IT Projects Failures: Introduction and Reasons
Starting from the title, I assume most of us will agree with the fact that the ratio of large IT projects being failed is much higher than in any other discipline. Just in case if some of us have other thoughts let’s look at some of the fact and figures generated by the global surveys and researches to find out how the actual statistics stands.
Michael Block, Sven Blumberg, and Jürgen Laartz revealed the following in an article that was based on Mckinsey & Company’s research in collaboration with University of Oxford:
- 50 Percent of all large IT projects—defined as those projects with initial price tags exceeding $15 million—massively blow their budgets
- On the average, these large IT projects run 45 percent over budget and 7 percent over time, while delivering 56 percent less value than predicted
- 17% of large IT projects (budgets $15M+) go so badly they threaten the existence of the company
Patrick Thibodeau stated some of the figures from Standish Report in his article, important excerpts from which are:
- Of 3,555 projects from 2003 to 2012 that had labor costs of at least $10 million, only 6.4% were successful
- The Standish data showed that 52% of the large projects were "challenged," meaning they were over budget, behind schedule or didn't meet user expectations
- The remaining 41.4% were failures -- they were either abandoned or started anew from scratch
According to an article “Why Your IT Project May Be Riskier Than You Think” on Harvard Business Review:
- One in six IT projects have an average cost overrun of 200% and a schedule overrun of 70%
Project Management Institute annual survey report for 2015 with the title Pulse of the Profession 2015: Capturing the Value of Project Management 2015 reveals more interesting facts:
- Only 64% of projects meet their goals
- The average large IT project runs 45% over budget, 7% over time, and delivers 56% less value than expected
Whereas the PMI report for 2014 (Pulse of the Profession 2014 – The High Cost of Low Performance) stated:
- Organizations lose $109 million for every $1 billion invested in projects and programs
According to Project Management Survey 2010 by KPMG New Zealand:
- 60% of companies don’t measure ROI on projects
One look at the figures above can get the user of this information piqued and start looking for deal breakers. Before formulating any opinion as to the causes of the failures, it would be wise to review the global research and development stats again to see the causes of these failure stories.
Geneca, a software development firm, published a survey that consisted of 25 closed ended questions 596 individuals closely involved in the software development process completed it. The key findings of this survey were:
- Business involvement is inconsistent or results in confusion: 78% feel the business is usually or always out of sync with project requirements and business stakeholders need to be more involved and engaged in the requirements process.
- Fuzzy business objectives: Only 55% feel that the business objectives of their projects are clear to them.
- Requirements definition processes do not reflect business need: Less than 20% describe the requirements process as the articulation of business need.
- Lack of complete agreement when projects are done: Only 23% state they are always in agreement when a project is truly done.
Some common causes of failures with percentages were shared in the PMI report of 2015:
- Changing priorities within organization – 40%
- Inaccurate requirements – 38%
- Change in project objectives – 35%
- Undefined risks/opportunities – 30%
- Poor communication – 30%
- Undefined project goals – 30%
- Inadequate sponsor support – 29%
- Inadequate cost estimates – 29%
- Inaccurate task time estimate – 27%
- Resource dependency – 25%
- Poor change management – 25%
- Inadequate resource forecasting – 23%
- Inexperienced project manager – 20%
- Limited resources – 20%
- Procrastination within team – 13%
- Task dependency – 11%
- Other – 9%
Reasons to failure of IT projects as identified above in the Survey report of Geneca and PMI report of 2015 are self-explanatory and require no further discussion at this point.
This part of the article covers the reasons why IT projects face such a high failure rate. In the next part, I will discuss the practical remedies to mitigate the risk of failure and the best practices to adopt, to ensure the smooth-sailing of an IT project.
Disclaimer: The views expressed here are solely those of the author in his private capacity and do not in any way represent the views of Systems Limited, or any other entity related to Systems Limited.