If Parkinson were to go over the project management scenario in software industries, he would have modified his famous Law as: “ Work expands to cause time slippage beyond delivery schedule, without regard to the utility of work performed.” ! Software projects do often face erosion of earned value due to cost and time overruns.

A 1995 study by the Standish Group International was very disquieting, as it declared nearly 90% of software projects studied as “ failed “, due to cost and time overruns. For one-third of the companies, the average cost and time overruns were put at 189% and 222% respectively of the original cost and time estimates. Their incidences in the Indian scene - 2003 are reckoned to be much lower at 20 – 40%, nevertheless a long way to go towards world class!

Reasons for this plight can be varied, such as :

1. Under-quoting for order-taking ;

2. Accepting Fixed Fee Contract and accommodating changes in project requirements midstream ;

3. Less first-time yield and so, more time consumed in reworking ;

4. Project leader in fire fighting mode and so, not taking time to lead his team effectively ;

5. Milestone reviews not resulting in prompt actions to cut time over the rest of the project ; and

6. Inadequate organizational learning from past project cycles and present collective wisdom.

Whatever may be the reasons, software enterprises striving towards World Class need to seek better ways and means to reduce cost and time overruns and to deliver their projects as scheduled. Their adoption of VA/VE methodology can greatly help them in this mission.

The Merits Of VA/VE

Value Analysis / Value Engineering (VA/VE) is a prodding methodology, proven in the Indian industries over the last three decades. It is also known by several other names, such as Value Administration, Value Assurance, Value Control, Value Improvement and Value Management. Its specific aim: Accomplishing the functions that the customer needs and wants, reliably, at the lowest cost.’ ‘Needs and wants’ mean what the customer is willing to pay for; ‘Cost’ signifies efforts on activities and time consumed.

The premise of VA/VE is that all cost is for functions required and ‘unnecessary costs’, not contributing so, are to be identified and eliminated. The VA/VE team approach evolved effectively on customer satisfaction and functional orientation to reduce organizational cost - in terms of effort and time.

VA/VE is being gainfully practiced, year after year, by hundreds of our Engineering Enterprises, Process Industries and Projects / Construction Companies. Illustratively, a project-oriented Heavy Engineering Unit - known for its products - earned itself the image of ‘a late deliverer’. The company could erase this image ( and grow healthily thereafter! ), thanks to several VA/VE teams on their projects over a two-year span.

Some Software firms are already exploring People Value Management (PVM) for engaging their employees retaining talent better and Earned Value Management (EVM) for monitoring and controlling their projects midstream. All such efforts should become part of the Total Value Management (TVM) strategy, of which VA/VE is a critical success factor. More and more enterprises in the services sector will increasingly feel the need to adopt VA/VE in order to survive - and thrive - in the 21st Century !

What makes VA/VE ‘click’ towards larger, quicker and easier value gains ?

l VA/VE can be applied quickly in any phase of a project and at any level of its Work Breakdown Structure. VA/VE done at the pre-quotation-submission / order-acceptance stages, is typically called ‘Value Engineering’, as it can prevent unnecessary costs ‘at source’. ‘Value Analysis’ is profitable at the start of project implementation and at the phase-and- components levels during ‘milestone review’ stages of an on-going project.

l VA/VE is a practical ‘learn by doing’ team approach. It can selectively identify the few phases and components, consuming effort and time disproportionately more than the worth of the functions they seek to accomplish. This is done by ‘blasting’ a project into its phases and carrying out a ‘Cost vs. Functional Worth’ comparison - also known as ‘ IS vs. SHOULD BE ‘ comparison in Process Value Analysis / Process Redesign. The focus is on : What does the effort DO in meeting the customer –required functionality and what is its worth in relation to the cost? There are several functional evaluation techniques available.

A study on the pattern of time spent on activities – important and/ or urgent – was very revealing. Executives (and project teams) in High performance companies, striving towards World Class, spent more than 50% of their time in the ‘important, but not urgent’ Quadrant, engaged in planning, preparation, clarification, prevention of problems by anticipating them, building relationships, honest listening / learning etc. Only 15% of their time was spent doing things ‘urgent, but not important’ Poorly performing teams spent their time the opposite way around ! To the extent ‘urgency’ drives project teams, ‘importance’ does not; software firms will do well to learn from it and act on what they have learnt.

Can Software Projects Afford To Ignore VA/VE ?

Yes, only at their peril ! A resounding ‘NO’, if they want to survive and grow in their fiercely competitive market-space. Software enterprises and their project teams can derive multiple benefits by adopting VA/VE as a way of life. Such an adoption will re-energize the teams and their work-place. Teams will proact more than react rather helplessly to the ever-demanding external environment.

As someone tongue-in-cheek said : “If you do not adopt VA/VE, your competitor will ; then your survival will become increasingly more difficult.” Software companies taking the ‘early bird’ VA/VE advantage will prosper better in the 21st Century !

The author is a Management Process Consultant based in Bangalore. An ex-Faculty Member of IIM-B, he was awarded by SIVAM (Society of Indian Value Management) for his ‘outstanding services to value management’.

Issue BG31 Oct03

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