Every time a large organization makes the decision to award a big it contract to a traditional vendor (and, generally speaking, SAP and Oracle are the two traditional vendors of choice), there comes howls of derision in the business newspapers from pretty much everyone in the IT industry. The open source fan boys (and girls) bemoan the fact that the contract was awarded to a proprietary vendor, when a bunch of open source tools could have done the job just fine. Those who have no issue with proprietary software, but do hold the ideas of agility and efficiency dear, wring their hands about monolithic software – how it is a direct blocker for organizational agility.

Of course, those who go in to bat for the traditional vendor that is being berated will say that these accusations of price-gouging, and the claims that IT project failures from big-box vendors are a common thing, are false ones. They will point to the huge proportion of the world’s largest organizations that run on these sorts of software stacks.

And so it is that we have yet another example of a project of this sort going astray. In this case, Kiwibank, the only large-scale bank still owned domestically in New Zealand, is advising its majority owner, NZ Post, that they might need an extra two years and $40 million from what was initially expected to cover cost and time overruns.

Kiwibank made the decision a few years ago to replace its core banking system. The project, entitled CoreMod, would see SAP power the day to day banking functionality. Kiwibank had originally forecast back in 2014 that it would spend around $100 million on CoreMod over “three to four years” – thus implying the estimated intention had been to wrap up the project by this year or next. Documents now suggest that the project might extend out till 2020 (and many would suggest that even that is optimistic).

Kiwibank’s head honcho, Paul Brock, seemingly stated the obvious, saying:

This is a significant and complex change programme which is taking longer than anticipated and will involve a higher level of investment and operating risk over the next two to three years

A Kiwibank spokesperson, feeling a little defensive, seems to deny the fact that earlier naysayers are being proved right. Acknowledging that the bank faced criticism for its choice of SAP right from the start, he suggested that the criticism was unfair:

Right from the ‘word go’ we had people saying we had chosen the wrong system, and a lot of that was vested interest

Vested interest, or informed commentary, I wonder?

I’m reminded in all of this of a conversation I had last year with Dawie Olivier, CIO of Westpac bank. Oliver is a refreshing departure for a banking CIO in that he doesn’t hold with big, heavy, monolithic operating systems. He aims for organizational agility and doesn’t believe monolithic systems allow for any degree of agility. As I wrote in my post:

As he sees it, banks have two options: They can replace their core systems internally, thereby creating new legacy systems that only the bank understands. Or they can outsource this work to a vendor and create a future that largely rests in those vendors hands. Far better, as he sees it, is to build a capability within the organization that is able to contemplate good customer outcomes and to create modular, componentized technology solutions. Olivier’s mantra is to create nothing that is so monolithic that parts cannot be replaced in isolation.

MyPOV

There are two separate, but intertwined issues here. Firstly, is this sort of big IT project blowout a regular occurrence and secondly, notwithstanding that, should organizations looking to be innovative even think about these big-box solutions. Statistically, while this SAP story might be an outlier, there is an overwhelming body of evidence that suggests that these IT projects routinely blow out time and economic budgets.

On the second point, it strikes me that monolithic solutions are the antithesis of agile and, if an organization truly wants to be able to act nimbly, it needs to look at the way Facebook, Google, and Netflix build their own solutions.

Ben Kepes

Ben Kepes is a technology evangelist, an investor, a commentator and a business adviser. Ben covers the convergence of technology, mobile, ubiquity and agility, all enabled by the Cloud. His areas of interest extend to enterprise software, software integration, financial/accounting software, platforms and infrastructure as well as articulating technology simply for everyday users.

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