As I've been writing about the organisation of the future, two key drivers for change have been agility and appropriate economics. When we put this into an IT context, what this means is that IT projects in the future, even more than today, need to be completed on-time, and on-budget. In IT circles, and indeed more generally in business circles, there is something of an expectation that IT projects rarely deliver what they're meant to in terms of completion time or cost. However, business myths and reality are sometimes different so finding some empirical measures for these things is important. Recently I saw some worrying statistics in a report out of the University of Oxford in the UK that suggested the status quo around IT projects is even worse than the naysayers had assumed.
The authors of the study, Bent Flyvbjerg and Alexander Budzier, carried out a global study that looked at IT change initiatives. The pair examined nearly 1500 IT projects and compared budget and expected performance benefits with the actual costs and results. The findings from their study were generally damning, but what is really interesting is the spread of cost overruns. Flyvberg and Budzier suggest that it is this figure, with some projects going over budget in terms of cost and time up to some hundreds of percent, that will potentially destroy a major corporation in the near future.
First, a couple of examples the pair found to highlight the impact of this issue:
Theese attention grabbing stories are less important than the metric for IT failure. In the study, the academics found the average cost overrun for a project was 27 percent. While this isn't ideal, its arguably manageable. Unfortunately they also found a large number of outliers with one in six of the projects studied, generating cost overruns of 200 percent. The pair say that:
This highlights the true pitfall of IT change initiatives: it’s not that they’re particularly prone to high cost overruns on average, as management consultants and academic studies have previously suggested. But rather, it’s that an unusually large proportion of them incur massive overages. IT projects are now so big, and they touch so many aspects of an organisation, that they pose a singular new risk….they have sunk whole corporations. Even cities and nations are in peril. It will be no surprise if a large, established company fails in the coming years because of an out-of-control IT project. In fact, the data suggests that one or more will.
This is, of course, an attention grabbing sentence. But if we look at these statistics in the context of a rapidly changing organisation, pressured economy and demand for ever more flexible tools, we can see that the problems raised by the study will only grow in the years ahead. Technology leaders need to change the way they look at IT projects. Some key tips:
IT is critical, and will only grow in criticality in the future. Ensuring that IT projects happen on time, on cost and, most importantly, deliver the benefits that are intended of them will be the CIOs lodestone as we enter the new world.