underestimated costs = underestimated risk 

It’s fairly well-known that we weigh many different factors when making a buying decision – some logical, some emotional.  When purchasing cloud computing, it is easy to fixate on the most obvious factor - the monthly fee – while developing a blind spot for many other key considerations.  For many IT buyers who are used to big dollar projects, the relatively low up-front costs of cloud computing can be as distracting as a sparkling toy to a child. (Ooo…shiny!)

So how do you ensure you don’t overlook key considerations that are lurking in your blind spot when you’re buying a new IT system?  

The other day I was talking with the enthusiastic corporate sponsor of a bank’s new cloud-based software system and he told me with the number of impacted staff, ‘the whole thing will only cost $100 per employee.’ When I asked him to describe the process by which this software was chosen, he giddily told me how easy a decision it was, given that the most they’d be out if it failed was $100,000 over the next two years. He was excited by how little risk to which his buying decision had exposed the bank, given how ‘cheap and easy’ it would be to implement.. (I repeat: Oooo….shiny!)

Does this sound familiar?

As our conversation continued, it became obvious that this bank executive was fixated on the $100 per employee cost. It’s how he got buy-in and it’s what he’ll be measured on at the end of the year. However, despite numerous attempts from a variety of people, no amount of persuasion could convince him that there were any other cost considerations besides the check he’d sent to the vendor.  His tight focus on the $100 per employee number meant he wasn’t able to consider anything that might change how he calculated the true cost of the cloud investment. It was clear his emotions were affecting his thinking and by significantly underestimating the true cost of the bank’s IT investment, this corporate sponsor also significantly underestimated the amount of risk the bank faced if the project failed.

Consider This

Industry estimates suggest the true cost of a cloud implementation is anywhere from 3 to 10 times the price of the system. To put that in hard numbers, even if the vendor is selling you the new system for only $100,000 per year, you’re staring down the barrel of a $300,000 to $1,000,000 in true costs.

And industry estimates suggest IT projects fail at a rate of 60 – 70%. (Oh. Not so shiny.)

Miscalculating an IT investment’s cost and opening up the organization to more risk means it’s even more important that you take action to make sure the system generates real value and capture a high ROI as soon as possible after go-live. After you adjust your estimated expenditures to reflect something closer to reality, you need a way to create value, produce positive ROI and mitigate the risk. How? It’s deceptively simple: get people to use the system. How do you do that? User adoption plans.

What It Means For You

When you consider all the costs of your cloud system, you probably have a lot more at risk than you originally expected.  You therefore need to make sure you get more value from the system to justify the additional risk.  You need to be able to demonstrate that your cloud system is being used and is creating real, measureable value. But how do you get people to use the system?

It’s really not about the technology, it’s about behavior. Changing the technology is the easy part (relatively). Changing peoples’ behavior takes a strategy and a way to execute that strategy, including having the organizational infrastructure, necessary skills, knowledge, experience, and, of course, executive support.

Things to Think About

1. What non-subscription costs do you need to include when determining your true cost of your cloud investment?  Where else are you spending your time, resource, money and effort to purchase, implement and support your cloud system? 

As the saying goes, “Time is money”, so calculate it as such. In addition to the price of the software if nothing else, figure in the costs associated with the full disruption of this project, from initial research to cost of training for future employees, by including the following in your calculations:

• how many people are involved
• rate(s) of pay (or a blended average)
• for how many hours
• over how many months
• plus lost productivity

2. If your updated calculation has a higher cost basis, how does this affect your business case/ ROI forecast? What level of user adoption do you now need to make sure you get the benefits you need to justify the investment? 

Many IT business cases fall down because they assume 100% user adoption.  But what happens if you only get 40% effective adoption? 60%? 80%?  Does your cloud investment still look attractive?  Think about adjusting the business case for different levels of adoption, over various periods of time and see if the business case still makes sense.

3. Do you have a comprehensive strategy that ensures you reach your target level of user adoption?  How will you ensure the highest rate of adoption possible? Do you have the resources, time, knowledge, skills or infrastructure to drive and sustain effective user adoption and achieve your ROI goals?  If not, how will you get what you need?

