Mar 12 2009

Go Time & Material Model

Published by xiaoming under Buisness,Howto

What is time & material model and when it applies

A simple definition of “Time & Material” Model is that the purchaser exchange “material” with a service provider’s certain quantity of “daily rate”. The material could be a bunch of document which contains advanced management process, intellectual property, a piece of software or one side of well painted wall. The daily rate could vary from £20 to £8000 depends on how precious of the service.

 

This business model applies when scope, specification and implementation plans of a project are not easy to define at the outset, Time & Material Model becomes an attractive option. Under this model, you pay as per use of the hourly development efforts, making it the most flexible of the three models. [From http://www.continuum-systems.com/price-timeandmaterial.htm]. Time & Material business model is developed for long-term projects, where the total effort cannot be estimated in advance and the scope of work can vary during the implementation. [From: http://www.qarea.com/outsourcing-services/pda-time-and-material.php].

 

If compared with Fixed price model, which is ideal for projects with a detailed technical specification, Time&Material model is the best for scalable projects. This business model is highly efficient in case the project is hard to predict in terms of time and creative effort and in case the development process needs control and improvement upon each iteration. Thus, it allows for cancellation at virtually any stage of the development project[From: http://www.qarea.com/outsourcing-services/pda-time-and-material.php].

 

Corporation old procurement process

So Fixed price model is suitable for purchasing of a physical product or something that has fixed scope or feature. While Time & material model is suitable for purchasing of service or something without explicit feature during the contract negotiation stage. If you have a look at most of the corporation procurement process it is not difficult for you to find comprehensive and decent process for fixed price procurement which is for purchasing of a physical facility, a car or PCs. The problem comes along when corporations plan to purchase service such as consulting service or customized software. As they do not have a process that specialized service purchasing, they tended to use the existing one. So things started going completely wrong.

 

They just do not fit!

Think of that you plan to spend money on something which you have no idea what it is or you only know part of it. How could you decide how much you need pay for it. Decision should only be made with necessary concrete information you require. Clearly, there is no enough information for anyone to make a correct decision. Old software procurement model aligns with the old business model.

 

Low technology –> Business not change so much –> Fix scope/feature –> Fixed price model –> Waterfall software development model

 

I believe that you know how fast and unbelievable the technology and business grow. It is almost not possible to oversee and predict how your business look like in 24 months of time. So business requires a suitable model for software development service

 

High technology –> Business change very fast –> Scope can not be fixed or predicted –> Time & material model –> Agile, adaptive software development model

 

Change is inevitable

The world is not odd. Software development industry has grown from design and development of fixed feature product into customized enterprise application in order to provide better service and survive. So it is much more than just producing a physical product. It is service now. If you disagree, I will encourage you to give me one single example that there was no change of requirement in the development of any large scale enterprise application. I bet you can not. Requirement change is inevitable because business is changing. If your business does not change but others does, it is clear that you won’t be able to survive. Also there is no way to predict or imagine the change of requirement. So you need a more flexible and adaptive business model for this kind of procurement.

 

Solution

Probably you have already figure out the solution. Let me recap
  • Upgrade your corporation procurement guideline and process with Time & material model of service purchasing in it.
  • Develop or recruit professionals to manage Time & material project. It does require special expertise.
  • The key of applying this model is risk management and contractor performance management

 

Change it!

If you still use the old procurement model for service purchasing, you will definitely experience argument, displeasure and waste of investment. So why not change it?

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Dec 05 2008

Capital nationalized

Published by xiaoming under Buisness

If you paid a little bit attention to global finance for the last 3 to 6 months, “credit crunch”, “financial crisis”,” economic recession” and “downturn”, these keywords would not be strange to you. Whatever it was called, your life was less or more impacted by it. If we were only allowed to tell one reason for the financial crisis without mentioning any financial terminology, it could be described as simple as that both banks and consumers  did not have enough cash to pay off their over spending.

There were many reasons that behind it. Financial organization took too much risk in investment; credit rating agencies did not give a correct rates to some products. Governments, especially US was not able to monitor and manage the system strictly. The financial crisis has already caused an economic recession in western european countries and America. Even China and India had paid a huge bill for the lessons learnt. Real economics started going down because of weak demand.  

Even though, all around the world, not every country was so damaged by the credit crunch. I watched a BBC finance show last night, there is a small middle east country called Lebanon (Capital Beirut) whose economic was not impacted almost at all. The treasure minister revealed the reasons that they foresaw the big risk in American and Western european financial system and had pull all their investment from US and Europe since 2007. Meanwhile, they have these very strict regulations for banks, such as

  • Banks must have enough cash otherwise they won’t be allowed to lend
  • Borrowers must paid at least 30% of mortgage and successfully approved that their earning is at least 3 times of their monthly payment.

