Business impact of online social networking

Last Thursday I had the pleasure of presenting a three-hour workshop at CPA Congress in Melbourne on the ‘Business Impact of Online Social Networking’.  Partly my presentation was regarding the business risk of online social networking, but also considering the positives and how online social networking can be used to make growing your enterprise.

@micktleyden was there, as was @alex_d13 from time to time.  I think it went fairly well – I have to say that three hours is a long time for any workshop.

Overall I was happy with it – as usual my opinion though doesn’t count so if you attended please feel free to email me or leave a comment either here on my blog or at the CPA Congress community.  Incidentally, I have to say that having the OSN to support the conference has been a different and good idea – it allows you to get expectations sorted out a little earlier and provides a framework for an ongoing discussion outside of the three-hour workshop.  Depending on your perspective that may or may not be a good thing.

Anyway, as usual you can download the ‘Business Impact of Online Social Networking’ workshop notes here.

Incidentally, the PR machine at CPA Australia has been working overtime – there’s been an interview with a journalist at Melbourne MX and apparently I am to appear on ABC radio in Melbourne with Richard Stubbs, about 2.30pm Melbourne time.

As it’s radio I probably won’t have to shave…

All good fun.  Hey, if I run out of things to say about online social networking perhaps I can talk about budgeting (did a thesis in it), database querying (did a thesis in it), technology dominance (doing a phd in it) or IT governance (lecture in it)

I am a dilettente.

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In-House Developed Software


A significant amount of in-house developed software is often created by the in-house IT area.  A key symptom is a proliferation of Microsoft Access databases. 

Although the positive results can be significant from developing in-house software, and this approach often removes the need to purchase very expensive software (and software in some cases that does not exist), several issues should be taken into account before developing in-house software.

Technical Issues

The use of Access databases may not always be technically appropriate. In particular, it becomes difficult to integrate Access databases and maintain software application versions across a network without affecting network speeds .

Stepping Outside the Budgeting Process

Often, the systems developed appear to be undertaken as requests from end users for software that cannot be funded from the budget. Software may be developed that address the required business functionality, meet the users’ needs, and save significant up-front investment costs. However, the application of resources (i.e. a staff member’s time) is not allocated according to a business need – the IT area spends its own resource (time) for another department to save resources (budget).

It is often difficult (but not impossible) for an internal application development team to consider the issues objectively and to act in accordance with the enterprise’s best interests. As part of the same enterprise, they can face internal pressures to develop information systems that would not be developed were the arrangement at arms’ length (as would be the case with a third-party software developer that must charge fees to be economically viable).

Uncertainty of Outcomes

When software is built in-house, the cost of doing so may initially appear to be less, as there is no profit component included and any overheads are considered to be ‘sunk’ costs.

However, the likelihood of achieving the benefits is less certain. Therefore, the benefits should be reduced by this risk factor when considering in-house systems for development (or alternatively, the costs of the project can be increased by the risk factor) in order to consider properly the business case of the application development. It is not appropriate to say “this database will save $10,000 on the cost of a new off-the-shelf system”. The potential benefit needs to be discounted by the risk factor that applies.

Additionally, the long-term support and maintenance of the developed information system is often not given proper consideration in the business case. Once the application is developed, there is a need to provide support and maintenance for that system in the long term and, without an extended user base (i.e. other businesses to share the costs with – as is the case with a packaged solution), the costs can be considerable.

Staff Retention

Linked with the issue of support and maintenance is the difficulty of attracting and retaining in-house application development staff. Application development staff generally prefer to develop new information systems rather than maintain existing systems. Retaining that corporate experience with the information system over the life of that information system with an in-house application development team can be difficult if the ability to challenge and extend the skills of the internal staff is limited.

In this case, a single person has created a significant number of database software applications. Although the software development environment chosen may be relatively mainstream (e.g. Java, Microsoft Access, Microsoft.Net), the risk exposure remains that future maintenance and development will fail due to staff turnover, or at least of the limits on that staff member’s available time.

Software Development Lifecycle

When a packaged application is purchased, it is expected that the software developer will carry out future research and development such that new technologies will over time be integrated into the product. With an in-house application, this is unlikely to occur – rather the system will tend to be redeveloped or have new technologies integrated only when the functionality loss is too much to bear, or at crisis points in the system’s lifecycle (e.g. when it suddenly stops working).

Risk-Adjusted Cost/Benefit Analysis

For all of the preceding reasons, there should be reservations that the benefits of in-house application development can be achieved.

