24 May 2016
Building enterprise IT projects as “capital investments” is something I consider potentially dangerous, because it lumps IT “assets” along with much more durable and valuable physical assets.
A key question to ask of an “IT asset” is just how valuable and permanent the asset is. In the venture capital world, nothing makes investors happier than hearing that a company is spending their investment dollars creating “intellectual property”. This is an intellectual product that is defensible and ownable: it’s not locked up between some employee’s ears, it’s owned by the company.
In contrast, building “intellectual capital” is a much more risky proposition. Intellectual capital is my stock in trade, it’s what distinguishes me from a random C/C++ programmer: I know some very detailed things about some specific open source projects that would take quite a long time to learn from scratch. It’s valuable capital, but it lives between my ears. It’s mine and mine alone.
Why is this important for enterprise IT projects? Because so much of the value created in IT projects is “intellectual capital”. Staff are assembled by a consultancy and take months and years to learn a business domain and the particular tools for the problem, and the particular code base that is the system itself.
And then when the project is done… they are sent off to consultancy’s the next project. Flush…
Treating enterprise IT projects as capital projects encourages miscategorization all over the place:
- The “system” is perceived as the target of the investment. But the value of the pile of code and hardware rapidly diminishes to zero once the knowledgeable staff are removed. Changes and enhancements that would take the original developers minutes now require days and weeks of staff learning time before they can be attempted.
- The nature of the funding assumes that at some point the system will be “complete”. It will be in “maintenance” mode. Except the budget assigned to maintainance is too low to make any substantial changes in response to unexpected future needs. So when serious new requirements arise, the response is always to start again from scratch. With a new team.
It’s weird that IT projects get this special treatment, because other areas of government are perfectly aware that when staff leave, they carry out the accumulated intellectual capital of years of learning.
The very nature of the outsourced IT relationship has obscured the fact that government is routinely building up very expensive stores of intellectual capital and then sending them on their way only a handful of months or years after they’ve built them.
Maybe it’s time to get back to building systems in house?
16 May 2016
Back when I first discovered open source software, at the dawn of my computing and consulting career, I was pretty sure it was some kind of rainbow magic, better than sliced bread. Once other folks found this stuff, it was going to catch on like wildfire, and why not?
- It was way more flexible to build systems with than proprietary black boxes.
- The community around it was helpful and knowledgable, further speeding development.
- The price of deployment was (obviously) unbeatable, and just as importantly, the lack of legal restrictions neatly avoided convoluted “licensing oriented architectures”.
That was over 15 years ago, so clearly I was really, really wrong, at least from the point of view of governments and large corporate enterprises (in the start-up space, the revolution happened over 10 years ago, and nobody is looking back). Over time, I began to reformulate my thesis:
- Open source is a toolkit best appreciated by tool users, and,
- Managers have generally moved beyond direct tool using and use proxy data for decision making, but
- Today’s young staffer is tomorrow’s manager, so,
- Eventually the sands of time will deliver an open source literate population of managers into decision making authority.
This morning, I saw this tweet, which is fun:
That’s one good data point, hooray!
But in all honesty, I don’t feel like there is necessarily an open source wave cresting, certainly not in the big organization I’m nearest to, the BC government.
- Yes, there are some young (and not so young) advocates, who have increased their decision making power over time. But, there is a larger population of similarly aged folks who, from an innovation and risk-taking point of view, might as well be from the last generation. Their ascendance will assure continuity: the only change will be from expensive proprietary on-site software to expensive proprietary SaaS solutions.
- Yes, the overall IT environment is more accepting of open source in general (there is even Linux being run in government!! ooo!). But, in general there is a mismatch in sales fire power between solutions that have high-priced outside sales people promoting them and those that have to be dragged in by staff. Managers (even young ones) have moved beyond direct tool use, and are sitting ducks for a good sales presentation.
So it still falls to in-house innovation centers like GDS or the US Digital Service to try to demonstrate, mandate, and teach a new way of doing things to the old guard of IT.