Government also played a critical role in financial system management and monitoring. All these regulations or rules that they made reminded me some basic principles in in Karl Marx’s Das Kapital that I learned from high school.

So far, US and UK have already nationalized some banks, insurance companies maybe car manufactories soon. In truth, part of the capital were actually owned by government, and nationalized. If there are more business which is danger, would government take them over and invest them? If that happens, the western financial system might look very much like Chinese financial system, which although is under construction from a very beginning stage compared to US and UK.

It seems that when western capitalism economics theory could not solve the problems that would happen anyway, they leaned to capital nationalized which was very similar to what Chinese government or Lebanon government do. Does it mean that Marx’s economic theories are the actually the way out to solve these problems?

It is obviously that China or Japan did much better than US and UK in this credit crunch till now. It does not mean what they did not make mistakes, in reality they did make a lot mistakes. However it might be the time to think of the reasons behind their success and mistakes that they made.

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Nov 03 2008

The spring of IT is coming

Published by xiaoming under Tech

Dot-com bubbles

Looking back a decade ago, Dot-com bubbles in 1995-2001 especially its climax in 2000 was hardly forgotten. The decline of IT, specifically Dot-come business defeated the confidence of IT investors and employees. The IT industry did not fall over, innovation of hardware and software, Web 2.0, google and new age of Internet started fighting back to the business. Investors and marketing also doted Web business, such as success of SNS. More money came into IT industry. Enterprises invested more in IT in order to develop their business and bring innovation to help business going forward. Probably no one did imagine around 2000 that IT giant would be able to come back so attractively and vivid.

Financial crisis and Economics recession


Finance institutions are always the core of world economic system. Investment banks, funds have innovated a big amount of products and tools to make profit aggressively. IT played a crucial role of building information system to transfer information, calculate risks efficiently and guarantee the continuity of business. Financial system hugely depends on IT system. When the financial crisis spreaded all over the world in 2008, the Wall street experienced a scary nightmare in a coupe of months, Lehman Brother, Merrill lynch and Bear Stearns fell down over night. There were huge impact on other business too rather than financial business itself because lack of liquidity and loss of confidence of investment. Business started cut off cost and save enough liquidity to prepare for even worse economics situation. No one can ignore the fact that world economics recession. The UK chancellor reported that GDP decreased 0.5% in the 3rd quarter which means the economics of the UK, one of the world top 5 economies is recessing. The US is also experiencing a huge pain and injected more than 700 billion dollars into their financial system. Car manufactures, toy makers, and other manufacturing had to shut down their business.

Challenge of IT industry

IT industry can not escape from the economics recession. Unfortunately, the IT investment was hugely cut off. IT industry laid off employees. In people’s mind, IT cost money. I recently attended a economics discussion panel which was held by China Economics Research Center. I clearly remembered that one of the key note speaker said “IT had never produced productivity. 20 years ago, stock market can use telegram to transfer message and make the transaction without IT.” I personally very much disagree with his opinion, although it was not totally ridiculous. So what does IT do to help business? Generally, IT improves the efficiency and reduces the likelihood of making mistakes of business. It looks like that IT does not add value to business directly, however without IT, business can not grow so fast and so efficiently and there would not be such good service without the support of Information system and IT infrastructure. The financial crisis impact real economy directly and slow down the investment on IT indirectly. Now IT is facing a very critical time. Where is the way out? How much should IT industry worry?

Opportunities of financial industry

One of the way outs is to help the business better, faster and more customer focusing. Jamie Dimon CEO of JP Morgan Chase recently was interviewed by CCTV and through the whole conversation, he emphasized several times that the success of JP Morgan Chase was more customer focusing, better product and server, faster responded to the market. From what he believes, how can IT help financial industry more customer focusing, provide better service, product and faster respond to the marketing is one way out. Some real life examples are:

  • Short life-cycle of project delivery.
  • End-user, customer focusing design and continuous improvement
  • Cloud and Grid computing to help transaction faster and efficiently.
  • Business Intelligence to help analyzes customer’s preference etc.

