Sten Vesterli's Blog

Making IT Live up to its Promise

Tag: Business value

AI is not Coming for Your Job

IT Leadership, Technology That Fits,

Unless you write corporate mission statements, AI is not coming for your job. Generative AI like ChatGPT works by continually adding the most likely next word. That ensures that an AI-written text is a bland average of all the texts it has read. It is unlikely to be thought-provoking or even useful.

I was reminded of how useless an AI-generate text is when LinkedIn invited me to participate in a “collaborative article.” The AI generates a text on a subject, and I am supposed to add a real-life story or lesson next to that. Unfortunately, the AI text is a collection of trivial platitudes. LinkedIn asked me to rate the article, and I immediately clicked “It’s not so great” (because there was no lower rating). Unfortunately, the feedback options did not include “Your AI text adds no value.”

The striking writers in Hollywood want guarantees from the studios that they won’t be replaced with AI. They need not worry. A script written by AI will be mind-numbingly boring. What AI might do for the film and TV industry is to take over boring housekeeping tasks like ensuring continuity – was the blood on his left or right jacket sleeve? But it won’t write the next hit show or movie.

The right way to use AI in its current state is to use it deductively – to analyze stuff. Programmers who inherit a huge pile of undocumented code benefit from having ChatGPT or its siblings explain the code. Using AI inductively to generate text might be fun, but it doesn’t create any value.

How Do We Make IT Projects More Successful?

IT Leadership, ,

At least nuclear waste storage is worse. In his book “How Big Things Get Done,” professor Bent Flyvbjerg ranks 25 categories of projects by their average cost overrun. IT projects are the fifth worst offender, better than nuclear but worse than buildings, rail, airports, tunnels, and many others. We all know many public IT failures (Denmark has its fair share), and the private sector has suffered many more, even if less publicized.

What can we do about it? One chapter in the book is dedicated to creating better estimates. The problem with our estimating today is that we treat every project as unique. We then estimate each bit, and our usual how-hard-can-it-be optimism leads to the underestimation so common in IT. Flyvbjerg argues that we should start by identifying the class of projects this new project belongs to. The average for this class of projects is then the starting point for our estimate, adjusted up or down.

For example, you estimate an ERP project by looking at other ERP projects. If the cost in your industry is $20 million on average, that is your initial value. Then adjust up or down depending on whether your project is smaller or larger – or more straightforward or more complex – than the members of the reference class.

Bring this book with you to the beach this summer so that you can help our industry move forward when you return from vacation. IT projects exceed their budgets by an average of 73%. We can do better.

Where is the Profit

IT Leadership, Technology That Fits, , ,

“But we’re a startup!”

“That’s not enough anymore. How will you become profitable?”

This is the essence of discussions between startups and their VC funders today and increasingly between big companies and their shareholders. Unfortunately, Ford’s CFO didn’t get the memo because he is still trying to pass off their $3 billion loss on electric vehicles with the “consider-us-a-startup” excuse.

Increased shareholders’ attention is also forcing all the big tech companies to kill off many of their loss-making projects that do not have any path to profitability, with an accompanying bloodbath of firings.

An audit showed that 47 of the 98 Danish municipalities were running AI projects. Two of these had provided value.

Do you have realistic business cases behind your projects? Or is the business case a collection of rosy assumptions retrofitted onto a project someone just wanted to do? It is better to find and kill vanity projects than to be called to the CEO’s office to explain why you are frittering away the company’s money. Contact me if you want an independent outside opinion on your project portfolio.

There are Many Reasons Not to Move to the Cloud

IT Leadership, Technology That Fits, , , , , , ,

You don’t save anything by moving to the cloud. Ask around – how many of the organizations you know who moved to the cloud have reduced operations headcount? Some things are simpler in the cloud, but many others are more complicated.

You enforce some good security practices because there is no way to NOT install the latest security patches. And you can quickly spin up an extra testing environment.

But unless you really have a highly variable load, or you are starting something new where you don’t have a clue how much power you’ll need, the cheapest option is to buy some hardware and put it in your server room.

The next time one of the vendors tells you how much you save by moving to the cloud, take a really good look at the calculation. I’ll be happy to help you. You will likely find out that there isn’t a business case for moving.

Yet Another Project With No Business Case

IT Leadership, Technology That Fits, ,

There is nothing so good that you cannot do it badly. Case in point: Recycling. I’ve just received five new recycling containers in my summer cottage. The point is for me to sort plastic, cardboard, metal, paper, dangerous items, organic waste, and the remainder in separate compartments. I’m all for recycling, but I was curious about the business case for providing new plastic containers for summer cottages with limited amounts of waste and driving around with more big trucks on little dirt roads to collect the stuff.

It turns out there isn’t one. The danish Engineer’s Association has a weekly newspaper, and they have been running stories on this. Dispassionate calculation shows that the cost in money and CO2 of collecting and sorting several of these waste fractions far exceeds the benefit of recycling. For plastic waste, it turns out that we have to drive it – in trucks – to neighboring Germany because we don’t have a facility to reuse it in Denmark.

