IT Project Failure Rates are set to improve

Posted by Kevin Brady on Fri 5th February 2010 at 01:57 PM, Filed in Project ManagementProject /Programme FailuresLegalsIndustry News

I just read this morning of a land mark legal case between BSkyB and EDS which is set to change the way IT Projects are run in the future.

The Technology and Construction Court found in favour of BSKYB following the company’s five-year battle with EDS over a failed customer relationship management (CRM) system. The case is the most expensive legal dispute in the history of the IT Industry, costing both sides an estimated £40m each. I have to say with 70% IT Project failure rates (please see CHAOS survey ) it is a surprise we have not seen a case like this earlier. It is extremely rare for an IT supplier to be accused of fraudulent misrepresentation and even rarer for a supplier to be found guilty of it. Make no mistake this is a landmark decision which in my view will give rise to   suppliers reviewing sales techniques (no longer will project managers be a salesman’s flunky), contractual arrangements and what is presented to customers in terms of their capabilities, services and products. Oversell and a supplier’s days could be numbered.

This judgment and the potentially huge settlement are of such magnitude that no supplier can afford a project failure. They will all have to be more careful in assessment of risk, more careful in what they bid for, and will face increased bidding costs because of the extra preparatory work. No longer with IT Projects be oversold and prior to sign up suppliers will have to take more steps to assess whether a project is feasible and the client is prepared to:-

• Specify in detail their requirements
• Accept “fit for purpose” governance
• Accept the adoption and application of Project Management best practices
• Tolerate the employment of experienced qualified Project Managers

As a former Lloyd’s Underwriter of Professional Indemnity Insurance I can certainly say that this judgment and its huge payout to the plaintiff will have a dramatic impact on premiums for fraudulent misrepresentation and professional indemnity. Insurance costs will be another factor in pushing up IT development bid prices. I believe some suppliers may not bid if they think the user is uncertain about their requirements and are unwilling to follow project management best practices. I truly believe that some IT buyers may face fewer bidders or no bids at all. 

BskyB won its five-year legal battle against EDS after judge Vivian Ramsey accepted BSkyB’s claim that EDS had misrepresented its capabilities in selling a CRM system, though EDS’s new owner HP will seek leave to appeal. BSkyB’s lawyers, Herbert Smith, say EDS will have to pay a minimum of £200 million which is several times the cost of the original system. BSkyB was able to show that EDS’s main witness, CRM practice jead Joe Galloway, had lied. EDS dismissed Galloway as soon as it discovered that he had lied in court. The question I would like to ask knowing the industry only to well, is what parting gifts or “Golden Good Bye” is Joe Galloway receiving on the way out.

I predict this judgment will cause lawyers to question the contracts between suppliers and users. Misrepresentation undermines the contractual deal. It means the customer can recover an amount greatly in excess of the contract value. It undermines the certainty and contracting principles which suppliers and customers have assumed for many years. In the past the contract was regarded as sacrosanct. This judgment shows shows that the contractual cap on potential liabilities in the event of a failure may mean little if the user can establish that the supplier misrepresented its capabilities.

I fully expect the old boy IT Consultancies to cotton onto the meaning of this judgment but the Indian outsources often having a lack of management maturity and due to their rapid growth have a God Like Attitude of “we can do anything” and a cultural inability to use the words NO. However, in my view given time all IT Suppliers will need to change client engagement and project management practices. I fully expect to see in coming years a beneficial impact on the 70% project failure rates we have all become accustomed too, and the employment of qualified /proven and experienced Project Managers.

No longer will I have to interview Project Managers for their “skills project undertakers” but their abilities to deliver correctly estimated, managed and successful delivered projects. Fantastic smile

 

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READER COMMENTS:

Kevin,

I am not sure that your statement quoting the Chaos Report “with 70% IT Project failure rates” is correct.

I wrote recently about this topic that we need to be able to examine the underlying data and measurements methods used as the basis for any report or study on IT project failures. Without examining the data, continuing to quote such reports is simply engaging in groupthink.

I have long felt that the people behind the Chaos Report, which is frequently quoted on IT failures, have the most successful marketing machine I have see in long time. It is amazing how the report managed to become an authority on IT project management, just by continuously showing how much IT is lousy at project management.

The rest of the article questions the definition used for “challenged” category in the standish report. More here:

(let’s-say-no-to-groupthink-and-stop-quoting-the-chaos-report) 

See comments there with link to an other article from Roger Sessions challenging the Chaos Report.

Posted by Samad Aidane  on Fri 5th February 2010 at 03:57 PM | #

Thanks for this important contribution. Well argued and well thought out. I agree about Standish being a huge marketing machine and this effects the impartiality of their publications.

However the problem is the same as getting independent financial advice “There ain’t no such thing as independent financial advice !” However, does that mean we should ignore all studies /polls etc and live in a vacuum. I think this would be a mistake especially when in this case there are numerous other surveys with corroborative research findings. Unless your suggesting next a conspiracy theory among all these other groups I think the Standish Groups failure statistics compare reasonable well with other studies.

In fact you might be surprised when I state that I believe (backed up with evidence I cannot share) that the CHAOS survey in my view for marketing reasons is actually a tad light on actually how bad the real failure rate situation is in the IT industry at this present time. Remember the large outsourcers and consulting companies spend LARGE sums of money (special departments) on building relationships with groups such as Standish etc and failure is something these organisations want to see a positive rather than a negative spin on such surveys (as a minimum). These failure rates hurt sales and makes the sales process more protracted. On multi million pitches for business I have witnessed this.

In my view the CHAOS survey covers projects of all sizes and does not show how problems get worse as project size increases. Having worked in the Webs Industry project failures are low due to plug in technologies and the small size of project teams. However, as size increases the failure rates (where both sides agree failure has occurred)increase exponentially. I have internal stats that prove this but I can’t publish. Take my word for it as a Programme Troubleshooter for some the worlds biggest organisations that large scale programmes /projects fail 90% of the time not 70%. Furthermore, my definition of failure in this case is > It’s where client and customer agree it’s screwed - SIMPLES smile. The only reason why you rarely see these things go public or worse go to court is compromise, backroom deals, out of court settlements and even threats to pull skeletons out of cupboards. If you don’t believe the later point take a look at the Wonderful Book “Rip Off” http://bit.ly/du0a6fleshooter which is all about how the industry has been making failure pay for 30 years . Must Read in my view !

My only surprise which has been something I have scratched my head about for many years until I have a bald patch as big as a BskyB satellite dish is how a case has not come to court earlier. 

Posted by Kevin Brady  on Thu 11th February 2010 at 03:35 PM | #

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