There are definitely more that IT can do in order to help business to achieve their goals. One of the reason that the US learnt from the financial crisis is that lack of effective supervision and Inappropriate regulations. In order to build or reform the existing financial system, a set of new rules, regulations, tools and products would come out. A new system which can lower the risks of investment and make the whole process clear and easy to supervised. All these changes need new information system or business re-engineering of existing system. Only IT can help business to make that happen. It is a great opportunity for IT to server government, industry and business to build good basis of the better financial system  and go forward.

Real economy need IT innovation

During the economics recession, business is in a awkward situation, on one hand, they want to less spend and on the other hand they have to invest and innovate new ways of doing things in order to grow and increase profitability. Whatever primary, secondary industry, they have no choice to get rid of IT and live by their own. A good information system can bring them into the market faster with better service.
So, even it is still cold, it is close to the end of winter and there are more demand floating up and the spring of IT is coming.

So what shall IT do to be prepared for the coming spring?

As Jamie Dimon mentioned in his interview, looking back into the mistakes that we had made, learn from where we fell down. This is definitely one thing that IT should learn from the financial crisis. Reducing the risks of investment, pay more attention to how to help business to generate more productivity is the second aspect IT should be aware of. Be more customer/marketing focusing, better and faster, align with the growth of business, feel what business feel and be responsible for what business is.  More innovated ideas, products and brand new ways of doing things is always a way out. Certainly there are more things that IT can do instead of waiting for the end of the world. I believe that the spring of IT is coming after this short winter. There will be more opportunities than ever.

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Mar 15 2008

GOT & GDT

Published by xiaoming under Tech

Successful projects

There are varied criteria of determining if a project is successful. They are

  • Maximize the business value of project delivery
  • Deliver on time
  • Achieve the quality of the project(product/working software)
  • Achieve the margin, reasonable the benefit
  • Customer’s satisfaction
  • The team well developed and enjoyable
  • Good relationship with client
  • Reputation in the industry
  • and etc

It is not too difficult to define and work towards those objectives in the beginning of the project. However, two months later, how many projects were still considering the set of goals is what they were working for? Many teams only focused on several of them. If you were asked the question, why did you give up some of them? The answer would be very simple “No time!” I can not blame the excuses because the crucial judgment of a successful project is “Deliver on time”. The reason that we did not achieve all the goals in the end of the project is that we regard them individually, not looked them as one OBJECTIVE. And the even worse, team member might understand the goals differently, and work towards different directions. You might find, some objectives were partially accomplished. Partially done work is also considered as waste, even effort was hard made. Personally, I don’t reckon that a successful delivery is always the top one criteria to measure whether a project is successful. However, it is mandatory.

So how can we ensure that the whole team works towards the same goals, keep going and accomplish them in the end of project. You need GOT and GDT.

GOT stands for Goal Oriented Thinking; GDT stands for Goal Driven Team.

In general, we need the whole team think the project in a way of “Goal Oriented” and the project team should be “Goal Driven”.
It might be quite dry to understand the concept and where to start. Let me give a start point, thinking of the reasons of failure projects.

Reasons of failure projects

The reasons of failure projects vary case by case. They could be

  • Customer’s expectation is beyond team’s capability
  • Contract is much risky
  • Requirement changes too frequently
  • Lack of communication and feedback
  • Team does not have the same goal
  • Team does not focus on the goal
  • and etc

Nevertheless, if the team does not work towards the same direction, the risk would be much more increased. Sometimes, project managers felt quite frustrated that the project failed even they had the money, right people and kinda nice customers.

Behind the reasons, either the team did not have the same goal, or did not work towards the same goal. So how to organize the team to achieve the same objectives along the road of project and make a project successfully? We need GOT and GDT.

GOT (Goal Oriented Thinking) & GDT (Goal Driven Team)

In order to make it more clear and transparent to my readers, I organize my thinking into five aspects(In pink). In each of them, there are solutions(In green) and tools(In yellow) to achieve the objectives of “GOT and GDT” through the whole life cycle of a project. Several solutions can also map to our daily business activities(In blue).

GOT GDT Free Mind diagram

There are also relationship between Solutions, tools and activities. For details of this diagram please view here.

Goal Oriented Thinking

In the beginning of a project, not everyone in the team might know what exact goal of this project. So first thing, a project manager need to do is to figure out “Goal for small and big team” and clarify them, put them in a place that is visible to the whole team all the time. Then a PM still ensure that all effort which the team makes is for the goal of the small and big team. PM is responsible for drafting and finalizing the goals. I will talk about this in the “What a manager/Lead should do”section. Sometimes, you work in a small team which is part of a big team. PM need to let everyone in the team know the goal of each team. In most of the cases, small team has more goals than the big one. Make sure to balance them across teams. Team member could have objectives for himself. Make sure PM has the interviews before you draft the goal of a team, considering their personal objectives and balance it. After a goal or set of goals is finalized. It becomes the goal for a whole team. So It is OUR goal but for individual. One team One Dream.