Accordingly, it is suggested that any consideration of an in-house application development project take the approach of a Risk-Adjusted Cost/Benefit Analysis. Here, the business case for the development of a new in-house application solution for member management needs to incorporate a risk-adjustment factor in consideration of the costs and benefits, and provide a range of costs/benefits for consideration. That is, the uncertainty of actual costs and the uncertainty of actual benefits being realised is factored into any consideration of an in-house application development project.

Strategic Grid

Consideration of the following strategic grid in evaluating new information systems for external purchase or internal development may be of assistance:

Important questions for consideration include:

  • Identifying existing in-house applications;
  • Identifying existing applications that are appropriate (and developing technical documentation for these applications); &
  • Migrating from existing applications that are not appropriate to new solutions.

It is often valuable for a business to develop a policy for the development of in-house application development of software solutions that takes into account the strategic grid outlined, and the risk-adjusted cost/benefit analysis.

IT Governance Day: Is IT governance just for geeks?

Well if it’s Monday – and it isn’t (at least not in Australia) -  that means it is IT Governance day at the blog.  I could start with a fundamental overview of the world of IT Governance and set out an agenda of blog entries for the next few weeks – but I won’t.  That would probably be too ambitious – so I’ll start with a fundamental flaw in, apparently, just about everyone’s thinking.

Tying this post back to the subject line, not only is IT Governance not just for geeks, it isn’t for geeks.  IT Governance is ensuring that the entirety of the IT system works towards achieving business aims and strategy.  It relates to ensuring that the portfolio of IT people, processes, and technologies is in balance.  That role absolutely has nothing to do with IT speak.  And yet I have been approached by journalists and clients alike in the past with the absolute underlying assumption that IT is very technical and that it cannot be managed without an understanding of the technicalities below that threshold. That is absolutely not true and in fact the opposite is true – it is probably less-than-helpful at a Board and committee level  to have that technical understanding of IT.  You do not need to be an IT geek to be on the Board and governing IT operations.  All members of the Board are equally responsible for IT Governance, not just a board member with technical expertise. 

No-one expects a board member to understand how the engines in the fleet of delivery vehicles work – and, news flash, the modern vehicle is fairly complex!  Yet information technology instantly draws shudders of revulsion from some quarters and dark murmuring of witchcraft, magic smoke, and database normalisation (all of which are the blackest of black magic and therefore clearly evil and not to be understood by anyone).  The role of the board member in IT Governance is, in my view at least, to focus on the portfolio of activities, require monitoring and feedback regarding the performance of IT, and to provide direction in the allocation of resources.  Certainly this requires advice from IT professionals – particularly around the area of resource allocation – but good IT Governance does not require that the mechanic be at the board table just because he or she knows how to rebuild an engine.  .

I think the situation that we have has come about because in the past IT professionals have been guilty of portraying IT as some form of dark magic rite, as that was felt to give power and direction over IT.  There is certainly a danger for IT professionals in comjmunicating only half the story behind IT to the board.  I have met with more than a few IT professionals in the past who complain that their IT budget has been slashed because they opened up and tried to explain to the board what was needed.  In most casese, the board listened, heard mutterings of dark magic, and then found a language they could understand – the language of the bottom line.  Which, with great glee, the board slashed – with little regard for what that meant to business outcomes.  The danger here is that IT is seen as a cost rather than a benefit – and the lesson for IT in dealing with the board and those responsible for budget allocations is to focus on the benefits of IT rather than just the costs.

There is a great publication that I was involved with two years ago through CPA Australia called IT Governance:  A Practical Guide for Company Directors, and it is a very accessible and usable publication with great ideas for implementing IT Governance.  It can be purchased here and is something that any company should consider purchasing if they are serious about seeing value from IT. 

I will use this guide as a framework for my future posts around IT Governance.  I will make the note here and now that, as chair of the ITM CoE for CPA Austrralia, there is a publication focussed on the business management of information technology in the pipeline, and a publication of the IT Governance Guide aimed squarely at SME’s.  These will be interesting future publications – probably coming out in the second half of 2007 and first half of 2008 respectively.

Some interesting facts about the value of information systems management

I have been revamping the content on the BDO website that relates to the area of information systems consulting, and one of the interesting things this has required was the development/research of “did you know” facts for the services we provide. They’re too good to lose so, in case they don’t make it through the content review process, I am blogging the research for posterity:

Information Management Strategy

  • One industry study estimated the total cost to the US economy of data quality problems at over US$600 billion per annum (Eckerson, 2002).

  • According to Continental Research’s findings, 60% of employees spend on average 15 minutes per day searching for information; 15% spend around 30 minutes; and 7% an hour or more.

