Late and Over Budget – Why IT Projects Fail

Introduction

It is a fact – IT project failure rates are among the highest across all industries. This should not scare anyone away from embarking on large scale IT projects, but it is important to understand why IT projects fail, so that even if one cannot avoid becoming part of these statistics, at least some measure of success can be enjoyed.

Part of the reason why the 'failure' rate is so high is due to the complexity and intangibility of software. It can not be seen, touched, or evaluated beyond actually interacting with it. Behind the scenes it is such a complex interaction of pieces, each built upon the other, that it can quite often not be understood fully by a single individual.

It is often said that an IT project can be late and finished, on time and unfinished, or within budget. At most, one can have two out of three, but an IT project that is complete, on budget, and delivered on time is almost unheard of.

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Late Projects

There are many things that can cause a project to become late. Late projects are usually over budget simply by virtue of the fact that they cost more (in terms of actual wages paid) or that they cause higher costs due to their delay.

One of the most common causes of true over-running is that the client introduces unnecessary changes along the way, as they discover new features that they might like to add to the project as it progresses. This is easy to minimise – it is up to the client, and the contractor should not be held responsible for late delivery if the goal posts keep on moving.

They can, however, be blamed if the lateness is caused by a bad estimate. Some might point out that bad information causes the bad estimate, but it is the responsibility of the contractor to make sure that they have correctly understood – which is why a third party project manager is quite often useful in providing an interface between the two parties.

This also helps in the planning and crisis management, as well as making sure that the project stays within scope. Since the third party is acting for both sides, and usually paid for by both sides, even if not directly, they are able to help both sides. This is useful if there is a danger of communications becoming fraught, as many projects fail simply as a result of a deteriorating relationship between client and contactor.

One legitimate cause of late projects is the change in scope or technology. While these need to be allowed, simply due to the nature of IT, they must be kept to a minimum, unless a rolling project can be set up in which new technology is always taken advantage of, and the project never really finishes.

Over Budget Projects

Late projects cause costs. There are two ways to deal with this; accept the increase in cost, or reduce the scope so that the project fits into the budget and accept that it will not be finished. The balance to find is where the increase in cost justifies the end product, and that the lateness associated with that does not cause indirect costs to rise.

One of the most difficult aspects of ETM is explaining to other people exactly what is going on. For example, ETM requires that interruptions are managed such that they do not interfere with the daily plan made first thing. This means that electronic mail will not be tackled until the mornings tasks are complete, telephone calls will not be made until the end of the day, and that people interrupting the flow will be asked to come back later.

These indirect costs will be likely to include a rise in staffing costs for those members of staff dependent on the successful outcome of the IT project to perform their daily tasks. Of course, the project management staff should have dealt with these at the outset of the project, and should be able to help minimise them.

Another root cause of budget over run is the employment of more staff to try and make sure that the project is delivered on time, and with all the required features. Sometimes, the client is not even aware that the budget has been over shot until the bill arrives. This is a symptom of bad project management, and can be avoided.

Finally, any late cycle changes in hardware or software specifications will cause a project to run over budget. These need to be avoided – even if it is a result of seeing an opportunity. Of course, if the client has been made aware that their request will cause an over run, then this might be acceptable for the benefits that the new development brings.

Summary

Proper planning prevents poor performance. This is one of the golden rules of any undertaking, but is even more important for IT projects. A complex system needs more planning than other, simpler, ones.

Proper communication prevents poor planning. By communication, we mean the ability of the parties to understand what it is the other is trying to put across. Sometimes a third party is needed to facilitate this communication and get the right project planned and executed, as opposed to just executing the wrong project correctly.

A project can succeed even if it is late and over budget, if it delivers enough benefits to the client. Understanding and communicating the benefits and costs are key to the success or failure of a project, and even in cases where the cost was higher than expected, a client can still come back to the contractor in the future if they have benefited from the experience.