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BLOG: Your IT project is riskier than you think

Joanne Flinn | Oct. 15, 2012
One in six IT projects fail, costing massively more than expected.

After paying his dues as a senior associate at McKinsey, Alex Budzier decided to see what really happened with strategies. His work at Oxford University with Professor Bent Flyvbjerg shows that IT-based strategies have unusual patterns of failure and success. Alex shared some insights with me over brunch one September Sunday in Oxford.

"We found a distinctly different pattern for IT projects - the big ones fail more often - it's a fat tail, not a normal distribution. They often cost two to four times what is expected," said Alex over scrambled eggs. "And what's more, nearly 50 percent of IT projects are under funded, they are starved."

"People get fired for failure, these big projects are high risk for careers. I'm looking into why a roomful of experts that get paid good salaries to be rational are still not making rational decisions." He and I dove into how politics, policies, psychology and group decision making all influence how risk and forecasts are constructed in business cases.

Alex's key points on business case, projects, policy and politics:

- Smart people are still part of the social system of the organisation. Approval and language affects them.

- Big projects are politically good for careers when they are kicked off even if they risk careers later on.

- Early warning systems for project success/failure need to consider more than average performance or percentage of on-time delivery.

I suggested that success or failure is not a dead certainly. Probability (and statistics) can predict which project is more likely to succeed compared to another. It can also give early warning signs like indicators of risks to project success (or failure). If measured and reported, this information helps executives pay attention to what is needed most.

Alex and I swapped stories on how an IT project at a Middle Eastern bank was successfully delivered on time despite a merger. He was amazed as it is rare for a project to succeed when a merger gets added into the mix. I shared that a friend on the project had told me "You should have been at the Steering Committee Meetings. The Sheik would come in with his big bodyguards - they had shining, sharp scimitars in their hands. It kept people really focused."

Fortunately, the wrong side of a scimitar is not part of most Steering Committees. Instead, get your early warning signals right. Monitor them. Discuss them in the Steering Committee. The risk of a 200-400 percent  (that's two to four times) budget over-run on major projects deserves monitoring.

Joanne Flinn is the author of 'The Success Healthcheck for IT Projects' (Wiley 2010).

 

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