According to a McKinsey/Oxford study in 2012, half of all IT projects fail to deliver on their promises. They reach their finish line late, and large projects (those over $15 million) run almost 50% over budget. These large projects also deliver less than half of their forecast and planned goals. The outcome, of course, is that ROI’s are way below expectations. The common ‘reason’ for such failure is a lack of resources, but there are a number of other reasons that come into play. Here I look at 4 massive IT project failures here in Australia, and then 5 reasons behind these failures.
Myers online shopping disaster
Australia’s biggest department store, Myers, invested tens of millions of dollars on website development as it tried to boost online sales. Yet every time the site got busy, it crashed. Stock clearance sales have been plagued by system outages, and on Boxing Day 2013, the whole site imploded. Senior management expressed ‘disappointment’ and apologies to customers. Shareholders were told that such system crashes would not affect profits.
Tens of millions of dollars doesn’t sound like a lack of resources.
Queensland Health and its Payroll System
Queensland Health decided to replace its outdated payroll system, and contracted IBM to design and build a new system. Between 2008 and 2010, IBM submitted multiple change requests because business requirements had not been properly defined.
5 years after commissioning, the system went live with a huge upgrade to costs from the original estimate. And when it did go live, even worse, thousands of workers were underpaid or not paid at all. The total cost to the Queensland taxpayer is estimated at around $1.2 billion.
The Australian Cargo Service
The Australian Customs Service spent around $225 million on upgrading its cargo system. In 2005, it switched over processing, but over the Christmas period cargo was left unprocessed, shipments were delayed, and the system was deemed a complete failure and indicative of poor project governance.
Victorian MyKi Smart Card
The Victorian government has an abysmal record when it comes to IT projects. The most costly is its MyKi Smart Card system, for use on public transport. The project suffered multiple delays and cost overruns. By the time it went live, it was estimated to have cost $1.4 billion.
Undeterred, the Victorian government decided to upgrade and modernize its healthcare IT systems. The Auditor General’s report in 2013 stated that not only had the project cost 50% more than budgeted, but it lacked proper controls which put patients at risk.
In total, such projects have cost Victorian taxpayers around $2 billion.
The real reason IT projects fail
Clearly, if resources are measured in dollars, then projects like these have not failed because of lack of resource. It could be argued that projects in the public sector suffer more than those in the private sector, and this gives a clue as to why so many IT projects – especially large ones – fail so miserably. Here are 3 real reasons for IT project failures:
Poorly defined goals
When project goals are not clearly defined, such as Queensland Health’s payroll system, then cost is almost certain to be blown through.
Over optimistic expectations
Myers expected its website upgrade to totally revolutionise its online sales, but these expectations were too high.
The project is too complex
Cargo processing is a difficult task, and complexity of processing means difficulty in integration with other systems, conversion of data, and competition for resource.
These reasons for failure add up to the real reason for the failure of IT projects, which can be summed up in three words:
Poor project governance
Projects don’t generally fail because of lack of resource, but because they aren’t governed effectively. They are poorly planned, poorly envisaged, and poorly managed. It is this level of poor governance that leads to lack of resource among other problematic issues for project managers.
In my next article I’ll begin to look at putting in place a framework to ensure effective governance of project management that applies not only to IT projects but all projects.