PM Article – The Current State of IT Project Failure

 

The Current State of IT Project Failure

 

-Priyanka Chakraborty

Where do we stand on IT project failures? Are success rates in the industry improving? Frankly, not really. At best, the old rates are holding steady. Let’s examine recent scenarios and industry statistics of IT project failure in order to both understand what is going on and also to find ways to buck the trend moving forward.

An example of a recent scenario is HSBC:In early-2016, HSBC became the first bank to suffer a major IT outage. Millions of the bank’s customers lost access to their online accounts. The bank’s CEO – Jack Hackett – citedthe failure of an internal system implementation project which stirred the outage.

Current State of Failure Rates – IT Projects

As evident from the above scenario, there are actual IT project failures happening. An annual survey (2016)of Innotas, a project management company, highlights that more than half of IT projects fail. Incidentally, it was two years after a similar survey displayed nearly identical findings.

55%of 126 IT professionals interviewed between Jan’15 to Mar’15 reported a project fail (despite having PMO and best PM practices), which was way above the 32% reported in 2014.

Some interesting statistics from recent studies depict:

• Organizations lose $109 million for every $1 billion invested in projects and programs.

• One out of six IT projects has an average cost overrun of 200% and a schedule overrun of 70%.

• Average Project Success Rates:

o 39% of all projects succeed (delivered on time, on budget, and with required features)

o 43% are challenged (late, over budget, with fewer than the required features)

o 18% fail (either cancelled prior to completion or delivery or never used)

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As a comparison, small-scale projects are considered to be more successful than the large-scale ones.

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Major Contributing Factors

The largest contributor to this continuing trend of IT project failures is poor estimation that occurs during the planning phase. Apart from this, lack of executive sponsorship contributes immensely to project failures. Despite being the top driver of project success, less than two in three projects had actively engaged project sponsors. Statistics depict 68% of projects don’t have an effective project sponsor to provide clear direction or help address problems.

The Impact of Project Failures–Time & Cost Perspective

If recent research reports are to be believed, a significant share of projects overruns their original timelines or budgets. Failing IT projects have average cost over runs of 59% and time overruns of 74%. Such cost and time overruns have an intense effect on national economies. One estimate of IT failure rates is between 5% and 15%, which represents a cost of $50 billion to $150 billion per annum in United States.

Poor project management comes with an enormous price tag; however, the costs aren’t always just financial. For instance, the failure of the FBI’s Virtual Case File software application cost U.S. taxpayers $100 million and left the FBI with an antiquated system that jeopardized its counter terrorism efforts.

In April 2015, Bloomberg’s London office suffered a major glitch resulting in their trading terminals malfunctioning. This happened at a crucial time when the UK’s Debt Management Office (DMO) was set to auction a series of short-term treasury bills. It eventually resulted in a significant monetary loss for the firm due to a combination of hardware and software failures in a project.

Several such instances have hampered the reputation and credibility of many firms in the respective markets and troubled their capability to bag new projects or client accounts.

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IT Governance – A Key to Positive Project Outcomes

Poor IT governance is likely to be one of the key causes of failure of big IT projects. Some major adverse outcomes would be increased costs due to the inefficiencies of short-term tactical IT deployments, risk of breaching data security and regulatory compliance necessities, and unproductive use of people and IT assets.

On the other hand, strong IT governance procedures provide a consistent, common language that helps create strong, long-lasting relationships, as well as build transparency into projects or processes. Listed below are some best practices offered by IT governance that are likely to deliver positive project outcomes, once implemented well:

• Better involvement from sponsors, stakeholders and business leaders

• Accurate estimation and planning

• Suitable and defined change management strategy in place

• Well-defined goals and objectives

• Sufficient resource allocation

• Maintenance of excellent records, emails, instructions, and meeting notes

• Adequate and timely risk planning

Conclusion

As evident from above statistics and details, IT project failures rates have the same trend as in the past. A viable solution to counter this issue is to have a strong IT governance in place and apply sound project management principles and controls to ensure better success rates. In addition, organizations also need to implement project management best practices to ensure better success rates for the IT projects.

“This article is owned by Computer Aid Inc aka CAI (http://www.compaid.co.in). The person mentioned in the author’s section coordinated to get necessary approvals to publish in PM Essence for sharing the knowledge with Project Management Community.”

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