A Rocky History: Studies of IT Project Failure

Posted in Strategy & Management and tagged , , , , , , , , , , , , , , .

Studies over the past 15 years show enterprise software project failure rates ranging between one-third and two-thirds. Failure is defined in various ways – over budget, taking much longer than planned to implement, causing major business disruptions, or simply abandoned. 

The OASIG Study

OASIG, an organizational management group in the UK, commissioned a study in 1995 that involved interviews with 45 experts in management and business who had extensive experience with information technology projects either as consultants or researchers. The in-depth interviews revealed a dismal 20%-30% success rates for IT projects, and the reasons cited for the overall poor track record were:

  • Failing to recognize the human and organizational aspects of IT;
  • Weak project management; and
  • Unclear identification of user requirements. 

The Chaos Report

The Standish Group is a research and advisory firm that in 1995 published The Chaos Report, which found

  • Only about 15% of IT projects were completed on time and on budget;
  • Thirty-one percent of all projects were canceled before completion;
  • Projects completed by the largest American companies had only about 42% of the originally proposed features and functions.

The firm extrapolated the results to estimate that in 1995, eighty thousand projects were canceled, representing approximately $81 billion in wasted spending. 

The KPMG Canada Survey

In 1997 accounting firm KPMG studied why IT projects fail. The top reasons were:

  • Weak project management, including insufficient attention to risk management;
  • Questionable business case for the project;
  • Inadequate support and buy-in from top management. 

The Conference Board Survey

In 2001 The Conference Board surveyed 117 companies that had started or completed ERP software projects. The results showed that:

  • Forty percent of the initiatives did not produce the expected benefits within a year of completion;
  • On average respondents reported spending 25% more than expected on the implementation and 20% more on annual support costs;
  • Only one-third of the respondents said they were satisfied with their results. 

The Robbins-Gioia Survey

In 2001, management consulting firm Robbins-Gioia queried 232 companies across a range of industries about their IT investments, particularly investments in ERP systems. Of the companies that already had an ERP system in place or were in the process of implementing one:

  • Fifty-one percent said the implementation of the new system was unsuccessful; and
  • Forty-six percent said they believed their organization didn’t know how to use the ERP system to improve business results.

My take on these studies is this: Projects fail for many different reasons, but nearly all of those reasons can be tied back to human factors. The likelihood of success is directly correlated to the decisions you make, the strength of your project team, the way they manage the project, the way you manage the team, and particularly the strength of your project manager (PM).

SharePin on PinterestShare on LinkedInEmail this to someoneShare on FacebookShare on Google+Tweet about this on Twitter