IT strategy, planning and architecture

  • Organisations that always use an IT strategic plan to guide IT investment reported that they receive 45% more business value from information technology than those that never use an IT strategic plan (Department of Communications, Information Technology and the Arts 2005)

  • That an IT strategy process must identify how information technology will support and enable the business to achieve its goals, and link to the business strategy in doing so.

IT governance, reporting and policy

  • In the United States poor IT Governance is a breach of Directors’ Duties and will result in a qualified audit report on the business, as it is the responsibility of the directors to ensure that an effective business reporting system exists

  • Companies subject to the ASX Principles of Corporate Governance should consider IT Governance issues in structuring the board and in recognising and managing risk from the business

Technology evaluation and procurement services

  • You should never select software on the basis of what it does and how it does it – rather, consider what you need to do and whether the software vendor will support you for the life of the software.

  • Selecting software on the basis of a product demonstration is not the recommended first step in selecting software.

Program and project management

  • The Standish Group shows that only 16% of software projects are completed on time and on budget. 31% of projects are cancelled before completion, and 53% of projects cost 189% of their original estimate (Standish Group)

  • That being ICT-aware, open to organisational transformation, and persistent in realising ICT benefits are the three leading factors in realising value from a business’ ICT investment

ICT business case & feasibility studies

  • Many businesses select new software based on “golf course” decision-making, and rely on fads, trends, and hearsay in selecting software, and then modify the business case to fit (CPA Australia IT Governance Guide 2005).

  • The business case should include the cost of decommissioning the technology and disposing of it at the end of its useful life.

Web services

  • For an inhouse software development project, maintenance costs of the software are about 55% of the cost to build the software in the first place

  • Sixty five percent of Australian organisations have admitted to losing revenue due to poor data quality, as a result of not having the time or resources to address this problem, according to the results of an international research study by QAS (2005)

CPA Congress in Melbourne – Catchy Titles R Us

Today I am presenting to CPA Congress in Melbourne, at the Melbourne Convention Centre.  The topic I am presenting to is "What is Open Source Software and When can Businesses Use It?".  I must spend more time on the titles, as I see that all the other sessions have catchy little titles like ‘Communication that Captivates’ or ‘Introduction to budgeting for non-accountants’ (OK well maybe that one’s not all that catchy).  I really should start with some eye-grabbing titles.  In this case, it probably should have been something like ‘Never Buy Software Again!’ or ‘What you don’t buy could hurt you’. 

Hmmm.  Maybe I’ll think about that.

Unfortunately I have always liked my seminar titles to say what they’re about – kinda boring, but functional.  I bet I won’t have anyone turn up to this seminar thinking they’re going to get free software from me.  I might have to establish a Catchy Names for Seminars department. 

Anyway I flew down this morning at 8.50am on the plane – but had to leave home much earlier than I had intended to since Brisbane is suffering greatly from traffic chaos.  Amazing what can happen when someone realises that about 100m or so of roadway could collapse and kill everybody in its path.  I’m sure they’ve done the right thing but honestly who can tell?  Got into Melbourne about 11.30 and immediately the fun and games started.  It seems my email with the presentation and workbook didn’t actually come through with the email I sent on Sunday.  Maybe I mucked up – it occasionally happens, and even more rarely do I admit to doing so.  Anyway, after much toing and froing I found the Press Room in the Holiday Inn (Trap for Young Players:  as an outsider looking in, apparently I am supposed to ‘know’ that the hotel with Crowne Plaza written all over it is actually the Holiday Inn.  What gives?).

That has lead us to a place where they can have the presentation in the room and can photocopy (!) the 12 workbooks I need to do my workshop.  Again, insert a big fat hmmm here. 

Why only twelve people I hear you ask?  Well, darned if I know either – I hope they all turn up or that whole group discussioon thing I’ve got planned is going to go pretty lamely.  Perhaps everyone knows everything about there open source software (I can but hope) or perhaps somewhat more realistically they have a nagging faint suspicion at the very core of their souls that three hours spent discussing open source software could send them into cardiac arrest or a reall really deep coma. This I think is a real problem for a profession when the topics I am up against are things like ‘3 secrets of how workplace fun boosts results’, ‘GST and Property Update’, and ‘Excel Beyond the Basics’ (that one needs two rooms).

Gak, perhaps this is my problem.  Accounting still thinks of IT as Excel (a tool to help you report on the financial aspects of the business) whereas I am thinking of IT as a tool that helps the business deliver its services or products.  Perhaps I should have mentioned that they wouldn’t have to pay for Excel to do 80% of the work they want to do…

Ah, accountants.  A conservative lot.