Trend: Rooting Out Rogue IT

Two weeks after Bruce Goodman settled into his new job as CIO for Humana Inc., his bosses came to him with a problem. There was this little information technology project, see, that a business unit had independently begun—off the radar screen of the IT department—and guess what? It was spiraling out of control, millions of dollars over budget and months past its deadline. Could Goodman help? The Louisville, Ky.-based healthcare company's accounting department had taken it upon itself to beef up a basic billing system so it could process payments from many more customers.

But the technology wasn't working. "They used an outside consultant to build it, and then it became a runaway project when a key person left," Goodman recalls. And that was just the half of it. The people testing the new system had been using hypothetical numbers. When fed actual customer names, addresses, dates and amounts owed by thousands of clients, the new system simply shut down. "It was designed to all the wrong specs," Goodman says. "In the real world, it simply could not work." To turn things around, Goodman says, he had to wrestle with a beast that was projected to take a year to develop, but ended up taking three years to fix. Meanwhile, he says, "the $9 million budgeted for the project skyrocketed to a total cost of $30 million" before it was all over.

Sound familiar? Humana is not alone. Many CIOs get stuck cleaning up the mess of ill-fated "ghost IT" projects—those "shadow" technology projects that result when a business unit goes off and self-finances a technology project under the radar of the CIO, and frequently without the green light, cooperation or knowledge of the rest of the company. The resulting duplicate projects, systems that won't scale across the company and ill-designed initiatives can bleed a company white, wasting enormous amounts of time and money. In these anemic times, such underground activity is being frowned upon as never before. "It's a different ball game now," says Unisys vice president and CIO John Carrow. "Given the sheer cost of technology, you just can't afford to have everybody doing their own thing anymore."

Just ask UPS CIO Ken Lacy. He says UPS partners, on the fringes of the UPS extended enterprise, "sometimes feel there are ways to get around us in IT," perhaps believing they can do IT projects more cheaply and quickly than Lacy's corporate IT shop. "Somebody can say, 'I can do this for $150,000 when it would take Ken Lacy $1 million to do the same job,' " he says. The trouble with that? "Most of the time," Lacy says, "when people go out on a limb, they'll end up spending that $1 million they said they could save by going outside [the IT department], and then still not have the ramp-up they need" to make the project work on a larger scale throughout the corporation. In those cases, Lacy says, he is called in to redo the project, often at many times the original dollar cost, and at the expense of time that could have been spent on other initiatives.