The survey of 450 IT directors across UK, Germany and France found 73% saying their company had suffered major faults with their IT systems.
Lack of quality in software had a direct impact on business performance, the IT directors said, with 36% believing IT failure led to "considerable reduction in turnover".
Some 43% said poor software quality led to a substantial drop in staff productivity and 45% believed poor software quality damaged the company's image among clients and prospective clients.
The most likely software fault experienced by the IT directors surveyed was a slowdown in the application (63% of respondents). But the IT directors admitted they had experienced more serious errors such as problems with functionality (59%), application unavailability ie crashes (38%) and improper representation of business processes in applications (19%).The survey also highlighted the problems of implementing business goals within an IT strategy. While UK IT directors had a strategy to align IT with the business, 63% felt they were being held back because of difficulties their management colleagues had in grasping the constraints and challenges faced by IT departments.