Is IT Project Success an Oxymoron?
February 4, 2011 1 Comment
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MEGATREND: The costs of technology are falling, but the costs of technology failure are rising
I’ve had a number of great conservations this week on the ROI of IT projects, why technology-related change is so hard and the catch-22 scenario of “don’t innovate and perish” vs. “invest and fail miserably.” I’m going to focus first on the latter – why failure occurs – in a series of posts. These posts will cover why we should care about IT project failure (numbers and the stats), why the failures occur, and what can be done about it.
Why should we care
1) It’s a big part of the CAPEX and OPEX budget
Technology-related investments (conservatively) account for greater than 50% (and growing) of the typical firm’s CAPEX and OPEX budgets, according to the legendary Professor Peter Keen who has taught at MIT, Harvard, Stanford, Wharton among other places.
2) When IT Fails, it can kill a business and your career
It’s an essential part of service creation, delivery, and communication. It’s meant to serve these ends. When it sours, there is an absolute haemorraghing of shareholder value and customer experience. I wrote earlier of Motorola’s $5B investment in Iridium, and FedEx’s $1B alternative fax network, Zapmail but even more mundane, mainstream projects like implementing SAP turns into “Stops All Production,” as the CFO of a large manufacturing firm told me recently.
The knee-jerk response – ‘No one ever got fired for buying IBM’ represents a suspension of thought. The spending, as Carr points out, is driven not by the interests of the buyers but by the strategies of the sellers.
3) …and it Fails Often (but is often not measured or called a failure)
Of the more than eight thousand systems projects the Standish Group examined, only 16 percent were considered successes—completed on time and on budget and fulfilling the original specifications. Nearly a third were canceled outright, and the remainder all went over budget, off schedule, and out-of-spec. Large companies—those with more than $500 million in annual sales—did even worse than the average: Only 9 percent of their IT projects succeeded.
The cost overruns amounted to more than 50 percent of the original budget, and nearly a quarter of the over-budget projects exceeded estimated costs by 100 percent or more. Of the projects that went off schedule, 48 percent took more than twice as long as originally planned, and 12 percent took at least three times as long. Of the projects that were completed but fell short of initial expectations, more than 30 percent failed to deliver even half of the originally specified features and functions. Standish also found that almost all the projects—94 percent—had to be restarted at some point, and some had to be restarted several times over.
So if you thought yes to any of the above, don’t worry – you’re in crowded company. But success often comes through failure, so don’t be too hard on yourself. As the saying goes, when life hands you a lemon, make lemonade.
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