Project Failure - How big is the Problem?

Posted by Kevin Brady on Mon 5th January 2009 at 12:56 AM, Filed in Programme ManagementProject ManagementProject /Programme Failures

It’s a Disaster

A good starting point for answering this question is the CHAOS (US) survey compiled by the Standish group, where it was noted from a significant sample set, that 70% to 91% of IT projects /programmes of work were judged as failures each year, with 40% of these cancelled prior to delivery.

Obviously, a project cancelled prior to delivery is surely in anyone’s books a failure. The criteria used to judge the rest as failures were based on whether the projects delivered systems which materially fell short in terms of required functionality, or significantly overshot targeted Time, Quality and Cost coordinates. In a previous post entitled – “Truth about IT Project Failure - How Big is the Problem” I cover this subject in more detail for those interested.

So what is IT Project /Programme Failure Costing The Nation ?

It is surprisingly difficult to find data concerning this important question because of the way companies hide IT Project /Operational costs within their balance sheets. I have therefore come up with my own national UK cost estimates based on the extrapolation of a few facts:-

These figures are based on the Computer weekly /KEW Associates annual IT expenditure survey, which indicate that IT expenditure for the UK is in the region of £88.10 billion per annum.

If you then take half of this enormous figure as a low-end estimate of what is spent on new IT Project /Programmes of work, and apply the percentages - 40% for canned projects and 70% (conservative estimate) for the total annual percentage of failed projects /programmes of work you get the following figures :-

Total Canned Projects - £17.62 billion
Total Failed IT Projects /Programmes - £30.84 billion (political deliveries)

My view is that these figures are on the low side. If you believe what David Craig and Richard Brooks of Private Eye say in their excellent book “Plundering The Public Sector” then these figures are likely to “Explode out of the box” with an additional £30 + billion to come from failing NHS IT Programmes in the next couple of years.

The sad truth about impending NHS disasters is already leaking out - see my recent post – “Management Consultants Friends or Foe”. All of this, in my view, could have been avoided and is yet again another “New Labour Cock-up”. Please read PART 2 of that article where I explain what the government can do to make IT Project /Programme failures a thing of the part by changing the rules of the game.

From the statistics detailed above it is clear that investments in IT Projects /Programmes of work are “Strictly Investments not for Wives or Widows” as they say in the stock market. IT project /programme failure is a significant financial loss to the nation, and represents a sizable slice of industry’s overall operational IT costs. Outsourcing, Partnering, Off-shoring is not going to improve the odds of success and the associated financial costs, when the problem is of this magnitude.

The reasons for such huge failure rates and associated costs are structural, regulatory, cultural in nature, and symptomatic of an industry clearly in the “Wild West” phase of its development. However, I do believe following successful regulatory changes in the US, designed to curb some of the excesses of the large “money machines”, the European IT industry is on the verge of a long overdue regulatory shake-up of the industry. Most industries throughout history (such as insurance, engineering and construction) have gone through such an evolutionary process and have subsequently changed the way they transact business in the interests of the greater public good.

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READER COMMENTS:

Here in the US, the State of Wisconsin has eaten $178 million USD in failed IT projects. Poorly written Business Requirements, no control over scope creep, incompetence at the top and unrealistic schedules are the reason.  These failures have put much of the IT segment in doubt with rising unemployment the result.

Posted by Terry Dexter  on Sun 18th January 2009 at 11:12 PM | #

Thanks for the comment Terry. Your so right. It sadly all to typical. For me the waste becomes more of sick feeling when I think about the fact that $178 million could buy help for those people struggling with medical bills and the more disadvantaged in society. Total waste and those involved should feel ashamed at the waste of public money. Does anyone else have failure stories they wish to add to the comments section of this post.

Posted by Kevin Brady  on Mon 26th January 2009 at 01:27 PM | #

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