Tuesday, September 27, 2011

Strategic and Utility Projects

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There are two kinds of systems/projects and the differentiating factor is competitive advantage.
One is called Strategic and the other is called Utility.

Utility
• An example of utility project is a ‘payroll application system’.
• In utility projects/systems, the focus is to keep the cost low and avoid disaster.
• Risk: is a risk of commission –doing it wrong.
• Use utility packages and reduce the cost ( compared to building customized systems; remember peoplesoft)

Strategic
• The other kind of system is strategic in nature. It can be any system that provides the competitive advantage to your business.
• In strategic systems, speed and innovation are more important and cost is a lesser consideration.
• Risk is the risk of omission- missing doing it.
• To attain the differentiating factor, follow shorter iterations, use cross functional and high capability teams.

When I heard Martin Fowler talk about this ( December 2010 Chennai, India), following thoughts came to my mind.

# Strategic projects, by their very definition don’t allow us to be focused only on resource utilization and capacity utilization.  These do matter, but we won't be dead if we go above planned limits on these, but can consider ourselves dead if we miss the target.
# This strategic vs utility categorization helps when companies need to do their portfolio planning and assign their limited resources.
# This division need not be a strict dichotomy, since for sure, there may be more categories of projects people can come up with. But if we strictly use the word 'competitive advantage' to define 'strategic projects', and be honest and can make people see the advantages of this approach (without allowing politics to color our decision making), then i am sure we can just do with these two categories.
# If a project is identified as Utility, then the company need not spend the same kind of resources on it like it were a strategic project. Where ever it is possible, company can get to save money by aligning their process in synch with the process definition of commercial off the shelf software (COTS).
# Projects can start as strategic and then become utility or vice versa. this happens when the project no longer provides any competitive advantage.

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