For the past 50 years, IT consulting companies have been delivering systems solutions to the financial services sector with an ever-increasing structured and formulated delivery methodology.
Over time, a myriad of solutions have evolved to meet the needs of the users, ranging from customer-defined proprietary development initiatives to the consulting firm's in-house IP software offering. With both the standalone and “unique” internal company IT solutions, the highly structured methodologies of the IT consulting firms and how they fit with the structure of the Financial Services Organization (“FSO”) have come under increasing scrutiny. Costs to the industry are increasing exponentially, as time after time projects are over budget, lacking the required functionality, late or, in some cases, facing complete abandonment. What is crucial to this whole discussion is that the real loser in this is the financial services firm, as it's left with emptier pockets and a non-functioning piece of software.
“The Methodology Problem”
- The FSO is over a barrel—they can't take the software and give it to another IT consulting company as the software has not, usually, been appropriately documented or the “use case” documentation is so voluminous that no one can spend the time to find out what exactly is wrong.
- The hiring of either a new IT consulting company or the creation of a new IT team takes months, with a significant amount of time to learn what has already been written and determine where the faults are.
- The IT consulting company will, in its worst-case scenario, negotiate the fees for the non-working piece of software to cost. This means they have lost nothing.
- It is customary for the IT consulting company to already know what and where the issues are in the failed software and have negotiated the “fix” at a price that will recover some of the lost margin in the aforementioned executives' deal.
The typical areas of focus in these situations when the FSO is trying to recalibrate the project/program are programming methodology, project management and delivery.
- For programming methodology, there are standards such as CMMI and AGILE. They are meant to be a quality management framework useful for large organizations that need to measure themselves in terms of their overall capability and maturity to demonstrate repeatable quality of the software work they do.
- Project management usually has a basis in some level of ISO 9001, which is a quality management systems standard, designed to help organizations ensure they meet the needs of customers and other stakeholders while meeting statutory and regulatory requirements related to a product.
- In delivery, firms use such methodology as COBIT and ITIL as they provide guidance for the governance and management of IT-related services by enterprises, whether those services are provided in-house or obtained from third parties such as IT consulting firms or business partners.
The merits of any and all of these methodologies are not in dispute, either alone or together. What needs to be understood is that seldom are both the FSO and the IT consulting company using the same standards.
This issue may be overcome with qualified PMI Certified project managers at both ends of the project who are familiar with the others' standards and can make them work together for the benefit of the project. This is seldom the case, if ever. What usually happens is that the FSO runs the project on their end under their internal methodology and the IT consulting company does likewise. Consequently, these recalibration exercises do not typically resolve the problem in any reasonable timeframe.
In a retroactive fashion, when the high cost/time overruns or, in the worst case, a failed project occurs, lawyers are brought in to determine the fault in the failed attempt at the project. The lawyers will then employ a professional services firm to forensically investigate the history of the project from both sides and objectively determine where the faults lay in the failed process. The only people who benefit from this process are the lawyers, and to a much lesser degree the professional services firm.
A Win-Win for Both
By proactively working with a professional advisor in the beginning, Financial Services Organizations can lower their total overall costs for such projects. IT Consulting firms also benefit because they can focus on what they do best: deliver a better client-based solution, on time and, ideally, under budget.
An independent advisor can focus their expertise on assisting in the current state by offering independent IT consulting companies its services and working with them in a proactive manner to provide both oversight and compliance on both a regulatory and a technology risk level to their current client base.
By proactively managing the relationship between the two firms, an independent advisor can also avoid the need for legal counsel and bring the two parties' methodologies together in an integrated fashion, resolving their formerly “irreconcilable differences.”
Other articles in this series: Feb 2016 - The Certification Process
About BDO
One of the nation's leading accounting firms, BDO Canada provides assurance, accounting, tax, and advisory services. As a member of the BDO international network, which spans more than 150 countries and 1,400 offices, BDO provides seamless and consistent cross-border services to clients with international needs.
About BDO's Financial Services Practice
BDO's Financial Services Practice helps clients in the financial services sector succeed in a changing landscape marked by regulatory reform, disruptive technology, and new service delivery channels. Our services, ranging from governance, risk and compliance to business process reviews and more, are tailored to meet the unique needs of financial services organizations.
To learn more, contact your local BDO office or:
Sam Khoury
National Industry Leader, Financial Services
416 369 6030
skhoury@bdo.ca
Gerry O'Mahoney
Strategic Advisor, Financial Services
416 369 6065
gomahoney@bdo.ca