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What is Project Failure?


 

Defintion of Project Failure

IT project failures are far more common than most people expect. In the last decade numerous studies and surveys on IT projects have shown that the success rate is around 25%, the failure rate is about 25%, and partial successes and failures fall somewhere in the middle. Typically, there are two types of project failure namely:

  

 A project that consumes resources but fails to deliver an acceptable Return on Investment (ROI), is terminated before completion, or is poorly scoped so resource allocation is insufficient. This results in low adoption, or produces insufficient value and no learning lessons. This can be deemed a project failure.

 

 Another project failure is one that consumes resources but fails to deliver as proposed, exceeds its budget, exceeds its time, and doesn't meet specifications.

UK flights grounded for 24 hours


Analysts Reports on the Problem

KPMG International's Survey of 600 organizations across 22 countries revealed that 86% of respondents reported the loss of up to a quarter of their targeted benefits across their project portfolios. Nearly half of respondents reported at least one project failure in the past year, an improvement from KPMG’s 2003 survey where 57% experienced one or more project failures in the previous 12 months. 86% of projects have a business case but over 60% ignore it.
Sources: KPMG in Information Age April/May 2006.

 

Standish CHAOS Chronicles v3.0

This was the earliest and first report (1994) by a research group on the subject of project failures. Standish followed up the article every 2 years with new reasearch. The "Extreme CHAOS 2001" report found a steadying improvement in the success rate of projects. The reasons for the increase (1994 to 2000) in successful projects vary. The average cost of a project has been more than cut in half. Better tools have been created to monitor and control progress, and more highly skilled project managers are using improved management processes. The fact that there are processes is significant in itself. Most of these new projects are well within The Standish Group's criteria established in "Recipe for Success, 1998," which limits project duration to six months and project staff to six people.

 

 "A quarter of the benefits of IT projects are being lost by organizations across the globe because of management failures during a project’s lifecycle..."
Source: KPMG International survey, Nov 2005  

 

In the latest CHAOS Summary 2009 report from The Standish Group, that surveyed 400 organizations, found that IT project success rates were dropping. In the past two years, it found that 24% were considered a failure (cancelled before completion or never used). Up to 44% were considered challenged and 32 % were considered successful, completed on time, and on budget.
 

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Does Project Failure Happen Often?

There is evidence to support that project success rates are rising. The original Standish's 1994 CHAOS study found that only 16% projects met the criteria for success—completed on time, on budget, and with all the features and functions originally specified. In subsequent studies this rate has improved and project failures have decreased.

Sources: http://www.softwaremag.com/archive/2001feb/CollaborativeMgt.html and “Chaos, a recipe for success”, Standish Group, 1998
 

For 2004 results show that 29% of all projects succeeded (delivered on time, on budget, with required features and functions); 53% are challenged (late, over budget and/or with less than the required features and functions); and 18% have failed (cancelled prior to completion or delivered and never used). A staggering 66% of IT projects prove unsuccessful in some measure, whether they fail completely, exceed their allotted budget, aren't completed according to schedule or are rolled out with fewer features and functions than promised.

Sources: http://www.standishgroup.com/sample_research/PDFpages/q3-spotlight.pdf Chaos, 2004

 

IT projects are notorious for being over budget. In fact, Gopal Kapur, president of the Center for Project Management in San Ramon, Calif., estimates that 77% of projects blow their budgets, with an average cost overrun of 169%. As for the remaining 23%, Kapur doesn't have a lot of faith in those project managers. "They just lie about it," he says.
Sources:
http://www.computerworld.com/action/article.do?command=viewArticleBasic&articleId=95196 August 16, 2004 (Computerworld)

 

In 2005 organizations and governments will spend an estimated $1 trillion on IT hardware, software, and services worldwide. Of the IT projects that are initiated, from 5 to 15 percent will be abandoned before or shortly after delivery as hopelessly inadequate. Many others will arrive late and over budget or require massive reworking. Few IT projects, in other words, truly succeed.
Sources:
http://www.spectrum.ieee.org/sep05/1685 September 2005 (IEEE)

 

 

Sainsbury

 

Project success and failure

Notable Project Failures

The following list of failures happened within the project itself supporting the Standish claim that close to 50% of projects are seriously challenged:

 

 

       The IRS project on taxpayer compliance took over a decade to complete and cost the country an unanticipated $50 bn.

        The Oregon DMV conversion to new software took eight years to complete, the budget grew by 146% ($123m).

               Public outcry eventually killed the entire project.

       The State of Florida welfare system was plagued with numerous computational errors and $260m in overpayments!

        In September 2006 Department of Homeland Security admitted project failure.

               The Emerge2 program closed with a loss of $229m (a new financial IT system).

        In May 2006 the disastrous Seasprite helicopter program for the Australian Navy was stopped.

               With $1bn spent, the helicopters were grounded due to software problems.

        In April 2005 inter-departmental warfare played a significant role in the failure of a $64m federal IT project.

        In 2005 British food retailer J Sainsbury wrote off $526m automated supply-chain management system.

        In 2005 US Justice Department Inspector General report stated $170m FBI Virtual Case File project was a failure.

               After 5 years & $104m in expenditures.

               In one 18-month period, the FBI gave its contractor nearly 400 requirements changes. 

        In 2005 the UK Inland Revenue produced tax payment overpayments of $3.45 bn because of software errors. 

        May 2005 major hybrid car manufacturer installed software fix on 160,000 vehicles.

               The automobile industry spends $2 to $3 bn per year fixing software problems.

        July 2004 a new government welfare management system in Canada costing $200m.

               It was unable to handle a simple benefits rate increase.

               The contract allowed for 6 weeks of acceptance testing and never tested the ability to handle a rate increase.

        In 2004 Avis cancelled an ERP system after $54.5m is spent

     In 2002 the UK government wasted £698m on Pathway project, smartcards for benefits payments.

             £134m overspend on magistrates' courts Libra system.

Notable Operational Failures in Implementation

Most problems with IT projects happen during the implementation, after the solution is built and has undergone testing. For example:

  

 

 The Hershey Foods ERP system implementation failure ($112m).

      Led to great distribution problems and 27% market share loss.

 The FoxMeyer Drug ERP system implementation failure led to the collapse of the entire $5 bn company.

Notable Operational Failures in Post Implementation

A more critical failure is after the implementation maybe days, weeks, or month into operation. These are the most expensive failures. The project has been deemed completed and therefore successful. These failures are unpredictable, unexpected and by far the most costly, because of impact on customers. With the arrival of the internet and ecommerce businesses have become increasingly more dependent on their operational systems to the point where if they are unavailable this can have a massive impact on the organization at different levels. The following list  of failures happened post-project after the implementation:


 
 

So Why Do Project Failures Happen?

When you examine the root causes to these problems, or failures, they tend to trace back to decisions made in all stages of the IT project. In parallel, investments in technology are not enough and need to be supported by investments and changes in processes and organization. To learn more about these type of failures and root causes read about Titanic Lessons for IT Projects. More sources:

       Software Horror Stories (Nachum Deshowitz, Tel Aviv University)

       Wired History's Worst Software Bugs