Dr. Evil teaches us about defining Success

How do you define Success?

Apply What You Learned:  Define Success in terms of User Adoption & Benefits Realization

Best Practices & Key Questions

• Set SMART (Specific, Measurable, Achievable, Realistic, Time-Bound) User Adoption goals for each stakeholder group.  Measure them over time to make sure you are hitting or missing them.  
  • Did Dr. Evil set SMART goals when he asked for sharks with frickin laser beams? 
  • Do you set SMART User Adoption goals for your IT systems?

• Acknowledge when you encounter an "It's a start" moment with user adoption, but still hold people accountable for achieving results.  
  • Did Dr. Evil hold people accountable when they only delivered sea bass when the requirement was sharks with laser beams?  What would  you do?  
  • Do you hold people accountable for hitting User Adoption goals, or are you OK with sea bass?

Related Resources

IN THE NEWS

"I could end the deficit in five minutes.  You just pass a law that says that any time there's a deficit of more than three percent of GDP, all sitting members of Congress are ineligible for re-election.  Yeah, yeah, now you've got the incentives in the right place, right?  (Laughs)” – Source: www.CNBC.com  07 July 2011.

“The campaign against distracted driving has provided another illustration that American drivers are more likely to respond to safety initiatives when they carry the threat of punishment.

...Publicity efforts alone, such as the “Buckle Up for Safety” campaign, were high-profile failures, but the “Click It or Ticket” effort that followed is credited with increasing seat-belt use. The weeping victims of drunken driving who appeared in public presentations and in the media captured widespread attention, but experts say sobriety checkpoints provided stronger motivation for the use of designated drivers.”  - Source: www.WashingtonPost.com  11 July 2011.

OBSERVATION

CONSIDER THIS

• If you want to improve user adoption, you need to make sure you have specified user adoption targets and defined policies that align incentives and rewards (including consequences) with desires behavior.  The rewards and consequences must be strong enough – and meaningful to end users – to actually influence user behavior.

• You need a structured program to measure user adoption against defined targets and then enforce your incentive policies.  This may include setting monthly user adoption metrics and targets, and then providing regular reports to monitor performance.

• You need to formally assign responsibility for implementing your incentive and rewards program.  With “Click It or Ticket”, police officers are responsible for enforcing seatbelt policies.  In your organization, it may fall to team leaders, department managers or directors.  What matters is that everyone is clear on whose job it is to implement your user adoption policies.

• Don’t forget that incentive programs that are heavily focused on driving user commitment  to adopt systems are preferable to programs that only focus on compliance or WIIFM.  Of course, even commitment-centric approaches still require that you have a structured program for monitoring adoption and allocating rewards.

THINGS TO THINK ABOUT

• Do you currently take a “Buckle Up for Safety” or “Click It or Ticket” approach to user adoption?  Is it effective?

• Are your incentive systems truly aligned to drive desired user behavior?  Do end-users feel meaningful rewards and consequences if they do not use your system?  How are they enforced?

• How do you know if your incentive program is meaningful to end users?  What do you do to validate that the rewards/consequences actually matter to the individuals whose behavior you are trying to change?  Or do you just assume you have the right incentives?

ADDITIONAL RESOURCES

OBSERVATION

• Many times there are organizational barriers outside the users control that prevent them from adopting the system
• Design disconnects between the technology, process and users prevent users from adopting the system
• Conflicting priorities, misaligned reward systems, and the directives of immediate supervisors result in a situation of, “hoping for A, while rewarding B”
• The Change Management and IT implementation methodology were inappropriate for driving user adoption
• No action was taken after go-live to create and sustain full user adoption

CONSIDER THIS

THINGS TO THINK ABOUT

• What factors outside of the users’ control would prevent them from adopting the system?
• Have you adjusted reward & recognition criteria to reward people for adopting the system and penalize them for avoiding the system?
• What are the reasons (other than the technology itself) that people did not adopt earlier systems?  What did you do to address these issues?
• Did you take appropriate action before, during, and after go-live to address user behavior and drive user adoption?  How can you move beyond traditional “Change Management” efforts to drive desired user behavior over the long term?