Goal Driven Team

GOT

When you have a team which has the same goal. Next, make sure team member continue working to achieve it. To build a GDT, first thing, let everyone in the team understand it and ask them how they can do to help the team and himself to achieve the goal. PM can make it as several action items for teammates every other week. Then in the end of each two weeks, PM can evaluate individual performance against goal/value. It is not a good idea to have a performance review in the end of each year. Because no one would actually remember what a team member did well or not. Why not divide them into each very small trunk and evaluate them.

A pull system is a good tool in order to achieve the goal for a team. After we have action items for individual, you don’t have to push tasks to them, all you need do is get the tasks ready and ensure its visibility. Team member will self-organize to pick up tasks in order to accomplish team goals and his personal action item.

To build a GDT, PM should make sure that you get the right person on board. If anyone who always have different understanding of the team’s goal or can not work towards it. He might suit for the other projects but this one. A PM need to recommend him to another team or resource manager in this case.

An organization has her own visions, objectives and targets. Our ultimate goal is to align the team’s objectives with organization’s vision. Only a Goal Driven team can make this easier.

Transparent Team

GOT

Even, a GDT is right there, we can not take for granted that a team will never change. Team member need to know everything in the team. The team shall be transparent to all sponsors, customers, users and team member himself. It does not limit to visibility of the plan, progress and risks but the business plan. Why business plan? If a team member does not know it, he won’t know how valuable his effort is. If team member don’t know it, he would not know whether what he is doing is waste.

Business process diagram

Another thing, every project need pay more attention to, let the team see the whole system but his individual area.There are several tools that we can use to help. Business process diagram of the whole system is always help. Each small team may highlight his own part.

Sometimes, developers focus on individual functionality/story, rather than the whole business process or the system itself. In the middle of project, some team keened to make large amount of code refactoring. There are many reasons that lead to the smell situation. One of them is that developers don’t see the design for the whole business process or system. The diagram here shows how stories map to the business process. Why not hang this diagram somewhere everyone can see it?

For project plan and progress reporting, I recommend several tools, such as “S-curve”, “Burn down and burn up Chart”, Kanban or story wall and task wall

What we did was not enough. 10 minutes technical knowledge sharing should happen everyday. One minute talk is another useful tool for the team to practice communication skills. We can do more. Get the lessons learnt visible to the whole organization and require feedbacks. Open discussion, more communication helps the team more transparent.

At the same time, the team has the reporting material for senior management team. No extra work is needed. Someone said that “Reporting is only for bosses”. Not all true! Bosses need see what is going on in each team, meanwhile every team member need know this as well. They should see the same page.

What a manager/lead should do

GOT

I have been talking about what a manager/lead should do in the previous sections. Personally, I don’t like separate managers and leaders into two groups. Nowadays, managers do not only control schedule, control cost and etc, we also set directions, develop resource, align people and Enable motivation.

First thing, a manager should do is to draft and finalize the goal for a team. So what is the goal composed of?

  • Contract and deliverables
  • Margin of the project
  • Individual career development
  • Organization vision
  • Customer expectation and satisfaction
  • Team’s enjoyableness of the project
  • Business development’s strategies
  • Reputation
  • And etc

This is how a project goal composed. Think of its balance and compromise then, explain it to the whole team, answer questions and reach individual’s understanding.

PM and the whole team need to highlight the goal in any occasion, such as meetings, activities, requirement discussion and etc. Whenever you observe an activity that violates the team’s goal, anyone should stand up and let the people know that they might be going to a wrong direction. The team shall consider those behaviors as waste and eliminate them right away.

In summary, project manager need focus on removing road blocker, providing any possible service to the team and at the same time guiding the team to a correct direction.

For HR team, it is a good way to measure people’s performance referring to if individual worked for the team’s goal and how much value that each team mate contribute .

Goal is not everything

Not everything

How do we deal those good ideas that are not associated with our goal?

Please don’t ignore or throw them away . Offer another place for those good ideas and encourage the team to develop the ideas into a real thing in non-project time. I always believe that the innovation is the key of successful business.

Summary

In summary, combine the goals of organization, project and individual into one GOAL, as OUR goal. Help the team to work towards the same direction in order to achieve the same goal which will make you a successful project and successful business.

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