activity
Periodic update and reviewed
23 Calculating severity Project severity expectation (1-10) impact (1-10) 24 Major Risks Come From Management Practices..
Poor analysis of supplier strategy and capabilities
IT treated as undifferentiated commodity
Cash injection looked for rather than business advantage
Difficulties constructing/adapting deals for
Poor sourcing/contracting for new technologies
Lack of maturity/experience with long-term total outsourcing
Failure to retain requisite capabilities/skills for active
contract and relationship management
Power asymmetries developing in favour of vendor
Unrealistic expectations with multiple objectives
(Source Lacity Willcocks 2001)
25 Main Risks in Outsourcing Other Industrial relations with internal staff No Learning from vendor about IT Systems interconnectedness adversely affected Loss of control over strategic use of IT New IT expertise from vendor fails to materialise Loss of control over IT operations Lack of expertise in managing contracts Irreversibility of contract Credibility of vendor claims Hidden costs of contract Points 26 Risk Mitigations Plan
Learn from Experience
Follow a the maturity model.
Best Practice / Multi-sourcing approach
Know what to outsource
Use the frameworks from previous classes
27 Stages Performing / Strategic Focus (Not just focusing on cost) 5 4 3 2 1 Norming / Proactive Cost Focus (Beginning to form norms and actively focusing and proactively using outsourcing for cost saving including offshore. Outsourcing 20-40 of IT activities) Storming / Strategic decision point (Organization leaders share conflicting ideas about outsourcing and pursuing different strategy to provide IT services) Forming / experimenting stage (outsourcing between 10-20 of IT activities) Insourcing / Bystander (outsourcing between 1-5 of IT. Mostly purchasing of IT functions). Time 28 Risk Mitigations Plan
Outsourcing Type and Scope
In case of multi-sourcing
Ability of suppliers to work together
Short term deals better than long term deals
Vendor Selection Criteria and Process
Check Xerox and General Dynamics case studies
30 And Unrealistic Expectations The IT Cost/Service Trade-off Minimal Cost Premium Cost Premium Service Minimal Service Superstar Senior managements and users expectations of IT Rolls Royce Realm of feasible IT performance
Black Hole Chevrolet Senior managements and users perceptions of IT Realm of feasible IT performance
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