Tata Consultancy: new IT failure stats and COO interview
Tata Consultancy Services (TCS), one of the largest Indian outsource consulting firms, with $4.3 billion in revenue, has released new IT failure research, based on survey results of 800 middle and senior IT managers from large companies.
According to the study findings:
- 62% of organizations experienced IT projects that failed to meet their schedules
- 49% suffered from budget overruns
- 47% had higher-than-expected maintenance costs
- 41% failed to deliver the expected business value and ROI
Business-critical software and services projects are clearly failing to deliver on the business objectives they set out to achieve. They take too long, cost too much and are riddled with defects.
1 in 3 companies’ IT projects fail to perform against expectations...
The finding that one-third of IT projects fails to perform against expectations does agree with other recent research (see here and here). Although this is not surprising, it's nice to see further confirmation from another study, especially one this large.
The innovation brought by this research relates to measuring the degree of management acceptance towards IT failure. The research concludes that senior management considers IT failure to be a routine occurrence. In other words, failed IT projects are considered the norm, and management seems to feel incapable of improving the situation.
To help interpret these results, I spoke with N. (Chandra) Chandrasekaran, Executive Director and Chief Operating Officer of Tata. The interview was conducted by phone: Chandra in India and me in Boston. We were joined by fellow Enterprise Irregular, Vinnie Mirchandani.
Why does management tolerate and accept such a high degree of IT failure?
The measurement of IT projects has historically been more a matter of art than science. Studies of the subject have shown great variance of results, no clear measurement methodologies, and a lack of process. As a result, customers have built up expectations, and a history of negative perception, regarding the level of IT failure.
In contrast, Tata has been measuring performance on IT projects for the last twenty years. Over time, we have built tools, and a fantastic set of metrics, that establish clear expectations for project success.
When you consider the size of the global IT industry, the most striking thing about this survey is the level of wastage reporting. The waste is probably at the level of hundreds of billions of dollars each year.
Please elaborate on the notion of customer perception with respect to IT projects.
We need to differentiate between the the customer's quality of experience vs. the quality of deliverables that the customer actually receives. Too often across the industry, there is a lag in customer perception because of the poor quality of their experience.
Service providers must first ask, "Are we delivering on time and on budget?" Then, we should measure the gap between quality of experience and quality of the deliverables.
In effect, you are saying there is a perception issue in addition to a substantive one. Why do these projects face so many difficulties?
Projects fail for many reasons. Primarily, expectations are not properly set on both sides; expectation management is critically important. In addition, lack of clear project definition, scope, and governance are also major contributing factors. Finally, if the right talent is not brought on board, the project can fail.
What recommendations do you have for improving the success rates of IT projects?
Proper governance is the most important thing. With the right governance in place, and a sound engagement model, you have every chance to improve. Bringing in best practices, a transparent process, and metrics-based project analysis also brings success.
In contrast to Chandra's nuanced and sophisticated insights relative to the issues raised by the study, I was surprised to see the Wall Street Journal's take on the subject. Ben Worthen, the Journal's usually-excellent Business Technology blogger, responded:
[T]ech departments don’t understand just how marginalized they really are. Yes, the IT leaders aren’t getting fired and budgets aren’t getting cut – so that’s good. But that’s a pretty low bar...But quite frankly, there’s no way any company can count on the IT departments represented in this survey.
Severe IT problems usually result from a complex set of causes and conditions that combine and cascade into the phenomenon we call IT failure. Management is frequently as much to blame as the IT department, by establishing conditions where failure is likely to occur. One example can be found in this description of fact-free planning.
Eric Chabrow is another observer who wrote about this study. Eric asks:
Though conducted by an independent firm, the survey was paid for by Tata, which is in the business of selling IT services. Considering its funding source, you decide about the accuracy of the survey.
My take: based on the data, it's correlation to other studies, and the interview with Chandra, I give this study two thumbs-up. Further, I encourage Tata to continue its contribution to the study and improvement of IT projects.