[Am-info] Owning Up To Failed Projects

[Fred A. Miller]

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Owning Up To Failed Projects

Imagine this: Three years ago, during the economic boom, Acme=20
Co., a $100 million anvil maker, invested $5 million in ERP. Acme=20
legally reported the project as a capital expense. The system=20
still doesn't work, yet that goes unmentioned in Acme's financial=20
reports.

Acme is fictional, but not the situation, says Ram Reddy, an=20
analyst at IT consulting firm Cutter Consortium. "Nobody wants to=20
be the one who says, 'Our five-year ERP implementation is a=20
wash.' " So nothing is said and companies continue investing in=20
failing projects. Few shareholders can use financial reports to=20
follow particular investments. With investors looking more=20
closely at earnings reports, these situations could come back to=20
bite, Reddy warns.

One way around problems is to fess up. Back when Wall Street=20
punished companies for a drop in earnings, hiding a failed=20
project, though unethical, made sense.
Now, it makes more sense to walk away from bad projects.=20
"Companies might as well come clean," Reddy says. "Now's the time=20
to write the bad projects off."

Does that mean IT projects shouldn't be capitalized? Reddy says=20
the shift from a manufacturing to a service economy makes it more=20
necessary to do so. - Eileen Colkin

Get more background:
Priority: Integrity
http://update.informationweek.com/cgi-bin4/flo?y=3DeIRM0Bce7K0V20Bf2q0Ag

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Fred A. Miller
Systems Administrator
Cornell Univ. Press Services
fm@cupserv.org, www.cupserv.org
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