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Moneyball IT -- A new way to measure and manage IT delivery risk
Moneyball IT (or "Moneyball for IT") is a cutting-edge methodology for identifying, reducing and transferring the delivery risk of information-technology projects, particularly in software development. Moneyball IT is based on insights developed by Robert Zafft in response to ineffective conventional risk-management and loss-control methods, as well as efforts to apply black swan theory to IT projects through so-called black swan management. Practical implementation of Moneyball IT has been developed by Zafft and Loren Nickel, FCAS, CFA, MAAA.

Moneyball IT's Basic Insight -- Manage IT projects on a portfolio basis using risk/loss-control techniques adapted from fields like boiler operations and construction
Traditional efforts to improve IT performance treat project delivery as an operational endeavor driven by technologists. What often results are ever more complex and expensive implementation methodologies, as well as value destruction on a massive scale.

Moneyball IT, on the other hand, treats IT projects as business endeavor which must be evaluated in financial terms, both as standalone efforts and in relation to other efforts competing for resources. Moreover, a client or vendor’s projects represent a rolling collection of endeavors. They are best analyzed and managed as a portfolio. Proof of success will not only come through better project delivery and business Return on Investment but the ability to insure IT projects for timeliness, adherence to budget, and full functionality.

The data, insights and opportunities generated by a financial, portfolio approach constitute "Moneyball IT", a play on the term Moneyball to describe a novel application of data analytics which upends conventional wisdom on performance metrics and drives a step change in productivity in large, highly visible industries.

Moneyball IT's Central Tenets -- Cross-functional underwriting, portfolio analysis and re/insurance risk transfer
The first tenet of Moneyball IT posits that successful project management requires a cross-functional approach. Successful project management in other complex-project fields like transportation, construction and healthcare shows that mis-communication and misalignment among project stakeholders generate the lion’s share of large-scale failures. Moneyball IT combines independent, technically expert project evaluation with proven insurance risk-management techniques. The goal is to give CEOs and CFOs operational insight into -- and financial control over -- delivery.

Moneyball IT's second tent is that portfolio underwriting eliminates excuses and exposes root causes of failure. Proponents argue that because delivery is hard, there will always be some overruns, delays and impairments. By analogy, over time, even the best managed, best equipped and best staffed trucking fleet will have accidents. As with auto-transport risk, portfolio-based underwriting for IT projects creates transparency and accountability. Tracking outcomes across a portfolio uncovers root causes whose existence or significance might not be knowable at the individual project level. Across the portfolio, aggregate impacts can be measured and correlations among factors, determined. Most importantly, the portfolio approach leaves nowhere to hide. On any particular project, IT or vendors can usually give a plausible, exculpatory reason why the project did not succeed. But, many excuses that might work on any single project do not hold water across a statistically significant number of projects. Once identified, otherwise undetectable root causes can be addressed.

Moneyball IT's final tenet is that insurance risk transfer represents the acid test of delivery and underwriting performance. Insuring project delivery may seem outlandish, but companies already spend vast amounts of money on it -- with little-to-no transparency for the CEO or CFO. For example, IT departments effectively self-insure by putting “fat” in project budgets and by inserting certain projects in the annual delivery schedule which IT intends to cut or delay to pay for higher-priority projects. Such fat and sacrificial projects constitute an informal loss reserve typically comprising 10-30% of the annual implementation budget. Another way in which end users buy “insurance” is even more expensive: they hire blue-chip consulting firms. These firms typically cost at least 30-40% more than quality second- or third-tier

With Moneyball IT, stakeholders develop loss histories and ratings that influence the cost of insuring the projects in which they participate, in the same way a credit score affects the cost at which consumers can borrow money. Stakeholders therefore have very strong long-term incentives to perform individually and to take part in process improvements that require collective action. As for the underwriters, they are assessed by how accurately he predicted and priced overall project losses. Moreover, where the company obtains risk transfer via re/insurance, the underwriter has skin in the game.