It’s not clear they are succeeding, even on their own terms. More on that another day.
Do you have links to interesting experiments in doing enterprise IT in a new way? Drop them in the comments, I think it’s time to revisit government enterprise IT and what kind of program can chip away at the culture that has accreted over the last generation.
There’s some interesting experiments out there, let’s hear about them.
10 May 2016
Economist Paul Krugman loves to coin phrases, and a favourite of mine is the “magic asterisk”, referring to a footnoted extra calculation that is both
- critical to the financial credibility of a piece of public policy, and
- completely made up.
The NRPP Business Case doesn’t really hide its magic asterisk, it puts it right in the executive summary.
See it? That little stack of green bars? The NRPP business case would have you believe that the lion’s share of project benefit is going to come from “economic growth and job creation” as a result of this technology and business process realignment project.
Please stop laughing.
The leap of faith you must make is to think that not only will an improved system speed up the time between natural resource project conception and delivery (I can buy that) but also it will result in a permanent and persistent rise in the rate of resource extraction in the province (that one is harder). That’s where the green bars marching to the right come from.
So, pop quiz, what is more likely to result in a lasting rise in rates of resource extraction:
Like all good magic asterisks, the NRPP plan involves real mathematics, applied to nonsensical inputs. In this case net present value calculations applied to unrealistic projections about likely upcoming major project investments in BC:
- Calculation based on approval of 8 new mines and 3 LNG facilities after NRPP is implemented
- 12-month acceleration of decision timelines for major mines and LNG facilities will create a present value benefit from faster revenue realization
- Conservative estimate which excludes any impact on other revenue streams
- Data for calculations was sourced from the BC Jobs Plan and LNG Strategy
- Present value calculations assume a 4.5% discount rate and a 30-year timeframe
NRPP Business Case, Key Revenue Assumptions, Page 59
See it? In order to make millions through faster approvals of major projects, only two things have to happen:
- We need 8 new mines and 3 LNG projects to go through.
- The new process actually has to make them go through faster.
So, no problem.
Please stop it.
It will be on time, on budget. Guaranteed.
05 May 2016
A reader asked me whether the pursuit of a magic IT bullet in BC natural resource management is a result of ignorance, and I don’t really think so.
If anything, it’s a result of magical thinking, a “drunk looking for keys under the lamppost” reaction to the extremely difficult problem of integrating resource management operations.
As an example of how hard integration can be, consider the relatively “simple” problem of bringing management of resource roads under a single statute and operational regime. The process kicked off in 2008, with legislation introduced and then withdrawn as the government came to grips with the huge number of stakeholders they’d forgotten to engage. Eight years on, the process still hasn’t come to a conclusion.
Yet the good folks at NRPP are willing to promise the political masters they can integrate decision making across multiple resources and land values, through the application of nifty technology, new legislation and business process changes.
There is a going to be a promise/delivery gap here, it’s just a question of how much money will be spent before that becomes clear.
It’s worth noting that this promise has been made before.
The BC Liberal government arrived in 2001 with the grandiosely named “New Era” platform, which included a promise to:
Eliminate the backlog and delays in Crown land applications, which have cost over $1 billion and 20,000 lost jobs.
Fifteen years later, the NRPP Business Case makes basically the same promise, on the same premise – that removing backlogs and delays will result in a permanent increase in provicial resource revenues.
The status quo is unsustainable as the current constraints and challenges faced by the NRS will lead to greater delays in project approval timelines, increases in authorizations backlogs, lost economic opportunities, increases in legal and financial risk, and declining levels of satisfaction with NRS services provided to the public, First Nations, clients and proponents. Investing in NRPP is central to enabling government to deliver on many of the commitments made in the BC Jobs Plan and in the June 2013 Speech from the Throne…
NRPP Executive Summary, 2014
The folks charged with implementing the 2001 “New Era” promise came up with essentially the same solution that NRPP is peddling today:
The government of British Columbia, as outlined in the New Era for Business, Investment and Opportunity document, states its commitment to create a cost-competitive business climate and to boost private sector, investment in the resource sector including the booming Oil and Gas sector. In support of this commitment the Ministry of Sustainable Resource Management has initiated a Business Strategy and Transition Plan aimed at constructing a government-wide registry of land and resource encumbrances. This registry will significantly reduce the costs and shorten the time required in gaining access to land and resources for both government and businesses.