Surely, the government that invented this process would have a good counterpoint? Nope. I’ve been looking through several government websites. There is a lot of greenery and nice words, but no business case for recycling as much as we currently attempt to do.

So here in Denmark, recycling is a project with a worthy goal, political backing, and no business case. Have you ever seen something like that happen in IT?

Why Projects Without Business Cases are Shot Down

IT Leadership, Technology That Fits, , , ,

I just had a customer attempt to start a project without a business case. Such projects are usually driven by the desire to use a specific technology and with a vague idea that this would somehow benefit the end user.

If the IT department is strong, some of these orphan projects get started. They might be successful. However, since the organization has no idea of the business benefit, it is blind luck if the benefits exceed the cost.

If the business prevention department (compliance/legal) is strongest, they are shot down. There is always a reason not to make any changes. A project without a business case can be mortally wounded by any objections about compliance, GDPR, security, etc.

That is why every project needs a business case. It prevents IT from wasting money on something that will not add value, and it prevents compliance & legal from killing projects with a positive business impact.

Do your projects have solid business cases? If not, get in touch, and I’ll help you.

A Value-Destroying Technical Innovation

IT Leadership, Technology That Fits, , , ,

The important part is not the technology itself. It is how it interacts with its surroundings.

The big Ethereum upgrade (aka “The Merge”) seems to have been successful from a technical standpoint. But it seems that the Ethereum community focused on the enormous technical challenge of merging the existing Ethereum blockchain with another without stopping either. The problem is that changing from proof-of-work to proof-of-stake turned Ether tokens from a currency into a security. When you “stake” your Ether, you earn interest. And suddenly, the Ethereum ecosystem is subject to U.S. Securities and Exchange Commission (SEC) rules. Consequently, Ether is down 26% this week.

You can implement highly advanced technology with enough skill, time, and money. But unless you have someone skeptical think through how your tech will interact with its environment, all of the tech wizardry might go unused. It might even be destroying value as the Ethereum Merge did.

Don’t Replace Production With IT

IT Leadership, ,

The public broadcaster here in Denmark has just announced they’ll be firing 47 journalists to hire more IT people. What the hell are they thinking?!

I’m all for well-staffed IT departments, but IT is supposed to be something that helps the business. When you start firing the people who actually create the product that is the reason your business exists, you are on the wrong path.

If you want more people in IT, present a business case that explains how these people will pay for themselves. That involves calculating a business benefit in dollars and comparing it to the cost of the new people. They should pay for themselves in 12 months. Things are changing much too rapidly to depend on the multi-year repayment schedules used in the past.

The Antidote to Value-Destroying Vanity Projects

IT Leadership, Technology That Fits, , ,

Choosing the solution that is 100 times more expensive sounds absurd. Nevertheless, that is what the U.S. Congress has decided, which is why NASA is struggling to get its SLS rocket off the ground. It has nothing to do with putting a man on the moon and everything to do with keeping the big NASA factory in Alabama running. They don’t have the technology to compete with newer space companies like SpaceX but are cobbling together old Space Shuttle parts. They’ve actually been going around to museums in the U.S., taking out old space shuttle engines for the quixotic project foisted upon them by Alabama Senator Richard Shelby.

Some organizations face a similar challenge: The CEO or someone else in senior leadership has an idea for some technology, and IT is ordered to deliver it. It doesn’t matter if such a vanity project is practical, feasible, or cost-efficient. You cannot fight this kind of project individually because they are highly connected with the ego of one individual.

The solution is to establish a standard evaluation process for technology projects. Every project needs a business owner responsible for calculating the business benefit. Every project also has a technical owner responsible for calculating the cost, including the ongoing running costs after completion. If the benefit comfortably exceeds the cost, the project is qualified to enter the competition with other claims on company investment.

You might not have such a process because a rational decision might also kill some of the IT department’s most beloved resumé-enhancing projects…

User Blaming

IT Leadership,

The IT industry has its own version of victim blaming. I call it user blaming. That is what happens when you build an IT system without proper regard for the users’ reality. When the purported benefits do not materialize, the vendor points to the convoluted and impractical instructions given and claims that if only the users would follow the instructions, the system would work as advertised.

I was reminded of user blaming this weekend. I had worn out the burrs on my coffee grinder, and as is sadly often the case, a replacement part was more expensive than a new machine. Being a professional, I always read the instructions. They told me to clean the machine after each use. Since I only grind what I need, that would mean several cleanings a day. And the cleaning involved six steps, washing everything in lukewarm water, emptying out the beans, disassembling the grinder, cleaning the burrs with the supplied cleaning brush, and much more.

That is an abdication of responsibility. Just like when an IT vendor provides unrealistic and impossible-to-follow CYA instructions. Take responsibility. Build a quality product that works in real life.