Monday, November 14, 2011

Data Migration: Pushing Risk to the Vendor is not the Answer

Data migration exercises are risky. I've previously blogged about steps that can be taken to reduce risk in my posts on Selling the Data Migration Strategy and Data Migration: Track Record or Process Maturity. One area that I've not touched on in either of these posts, but one that has come up as an idea in pretty much every data migration project I've ever been involved with, is the use of the commercial negotiations process to handle data migration risks. Here I'm talking about payment milestones being closely tied to successful migration of the data. This must be a good thing, right? If our vendor doesn't get our data across to the new system then we don't pay them, or we withhold a sizable chunk of cash. I'm not so sure - for me this approach is at best a blunt instrument, something to beat a vendor over the head with, to cajole them into getting the job done.  

Step back and analyse the position you'd be in if you exercised the right to withhold some part of payment and you may start to share my point of view. OK, so your data migration project has hit problems, it's either running over time or the vendor has flat out just failed to deliver. That's not good, but at least you've got a good chunk of the project budget left, you've not wasted your company's money, or have you? Take a look at the projected benefits for the data migration project and / or the larger project the migration is part of and consider which of those benefits has either been forgone or deferred to some future date due to the migration problems. How do the financial outcomes look now? Sure, you may still have $200k in the project budget courtesy of the non delivery clause you negotiated, but you're going to have to spend that (and then some) to attempt the migration again, or fix what you have, with another vendor. Also some or all of the (financial savings) benefits the company was counting on in this year's budget now won't come through until next year (or later). Not the best situation to be in!

Of course, the counter argument can be made that by having financial penalties built in to the contract, or payment milestones tied to delivery milestones it's more likely that the vendor will be motivated to ensure that the job gets done, that your data gets migrated no matter what it takes. It's those five words which bother me - "no matter what it takes". What this may well mean is that vendor is sacrificing the true desired outcomes of your project in order to protect their financial interests. There will always be a degree of this apparent in any vendor- client relationship, but this is much easier to manage when there aren't extra pressures looming in the shape of potential financial forfeits. Shortcuts, a focus on short term fixes to specific problems rather than techniques in line with the best overall outcomes, and circumventing process and testing in order to hit deadlines are all behaviours you may need to deal with if you insist on these sorts of clauses. 

But what about the scenario where the vendor is the party suggesting this type of arrangement? In the past I've seen vendors offer arrangements where the lion's share of their payment (as high as 90% of the project total) is not due until the migration project is complete and accepted. You could argue that in such cases there is no harm in using these terms, after the vendor is offering the option freely, rather than being forced to this arrangement. In reality, the vendor may be being forced to these terms, not by you (their client) but rather by market forces. They may have to offer such arrangements in order to win work. Often this will be the case when they are inexperienced / new to the market space or have failed to build a portfolio of past successful projects which they can use as reference sites. There will be exceptions, but often the vendors who need to offer these types of terms are perhaps the vendors you least want to have on your data migration project. 

So, what's the alternative? In my opinion it's to be proactive. Don't push the risk to the vendor, but step up and own that risk yourself. Recognise and publicise the data migration risks early and take steps to mitigate them. It's your data so take accountability for the success of the data migration process. You can't afford to be simply a passive by-stander through the migration. If you are, when things fail (and they probably will at least to to some degree) yes, you'll be able to point the finger of blame at the vendor and say they failed to deliver.  But you'll still have a failed project on your resume, your company will have missed some or all of its projected benefits, and you may well have an extended miserable time as you attempt to mop up behind the project and live with work-arounds for years to come.  A data migration strategy, upfront planning, carefully selecting a vendor who is aligned to your strategy and likely to be able to deliver because they work effectively to an established and proven process, and staying actively involved throughout the migration are far more likely to keep  your risks from becoming realised issues. 

So, be brave, step up and own that risk. Good luck!

1 comment:

  1. Couldn't agree more. The problem with the payment milestone approach is that it hides the risk from the project manager when the actual risk proximity is quite close. Anything that masks/hides risk proximity is bad. A lot of inexperienced PMs think that this is an effective way of managing risk but as you say it is just "putting your head in the sand"...