Business Strategy and Transition Plan, Integrated Registry Project, 2002/10/31
The only differences are of scope:
- The 2002 Integrated Registries Project only aimed to consolidate information and processes around land tenuring.
- NRPP aims to consolidate all land and resource decision making, on major projects as well as operational tenuring.
- The 2002 Integrated Registries Project was given a $14M budget.
- NRPP has been given a $57M budget just for Phase One.
Unlike NRPP, we already know how the 2002 Integrated Registries Project panned out:
- The various land tenuring acts, which were going to be combined into a single new piece of legislation feeding a single statutory register, were left intact.
- The register itself was downgraded from a single statutory point of truth, to a somewhat real-time data warehouse of land tenuring information.
- 15 years on, land management decisions are still considered “too slow”, to the extent that NRPP can assert that “as a result of NRPP, the time needed to approve major projects will be reduced, and government will achieve a significant benefit from realizing revenues sooner.”
It’s not that I don’t think NRPP will have some valuable results, just as the Integrated Registries Project did. I just think that, like the old registries project, those predictable benefits could be realized at about 10% of the cost if they were prioritized right up front, and the grandiose promises (predestined to failure) were left at the door.
05 May 2016
Far and away the most amusing part of the NRPP Business Case that the government quietly placed online this March is the “Financial Benefits & Lifecycle Costs” section, the part where they are supposed to make the dollars-and-cents case for the project.
In order to ensure transparency and instill public confidence in the project, all the dollar figures have been replaced with “$X” in the text. So awesome!
But just as good, in the Lower Risks Exposure section, they outline in clear prose some of the resource management disasters of the past 10 years:
- A dam collapsed and caused significant property damage after the NRS failed to enforce the need for repairs and maintenance. Contributing factors included a lack of effective record keeping, inaccurate risk/consequence ratings given to the dam, and a lack of action to address decades of warnings that the dam was in poor condition. Settlements paid by government to affected parties totaled more than $X M
- A District Manager approved a forest development plan and awarded multiple cut blocks in a watershed; however, the decision was inappropriate and not durable because the plan was contrary to regulations and it did not consider impacts to endangered animal populations. The case was settled for $X M
- An oil and gas company acquired a tenure in northeastern British Columbia only to find out that the NRS had not disclosed that the tenure was in an area that was considered historically and spiritually significant by a local aboriginal group. The matter proceeded through an extensive litigation process and settled for $X M
That’s some pretty bad stuff! Not the kind of thing that makes it into the average government press release!
But, being information technology people, they cannot help themselves, they look at this bad stuff and they think, “if only people had the right information at the right time, none of this would have happened”.
Through the implementation of an integrated spatial and operational database, a risk-based framework for compliance and enforcement activities across the province, and through facilitating information sharing across lines of business, NRPP will contribute to a significant reduction in legal risk and potentially a reduction in litigation and settlement costs.
Aren’t IT people cute! Don’t you just want to stroke their fur and take them home?!?
Non-IT people might have a different reaction to that list of calamities. They might think, “political pressures that make speed of permit approval the primary metric of good resource management are causing corners to be cut and very expensive/damaging mistakes to be made.”
Unfortunately, those are the kinds of thoughts that will quickly end careers if expressed out loud in government.
So instead, we have a new $57M IT megaproject. The kind of project that has the maximum likelihood of failure and delay: a multi-year, multi-million-dollar, maximum scope project.
Don’t worry though, it will be delivered “on time and on budget”.