Drawing parallels: Government Infrastructure & Enterprise Software Projects
Key insights & lessons for Managers from the other side of the great Public-Private Divide
Many enterprises in the second decade of the 21st century have a pressing problem related to IT infrastructure – hopelessly outdated software systems and hardware. And the managements are caught in a bind when considering an upgrade due to these three factors: complexity, cost, and urgency.
It is a sentiment shared by a far bigger, more powerful entity these days – the US Government. The only difference is that the government’s problem is with another kind of infrastructure – the sprawling road, rail, and subway networks across America.
Despite the chasm that exists between public transport infrastructure and a business organization’s IT infrastructure, the parallels are strikingly similar. They exist in the planning and execution stage of these projects, mainly as challenges and obstacles.
But there is no doubt that government infrastructure projects are more complex and difficult, purely due to their sheer size and scope. This is why it is a good idea to take that side of our argument as the base and build from there towards the software upgrade headaches of enterprises.
The Great American Infrastructure Crisis
This issue was so important that it cropped up several times during the last Presidential election cycle. Simply put, US infrastructure is aging and in dire need of investment and upgrades to the tune of up to 4 trillion dollars or more.
In 2017, the American Society of Civil Engineers released its quadrennial Infrastructure report card for the United States. Here are some highlights:
- The overall grade for US infrastructure remains stagnant at D+, same as in 2013
- Out of the 600,000 bridges, one third are over 50 years old and require $128 billion to repair/renovate
- One-third of urban roads are in bad shape, with an estimated backlog close to $1 trillion to fix the highways system
- Urban transit is also underfunded, with a backlog of nearly $100 billion
And these are just issues affecting transport and transit infrastructure. The situation is even more precarious when it comes to flood control, dams, water/waste management, and the national parks system.
The Confounding Cost of Infrastructure Projects in the US
It certainly does not help the Government’s cause when the US has a well-recognized problem with keeping infrastructure projects economical. In fact, the problem of cost overruns is so severe, it is estimated that American road and rail projects are at least three or four times more expensive when compared to other developed nations in the G-20.
The four most expensive rail/transit/tunnel projects in the world all call the US their home. This includes the infamous New York East Side Access Project, currently being built at a cost of $3 billion per kilometer.
Another project in the city, the Second Avenue Subway, is costing the authorities anywhere from $1.5 to $2 billion per kilometer. In comparison, similar projects in Tokyo and Madrid would have cost only $250 million and $55 million per kilometer respectively.
And this is not just an issue with the city of New York, as there are three other US subway expansion plans in the top 12 list of the expensive projects, including the Los Angeles Westside Extension, the Boston Red-Blue Line Connector, and the Central Subway in Chicago.
Some Probable Explanations for this Situation
What could be the reason for this magnitude of difference between US and international projects? A recent study conducted by the Government Accountability Office under the directive of Congress yielded scant results, citing the massive scale of these projects, and their complexity.
But there are several different theories regarding this. None of them can adequately account for the problem on their own. It is highly probable that they all contribute in varying degrees to make US infrastructure projects so expensive and inefficient.
One common perception regarding government projects is bureaucratic inefficiency and corruption. But that exists in all nations, and the US is not ranked low enough on the Global Corruption Index to adequately explain the drastic cost difference.
Thanks to the US legal system, property owners can challenge the acquisition of land for these projects in courts, leading to delays and spiralling costs. In contrast, countries like China can evict entire villages and settlements with impunity to construct highways and rail networks.
Another key reason is the common bureaucratic practice of low initial estimates, in order to get project approval from the public as well as the higher authorities. Often this is done on purpose -once these projects get underway, costs are no longer an issue as you cannot simply stop a gigantic road or rail project midway and abandon it.
How Enterprise Software Projects Compare
Delays and cost overruns are a frequent sight in the ERP software upgrades landscape for businesses larger and small as well. Studies indicate failure rates anywhere between 60% to 75%. There are numerous examples that serve as cautionary tales for managers looking for a quick and easy upgrade.
Revlon lost millions of dollars in sales and even got sued by their own investors when they ran into trouble with an ERP upgrade involving a new vendor in 2016. The German supermarket chain Lidl lost $550 million between 2011 and 2017 in an abortive upgrade from legacy systems to SAP ERP/CRM.
In the alcohol industry, thanks to frequent acquisitions and mergers, MillerCoors ended up with multiple legacy versions of SAP software. Their failed attempt to unify all SAP implementations resulted in a lawsuit worth $100 million against the partner HCL due to a flawed contract.
Comparing Infrastructure with ERP/CRM Upgrade Projects
Many striking parallels can be drawn between enterprise-level software and IT upgrades and these mega rail and road projects. Here is a quick breakdown of some of the similarities:
Crumbling infrastructure has tangible social and economic costs, affecting communities, and hindering commerce. Old and crumbling bridges and dams do pose a real threat to the lives of countless citizens.
Outdated IT infrastructure makes a business less efficient and extremely vulnerable to the competition. It can massively hinder the ability of a business to expand in a digital era where customers demand instant gratification.
Given their widespread impact, both require extensive planning and preparation. Cost estimation is a key component as it is directly responsible for getting the projects greenlit. Both governments and management often struggle to gauge the accurate cost of a project.
Finding appropriate external partners is crucial for the successful execution of these projects. For highways and rail, it is all about the right contractors. For software, you need a vendor with a system that is appropriate for your business.
All individuals and businesses that use the road/rail network in the construction area are affected. In business, all departments still using legacy software are affected. Even worse, customers and clients will face at least some inconvenience even in the best-case scenarios.
Court challenges can arise from members of the public who are against a construction project. Environmental protection groups/departments, landowners, and businesses can all stall a project.
Inside an enterprise, resistance to a software upgrade can arise in other ways. Hostility and lack of cooperation for an upgrade can happen because of a conservative mindset, fear of inefficiency, fear of losing clients, and even compliance concerns.
There are undeniable similarities between public infrastructure projects and ERP software projects. But business management has several key advantages. Improved efficiency in private enterprises can give it an edge in the implementation of software upgrades.
Most of the well-known failures in ERP happened due to largely avoidable mistakes – in the realm of planning, preparation, and the selection of good partners/vendors.
In public projects, pre-existing networks of kickbacks and a nexus between government officials, labor unions and contractors do exist, as has been shown in the analysis of big projects in cities like New York.
Such networks are much rarer in private enterprises, especially in software and IT upgrades, where it often involves just two parties – the enterprise and the vendor. So even taking into account all the parallels, there is no doubt that an enterprise-wide software upgrade is still far less complex than a mega public highway or rail project.
This should, on paper, make the job far easier for business leaders. The challenge lies in balancing operational efficiencies and internal stability during the upgrade process. Granted, this is a tough ask, but given the existential threat posed by outdated IT infrastructure, it is well worth the risks.