Tuesday, May 26, 2015

It's going to cost how much?

This is a true story. The name of the company has been changed.


The Acme Corporation is a large North American retail company, with thousands of stores across the continent. The procurement function was centralized, with purchases made and paid at the head office.

The process for stores to make a requisition was extremely outdated, relying on phone calls, emails, and faxes to make requests and with no insight into the process once it was initiated. Acme decide to replace their procurement system with a web-based system that allowed on-line requisitioning, and the ability for store staff to see at any time the status of their requisitions.

How much money?

During the planning stage, the project manager had the project technical lead do an assessment of what infrastructure was needed to support the new system. When the technical lead assessed the network between the stores and head office, she determined that the new application would run too slowly.

The project manager talked to the Network Services department and discovered that the group had no budget to upgrade the network. They told the project manager that if his project needed the upgrade, it would have to come out of the procurement project budget, at a cost of over $100 million.

The estimated cost of the procurement project was $2 million, so this additional cost would be the end of the project. It wouldn’t be possible to make a business case for the procurement project if the cost was increased fifty fold.

Action taken

The project manager asked the technical lead to do some further analysis, which determined that with the current network, the response time for users would be more than two minutes, which was definitely unacceptable. Without the network upgrade, the project was not viable.

In addition, the project manager asked the Network Services group for a review of the cost estimate, and the Network Services group responded that the cost estimate was accurate.

The project manager was not satisfied, and asked Network Services for another re-work of the cost estimate, with more details, so that it could be included in a report to the project steering committee. This time, the Network Services group found a large calculation error, and revised the cost estimate to $8 million. Although a dramatic reduction, this could still not be accommodated in the budget for the project.

The project manager advised the steering committee that the project was not viable without the network upgrade, but that the cost of the upgrade could not be accommodated in the project budget.

The steering committee realized there was never going to be a single project that could absorb the network upgrade cost and still produce a return on the investment. In addition, the steering committee also felt that the speed of the network would be a recurring theme, as demand for faster processes and instant access to information increased.

The steering committee recommended to Acme management that the network upgrade be approved as a separate project, and Acme management agreed.


The store managers were pleased with the new procurement functions and the timeliness of the information available to them. In addition, store managers who ran multiple stores could see the additional stores more easily than before.


Discovery of the slow network demonstrates the project manager’s thoroughness in the planning stage, taking into account factors other than the application functions themselves. His disciplined approach was also in evidence when he requested additional backup, ensuring his estimates were correct, before reporting to the steering committee.

The steering committee comprised several Acme executives, which was valuable in getting the attention of Acme management when they needed to remove the financial obstacle to upgrading the network.

Copyright 2015 Debbie Gallagher