Introducing “Unravelling the Price of ‘Failure’: The Hidden Costs of Unsuccessful IT Projects and How to Avoid Them“: A Guide to IT Project Success
In the ever-evolving digital landscape, IT projects are becoming more complex and critical for businesses to thrive. However, with failure rates alarmingly high, it’s essential to understand the factors contributing to these setbacks and how to successfully navigate the complexities of transformational IT projects.
Research presented separately by both McKinsey and BCG estimate the failure rate of large scale IT digital transformation programmes might be something like 70%. Gartner Group, meanwhile, has reported that as many as 75% of US IT projects fail, to some extent.
These are scary numbers but there is nuance within them. ‘Failure’ in this context, is subjective, as well as being a highly emotive term. Some of these high percentages capture project delays and missed deadlines, budget overruns – both big and small, apparent inability to deliver what was originally anticipated and planned for, as well as project cancellations.
Outright project abandonment, though relatively rare, is sometimes necessary and can be heinously expensive. One example, in a sector where we’ve done a lot of work with clients, was when leading UK building products retailer, Travis Perkins chose to invest in an Infor ERP platform in 2016. For many reasons, by 2019 Travis Perkins had written off over £100 million relating to that particular IT project and was seeking damages from the vendor ahead of its decision to replace its original choice with another product. The Google waves are awash with many other such large project transformation disasters.
Our own experience is that about 20% of our new client engagements over the last 3 years have included some form of ‘project recovery’. That proportion declined slightly in 2022 as we completed more in the way of new mandates with already established clients and where we had greater project visibility from the outset. But the proportion of engagements requiring remedial work, with new clients was still significant. We expect the proportion of that sort of recovery work to increase over the course of this year. Here’s one case study example of the type of project recovery work we’ve been completing in recent years – Healthcheck saves firm from potential £10m overspend | Panamoure Consulting. A broad inclusion of people from the client, both IT and business unit managers, as well as a client-dedicated team from Panamoure assured the success of this project.
One of the main causes of for many project ‘failures’ (amongst a list of many) is that business management tend to think of any project that involves some kind of IT system as just a technology project. There’s tendency therefore for those implementations to end up as just an IT Services team project. What is often required, and would usually create more value for the business, is the inclusion of personnel from across the business in the forefront of Discovery, planning, implementation, maintenance and knowledge management. For successful project completion, its typically having this breadth of people inclusion and commitment that drives it across the finish line. If there is insufficient inclusion and commitment, it’s hardly any wonder that a project might ‘fail’ or, at the very least, under-deliver.
One very important note – programmes that transform a business often come from a “pure” business need. It’s the business and how it needs to change, whether from a process, cultural or “tech” (solution) perspective, rather than just an IT improvement. Generally, it’s the business that requires change.
If the COVID-lockdowns presented any advantages, one key example was of businesses realising the importance of a fit-for-purpose digital infrastructure for business continuation and expansion. For some companies this was essential in order to continue any form of business during said lockdowns. For others it represented an opportunity to improve IT capability that was already in place and to open up new revenue streams. As many global markets enter another period of modest economic growth, or even recession, it means that those companies that are still at the early stage of their digital journey may be at considerably greater risk than more digitally mature competitors. An even worse scenario might be awaiting those that, spurred on by Covid lockdowns, rushed into digital transformation programmes without sufficient forethought, Discovery and planning.
As the figures in the first paragraph indicate, there is the very real possibility of IT projects being delayed, extended, going over budget, or being halted and abandoned altogether. Such decisions can be expensive, with upfront capital investment costs being written-off being the most obvious impact to the bottom line. Yet, there are also additional expenses relating to delay, project reassessment and remedial action, through to the lost working hours of IT professionals, as well as what cancellation or remedial work might do to their morale. In aggregate, the repercussions for economies can be substantial. In 2015, Wrike reported that for every $billion invested into IT projects, $109 million is lost or wasted and in 2020, the Consortium for Information & Software Quality (CISQ) estimated that the cost of failed software project development efforts alone amounted to over $260 billion. Of course, most of the smaller ‘failures’ don’t make the press, or even become public knowledge so the true cost of global IT ‘project failure’ is almost certainly higher and probably incalculable.
Whatever that figure might be, it represents a huge waste of corporate, financial and human capital effort. Much better to “get it right first time”. Avoidance is better than recovery, but if you are seeing the warning signs of a ‘failing’ project, here are your options, from worst to best:
- If ‘failure’ is so far advanced, with no realistic sign of delivery, then abandonment may be the best course of action, though as technology consultants, we would do our very best to avoid this hit to any company’s balance sheet.
- If the project is going critically wrong, the first correction tactic you need to use is to use is to ‘pause’ implementation (although it will be important to keep essential business processes progressing as usual, at the very least).
- Identify ‘failing’ projects, or elements thereof, early. This includes the people element too. Has your IT team been working in isolation, without input from your Business units? Problems of this kind, identified early, can often be more easily remedied.
- Don’t ‘fail’. Succeed by identifying, planning and realising the anticipated project aspirations from the very start.
- Do better than ‘succeed’. A successful implementation is a superb result, but we would suggest an element of ‘failure’ if efficiency and additional revenue streams have been ‘left on the table’. Again, if your implementation people complement is complete at the beginning, ‘failure’ of this kind is considerably less likely.
Panamoure’s approach is to maximise the realised value to be gained out of any system implementation, irrespective of the technology involved. Getting it ‘right first time’ means maximising business benefit and ROI from the system as rapidly as possible. Our focus is on delivering the maximum ‘bang for your technology buck’ to our clients.
Do you have an IT Project that you believe is failing? If so, please submit your details below and one of partners who specialises in project recovery will review your case and be in touch.