Over-budget? Behind schedule? Relationships under strain? Disagreements on changes of scope? Shifting technological backdrop and needs? These are just some of the common symptoms of a faltering IT project, which can lead to organisations having to decide whether to invest more time and resources into the project or whether to ‘cut and run’.
Many IT projects will experience some or all of these symptoms at some point, particularly given that organisations have increasingly sophisticated and/or time critical needs, with their IT systems being an integral part of their businesses and/or products. Faltering IT projects, if not managed properly, can be capable of causing significant and detrimental consequences for business, end-customer relationships and careers.
Below we consider 7 ways in which both parties to an IT project can try to bring a faltering IT project back on track or take appropriate steps to exit from a project that cannot be salvaged, whilst mitigating risk and protecting the position of their businesses:
1.Review your Contract
Having a solid contractual foundation is essential for any IT project, as the contract governs the parties’ rights and obligations. However, we often find that the contract no longer reflects how the parties have been operating (assuming there is a contract in place at all – it is not unusual for IT projects to kick off and get into trouble before the terms have even been settled!). We also find that even where there is a contract in place, in practice the parties often fail to enforce those rights and/or obligations properly, or at all. In our view, understanding how the underlying contract for an IT project operates is essential. A few points to consider include:
- Is there a contract in place? If not, where are the parties’ obligations recorded? How have the parties’ been operating to date?
- Have any changes in scope been agreed in formal written variations to an original contract? It may be necessary to document a variation to the original contract. Such a variation may help get the project back on track and allow the parties to move forward with certainty.
- Know your exit points. Many IT contracts provide for certain milestones to be met before payment is required. If the project is doomed to fail, consider whether the costs invested to date are ‘sunk’ costs. Your business may be better off halting the project and cutting its losses at certain exit points in the project.
- Similarly, what are the deadlines involved and does a particular missed deadline entitle you to exit the contract?
2.Assemble the Right Team
IT projects can often stall as a result of a turnover amongst staff during the course of a project. If possible, you should try to keep consistency of staff and of the project management team taking responsibility for the project to avoid losing knowledge and momentum.
However, if your counterparty on the project is constantly changing its staff, to the detriment of a project, the contractual provisions could help. It is common for there to be contractual obligations for “key personnel” to be retained throughout a project and/or for appropriate replacements to be introduced. Even if there aren’t such obligations, there may be other contractual arguments available.
If a dispute is likely, you may wish to assemble a team of IT experts both internally and externally as well as, briefing senior management and instructing lawyers. Reviewing contracts and getting advice at an early stage can often help get a project back on track.
3.Keep an Accurate Record of Meetings
In the event that a dispute appears likely, you should (if you are not doing so already) document minutes of meetings, covering who was in attendance at such meetings and clarify follow-up actions and ownership of relevant tasks. It should be made clear what the action points are from each meeting to avoid any ambiguity. Clarity is essential. In faltering IT projects it is critical to ensure it is clear who is responsible for what – often the level of co-operation and partnering spirit can be lost as relationships become strained. These minutes could of course also serve as evidence in a potential dispute further down the line so it is helpful to keep accurate records.
4.Addressing Team Morale
In our experience, the toll of a faltering project on the internal teams of both parties can be significant. It is quite often the case that the loss of trust and confidence in a project counterparty leads to some of the biggest issues. Escalations to senior individuals, who are not involved in the project can break through an impasse, to enable projects to continue. Having such escalations either enshrined within the contract at the outset or agreed to by the parties can often save projects that are otherwise teetering on the edge.
5.Have a Plan B
From a customer perspective, it may be worth investing time to seek input from an alternative supplier. They may be able to provide insight on projected costs to finish a partially complete project or the cost of a complete start over solution. Alternatively, seeking this input can serve to inform your discussions with your existing contractor.
However, before turning to an alternative supplier, it needs to be established whether such an approach risks amounting to a breach of contract. For example, if there are exclusivity provisions in your contract, depending on how these are drafted, even an initial approach could amount to a breach. Equally, care needs to be taken in respect of what information is provided to an alternative supplier about the solution or project – you could fall foul of confidentiality and/or intellectual property rights by sharing project documentation or details of developments.
6.Consider Termination of the Contract
You may have reached the point where termination is the best option in the circumstances. If so, it is important to follow the contractual provisions for termination by, for example, serving the termination notice in the correct form and to the relevant contact. Often, contractual provisions in a contract contain a dispute resolution clause whereby parties are required to escalate a dispute to senior executives of their respective businesses and/or enter into a formal mediation before you are contractually entitled to terminate. Terminating without following the contractual provisions can be a costly mistake.
Termination is often a drastic step and we would recommend taking stock before doing so. There may be issues to consider such as the value of a partially completed works (e.g. unique code) and who owns the intellectual property rights to such material. What will happen to staff dedicated to the project? Will the other side be required to (and will they willingly) delete certain software, return data, or shut down their access to a shared site? Will the other side need to assist with a handover to a new supplier if a new supplier is picking up the baton?
7.Do a Post-Mortem
There can be a tendency to walk away from a failed project without reflecting on the issues that arose. A balanced, honest and frank internal appraisal meeting can prevent such issues occurring again in future. Such a meeting could help to identify areas where the business may be able to salvage some of the work undertaken to date. It may also be helpful, from a morale perspective, to identify project managers who did a good job in difficult circumstances. External advisers, including lawyers, may be able to assist in providing an independent view if there is hesitation within the business and a fear of apportioning blame unfairly