Sten Vesterli

Making IT Live up to its Promise

Risk

Contingency Plans

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Last week’s episode of my podcast Beneficial Intelligence was about contingency plans. Texas was not prepared for the cold, and millions lost power. The disaster could have been avoided, had the suggestions from previous outages been implemented. But because rarely gets very cold in Texas, everybody decided to save money by not preparing their gear for winter. At the same time, Texans have decided to go it alone and not connect their grid to any neighbors.

In all systems, including your IT systems, you can handle risks in two ways: You can reduce the probability of the event occurring, or you can reduce the impact when it occurs. For IT systems, we reduce the probability with redundancy, but we run into Texas-style problems when we believe the claims of vendors and fail to prepare for the scenario when our redundant systems do fail. 

Texas did not reduce the probability, and was not prepared for the impact. Don’t be like Texas.

Contingency Plans

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This week’s episode of my podcast Beneficial Intelligence is about contingency plans. Texas was not prepared for the cold, and millions lost power. Amid furious finger-pointing, it turns out that none of the recommendations from the report after the last power outage have been implemented, and suggestions from the report after the outage in 1989 were not implemented either.

As millions of Texas turned up the heat in their uninsulated homes, demand surged. At the same time, wind turbines froze. Then the natural gas wells and pipelines froze. Then the rivers where the nuclear power plants take cooling water from froze. And finally the generators on the coal-powered plants froze. They could burn coal, but not generate electricity. You can built wind turbines that will run in the cold, and you can winterize other equipment with insulation and special winter-capable lubricants. But that is more expensive, and Texas decided to save that money.

The problem could have been solved if Texas could get energy from its neighbors, but it can’t. The US power grid is divided into three parts: Eastern, Western, and Texas. They decided to go it alone but apparently decided to ignore the risk.

In all systems, including your IT systems, you can handle risks in two ways: You can reduce the probability of the event occurring, or you can reduce the impact when it occurs. For IT systems, we reduce the probability with redundancy. We have multiple power supplies, multiple internet connections, multiple servers, replicated databases, and mirrored disk drives. But we run into Texas-style problems when we believe the claims of vendors that their ingenious solutions have completely eliminated the risk. That leads to complacency where we do not create contingency plans for what to do if the event does happen.

Texas did not reduce the probability, and was not prepared for the impact. Don’t be like Texas.

Listen here or find “Beneficial Intelligence” wherever you get your podcasts.

Risk and Reward

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Last week’s episode of my podcast Beneficial Intelligence was about risk and reward. Humans are very good at calculating risk and reward. That means we will do what is best for us, even if it is not the best for the company.

It is easy to create incentives for being fast and cheap, but hard to create good incentives for quality. That’s why we try to use incentives for speed and cost, but try to use QA procedures to ensure quality.

Incentives almost always win over procedures. As CIO, you need to make sure there are also incentives for quality. If not, you can be sure that your procedures will be circumvented, and corners will be cut.

Risk and Reward

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This week’s episode of my podcast Beneficial Intelligence is about risks and rewards. Humans are a successful species because we are good at calculating risks and rewards. Similarly, organizations are successful if they are good at calculating the risks they face and the rewards they can gain.

Different people have different risk profiles, and companies also have different appetite for risk. Industries like aerospace and pharmaceuticals face large consequences if something goes wrong and have a low risk tolerance. Hedge funds, on the other hand, takes big risks to reap large rewards.

It is easy to create incentives for building things fast and cheap, but it is harder to create incentives that reward quality. Most organizations don’t bother with quality incentives and try to ensure quality through QA processes instead. As Boeing found out, even a strong safety culture does not protect against misaligned incentives.

As an IT leader at any level, it is your job to consider the impact of your incentive structure. If you can figure out a way to incentivize user friendliness, robustness and other quality metrics, you can create a successful IT organization. If you depend on QA processes to counterbalance powerful incentives to ship software, corners will be cut.

Listen here or find “Beneficial Intelligence” wherever you get your podcasts.