CIO analysis: Why 37 percent of projects fail

Summary:New research identifies five important reasons that projects fail.

A study by project management consulting company, PM Solutions, identifies top causes of IT failure.

The report, called Strategies for Project Recovery (PDF), covers 163 companies roughly split between small, medium, and large organizations. On average, respondents manage $200 million in projects each year, of which approximately 37 percent are "at risk." The average company in the study therefore faces $74 million of "at risk" projects each year.

The study identifies five top causes of troubled projects:

  1. Requirements: Unclear, lack of agreement, lack of priority, contradictory, ambiguous, imprecise.
  2. Resources: Lack of resources, resource conflicts, turnover of key resources, poor planning.
  3. Schedules: Too tight, unrealistic, overly optimistic.
  4. Planning: Based on insufficient data, missing items, insufficient details, poor estimates.
  5. Risks: Unidentified or assumed, not managed.

According to the survey, the most common obstacles that interfere with recovering failed projects are:

  • Getting stakeholders to accept the changes needed to bring the projects back on track-whether they are changes in scope, budget, resources, etc.
  • Poor communication and stakeholder engagement; lack of clarity and trust.
  • Conflicting priorities and politics.
  • Finding enough qualified resources needed to complete the projects.
  • Lack of a process or methodology to help bring the project back on track.

STRATEGIC ANALYSIS

This study is useful but not groundbreaking; it sheds light on a common problem, reaffirms existing beliefs on causes of failure, and brings attention to important issues.

The 37 percent failure rate is notable because it falls within the broad range of statistics (thirty to seventy percent) that most studies report, even though it is somewhat surprising the number is so low. This report did not focus on failure rates, but instead emphasized project recovery, which could have affected these specific results.

Failure rates are notoriously difficult to measure and virtually impossible to compare across multiple studies by different researchers. Therefore, consider specific failure rates as suggesting problems and relative magnitude of seriousness; failure statistics are not absolute indicators.

Related: CIO analysis: Defining IT project 'success' and 'failure'

Nonetheless, it's incredible to consider that over a third of projects in this study are likely to have serious problems. The financial impact of these failures is significant and meaningful, to say the least.

It's easy to brush aside the five causes of failure listed above, thinking they offer nothing new. However, such superficial views do not help solve the problem. It's far better to acknowledge the challenge and difficulty of aligning expectations and perceptions across a diverse set of stakeholders, which is a fundamental obstacle to project success. That's why this blog discusses change management so frequently.

CIO perspective: Acknowledge the reality of project risk -- vulnerabilities from so-called "obvious" sources represent a clear and present danger to your organization. To address these inherent risks, develop improved methods for communication, collaboration, and information sharing across silos and departments, both inside your organization and with external partners.

In addition, consider methods for making your projects more adaptive. On many projects, decision-making is a step function where information gathered over a relatively lengthy period culminates in periodic review and analysis. Reduce these decision cycle times to keep your projects responsive to changing conditions and requirements.

Solving the IT failures problem is difficult precisely because there is neither a silver bullet nor a clear target at which to aim. Forward thinking CIOs will recognize these realities and innovate by constructing a broad-based, long-term campaign to ensure that project outcomes align with organizational interests.

Update: Argentinean IT consultant, Carlos Francavilla, translated this post into Spanish, which you can read here.

Topics: CXO, IT Employment

About

Michael Krigsman is recognized internationally as an analyst, strategy advisor, enterprise advocate, and blogger. For CIOs and IT leadership, he addresses issues such as innovation, business transformation, project-related business objectives and strategy, and vendor planning. For enterprise software vendors and venture-funded star... Full Bio

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