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 IT Project Failure : sample cased & why

Priyanka Chakraborty Assorted Authors, CIO, Risk Management

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

Recent IT Project Failures

NHS IT Projects (£5bn) at ‘High Risk’ of Failure – 2016

According to the recent updates from Health & Social Care Information Centre (HSCIC), National Health Service – UK faces a high risk of losing £5bn invested in IT projects. All the projects are presently struggling with “red” or “amber/red” status, thereby implying an unsuccessful delivery.

The HSCIC report suggests flagging of the £2.3bn CSC Local Service Provider (LSP) program, £168m NHSmail2 program, NHS Choices website, and Care.data program as these are unlikely to meet the pre-defined delivery norms. Most of these programs were originally started in 2003 or 2004 and have had an extremely troubled history since then.

IBM sued over SAP Project Disaster

IBM was slapped with a multimillion-dollar lawsuit in 2012 by chemical products manufacturer Avantor Performance Materials, which alleged that IBM lied about the suitability of an SAP-based software package it sells in order to win Avantor’s business. IBM had charged over $13 million from Avantor for a systems implementation project that was mismanaged and was unable to perform properly.

Current State of Failure Rates – IT Projects

As evident from the above scenarios, actual IT project failure rates are still looming in the dark. For instance, an annual survey (2016) of Innotas, a project management company, highlights that more than half of IT projects fail, 3 years after a similar survey displayed nearly identical findings.

In 2013, a survey from Innotas revealed that 50% of businesses measured had experienced an IT project failure within the last 12 months. Nothing much has changed in the last three years. On the contrary, according to the most recent Innotas Annual Project and Portfolio Management Survey, the numbers have increased. Fifty-five percent of 126 IT professionals interviewed between Jan’15 to Mar’15 reported a project fail, which was way above the 32% reported in 2014.

“The problem isn’t necessarily that there’s a shortage of project managers or technology tools to help organizations address these issues. It’s a problem with resource allocation and aligning those resources with business goals.”
-Tushar Patel, Senior Vice President of Marketing, Innotas

Some interesting statistics from recent studies depict this:

• Only 64% of projects meet their goals; organizations lose $109 million for every $1 billion invested in projects and programs.
• Average Project Success Rates:
  • 39% of all projects succeed (delivered on time, on budget, and with required features)
  • 43% are challenged (late, over budget, with fewer than the required features)
  • 18% fail (either cancelled prior to completion or delivery or never used)

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 2 in 3 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 an average cost overrun of 59% and time overrun 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 counterterrorism efforts.

A similar scenario can be seen for IBM in 2013 when it got sued over a $1 billion project that led to it being banned by Queensland, Australia. The matter in consideration was a custom computer project that was originally supposed to cost AUS$6 million and escalated into an over-budgeted AUS$1.2 billion, thereby hampering the reputation and credibility of IBM in the said market and its capability to bag new projects or client accounts.

IT Governance – A Key to Positive Project Outcomes

Poor IT governance is likely to be one of the key causes of failure in 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 & 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:

• Hands-on business leadership direction and sponsorship
• Creation of a formal business case to understand the value proposition of the project
• Assurance that projects are incremental with milestone verification
• Adequate checkpoints and tests along the way to mitigate the risks
• Acceptable resource allocation
• Establishment of a change management system
• Maintenance of excellent records, emails, instructions, and meeting notes
• Expert independent performance verification and audits
• Value delivery and benefits realization assurance

Conclusion

As evident from above statistics and details, IT project failures rates are still continuing the same trend as in the past. The only viable solution to counter this issue is to have a strong IT governance in place and apply sound project management disciplines and controls to ensure better success rates.

References

• http://www.cio.com/article/3068502/project-management/more-than-half-of-it-projects-still-failing.html
• http://www.pmi.org/~/media/PDF/RCP/PwC_PPPM_Trends_2012.ashx
• http://www.ittoday.info/Articles/State_IT_Project_Management.htm
• https://www.wrike.com/blog/complete-collection-project-management-statistics-2015/
• http://www.theregister.co.uk/2015/12/08/5bn_nhs_it_projects_high_risk_failure_hscic/
• http://www.gallup.com/businessjournal/152429/cost-bad-project-management.aspx
•  http://www.zdnet.com/article/poor-it-governance-key-to-project-failures/
• https://www.isaca.org/Certification/CGEIT-Certified-in-the-Governance-of-Enterprise-IT/Prepare-for-the-Exam/Study-Materials/Documents/Developing-a-Successful-Governance-Strategy.pdf
• http://www.bizjournals.com/pacific/news/2016/06/06/servco-pacific-files-lawsuit-against-mainland-firm.html