I’m blogging the conference Agile Approaches for Delivering Business Value
Can IT Projects be Insured?
Graham Oakes, Graham Oakes Ltd
Summary
In the movie industry, the people financing new productions can buy “Completion Bonds” – effectively insurance policies that repay their investment if the film isn’t completed on time and in line with the original proposal. Such bonds cost perhaps 2-6% of the total production budget. Could we do the same for IT projects?
Notes
Graham Oakes – independent consultant, help people to set up projects in early stages, and help organisations/sponsors to keep in touch with the project.
We like to think about a project as a contained world – but what about the “space” around it – the things outside the project which can impact but which we don’t pay enough attention to?
Zoom out even further – most organisations have lots of shapes and sizes of projects – lots of hidden interactions. “Gravitational force” of large projects affecting other… How can we control the “black space”?
Zoom out even further – universe of projects – but even more space…
Chaos. Standish Chaos Reports – most projects unhappy. But how come most project manager CVs look like most projects are good!! Sampling the same universe!!
Perhaps it’s about how you define success…
Creates lots of Confusion and Blame – procurement processes which are self-defeating. Contractual structures which only hide or defer risk, don’t transfer it in the way that is intended.
Hence downward spiral – expectations of failure, lead to procurement and governance processes which have unintended consequence of making failure more likely, which increase fear…. and so on.
We’re all in this, and it’s hard to break out. For people with “skin in the game” it’s hard to risk change…
Look at film industry – completion bonds. Insurance policy – 3–way between producer, money and insurer – typical premium 2%-6% of production budget. If film not completed on time and budget, insurance repays the financier.
Part of the contract is insurer has right to vet people on the film, check script, come on location etc. If they think project is off course, they have right to intervene. In their interest to not intervene – happens about 20% of projects in UK, fewer cases where they need to takeover.
So how would this work for software?
If company could buy cover, get independent advice, would help more SMEs take advantage of opportunities to get value from IT projects.
So what would be needed to make it happen?
some group work happened…
some of the ideas were:
- agreed measure of progress – e.g. automated acceptance test figures
- minimum engineering practices
- risk management
- transparency
- a market in insurers… which implies that someone can take a view on how to judge risk…
- process, methods, maturity…
- where are you in the process?
- evidence of capability
- completion and intervention criteria
- co-location and collaboration
Graham’s input:
- evidence of alignment between all the stakeholders
- clear definition of requirements
- shared plans and practices
- team and track record
- IPR – if project doesn’t deliver, insurer gets IPR in what has been done…
Visibility is critical…
What would this do to the customer-developer dynamic?
Lack of trust is preventing people starting projects, and killing projects which would otherwise be possible.
Not enough to just say “trust me”
Triad relationship might build boldness, expectations, accountability, management of the business priorities bottleneck…
All parties need skin in the game
Could this work?
I (JE) asked the question “why hasn’t this been tried already?” – according to Graham there was apparently one large project which looked at it a couple of years ago, but the insurers quoted a premium of 40% of the prOject value…
