Why do projects fail?

Create a common culture between IT and business people to reduce protect failures

With users and managers now involved, why do projects still fail?

Why is IT so poorly managed. In the US alone it is estimated that more than £52bn is wasted on failed IT projects every year.

Since the mid-1990s the search for an answer to this question by research companies and academic institutions has focused on three main difficulties:

  • Aligning IT with organisational cultures
  • Lack of user involvement in design and development processes
  • Lack of precise mapping of the business processes the systems are intended to support.

Most studies also emphasise the importance of senior management’s active involvement in strategic IT decisions.

This research appears to have had an impact on the management of IT in most organisations. Today’s businesses have an overwhelming number of IT committees that involve end-users and business sponsors at every level in the decision-making process and the design of almost all corporate IT development projects.

Senior management can no longer avoid taking an active role in the formulation of corporate IT strategy and, in most cases, large IT projects must be presented in a cost-benefit perspective for funding approval.

Apparently everything is done to comply with the lessons learnt during the early 1990s. Nonetheless, despite these efforts, the failure rate of large IT projects and the resulting financial losses is still significant.

In a 2002 study of the success of large customer relationship management projects, researchers from management consultancy McKinsey found that at least 60% of projects did not meet the expectations of the managers responsible for the investment decisions.

On the financial side, the expected revenue growth and other expected advantages had not been realised. In some industry sectors, 80% of CRM projects failed to provide any contribution to economic performance. A large proportion of the projects missed deadlines, and cost overruns of 200% to 300% were not unusual.

In the case of CRM projects, most senior managers did take an active role, simply because the projects were extremely costly.

Today, hundreds of CRM systems sit idle and unused on corporate networks and all involved wonder what went wrong. The answers that came up in the McKinsey study are identical to the answers in the analysis of the mid-1990s: a lack of clearly defined objectives, weak organisational alignment and technical problems.

The reasons why IT projects fail today are more often down to a lack of alignment between the culture of the IT department and the general business.

The big problems are no longer rooted in a lack of end-user involvement, business sponsor involvement or the involvement of senior management. Everyone appears to be heavily involved, but in many cases this has an unintended result – IT project designs become burdened with hundreds of "special needs" that require complicated and costly customisation.

For more on the subject, read the book Outsourcing-Insourcing: Can Money Be Made From the New Relationship Opportunities? by Per Jenster, David Hussey, Patricia Plackett and Henrik Stener Pedersen, which can be ordered online (ISBN 0470844906) from:

www.wiley.com

This was last published in March 2005

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