Analyst : Lars Mieritz
Published: 1 June 2012 ID:G00231952
A recent Gartner user survey shows that, while large IT projects are more likely to fail than small projects, around half of all project failures, irrespective of project size, were put down to functionality issues and substantial delays.
- Runaway budget costs are behind one-quarter of project failures for projects with budgets greater than $350,000.
- Small is beautiful — or at least small projects are easier to manage and execute. The failure rate of large IT projects with budgets exceeding $1 million was found to be almost 50% higher than for projects with budgets below $350,000.
- To optimize success, look for ways to limit the size, complexity and duration of individual projects, and ensure funding has been committed.
- Stay on top of costs, especially for the largest projects. Ensure that there are the appropriate mechanisms in place to identify budget variances and/or overruns early. Regularly review how cost estimation is done to understand how accurate and effective your approaches are, and pursue improvement opportunities.
- Keep the schedule realistic. Many large projects fail because business conditions keep changing after the project scope has been set, leaving a significant disconnect between the agreed-on scope and budget versus what the business will require and pay for by the time the project is delivered.
- Invest in truly capturing and understanding the business expectations and functionality sought from the project, and ensure that there is initial, adequate allocated funding, as well as good processes in place for revisiting the expectations and required funding at multiple points during the project.
- Increase the frequency of project status and review meetings, as well as ongoing confirmation of the project’s alignment with business strategy — with an eye toward identifying and cancelling projects at the earliest possible stage that no longer meet company needs.
The survey was conducted to provide insights into IT project performance in organizations across North America, France, Germany and the United Kingdom.
Survey data is a useful tool for heads of project management offices (PMOs) to gain a broad perspective on the major causes of IT project failures and to assist in the challenge of identifying, building, and developing the skills and staff required for highly effective project and program leadership.
This research explores the survey results with regard to causes of project failure across three project sizes and provides a tangible reminder for all project and portfolio management (PPM) professionals not to lose sight of the trade-offs sometimes required for delivering projects on time, on budget and with the agreed functionality.1 For the purposes of this survey, small, midsize and large projects were defined as follows (see Figure 1):
- A small project was one with a budget of less than $350,000.
- A midsize project was one with a budget of $350,000 to $1 million.
- A large project was one with a budget that exceeded $1 million.
Figure 1. Distribution of Success and Failure Across Project Sizes
Figure 1 illustrates the distribution of success and failure across project size. The respondents were asked to indicate the percentage of their organization’s IT projects over the past two years that were deemed a success or failure by the business.
In analyzing the collective responses of some 150 participants in the 2011 Gartner five-country survey, the failure rate of IT projects with budgets exceeding $1 million was found to be almost 50% higher than for projects with budgets below $350,000.2 At 25% and 28% respectively, the failure rates of midsize and large projects are similar, and in both cases, nearly one-third higher than the 20% failure rate observed for small projects (with budgets below $350,000). Overall, the results of this survey are consistent with what we have observed when we have polled this question previously, and we are seeing a pattern emerging where small IT projects experience a one-third lower failure rate than large projects 3
Many small brooks make a great river. The survey results give a clear indication that, by ensuring that projects are kept small, and as a rule of thumb, not exceeding six months in duration, a much lower failure rate can be achieved. As such, setting clear criteria around limiting project size will be a hallmark for successful PMOs, and the guiding principle revolves around establishing projects whose scopes and functionality can indeed be delivered in the time frame and, thus, maintaining a clear focus of the endpoint.
Rather than taking on large, expensive and lengthy projects, it will be more prudent to view them as programs consisting of a series of small projects, each delivering its piece of the overall initiative. This will also enable the use of regular program oversight reviews to ensure that the big picture is maintained and to rapidly reassess and recalibrate should any of the individual efforts get off track.3
No matter what the reason, no one likes failures, so in seeking to understand the causes behind the project failures, Gartner asked the respondents to distribute the projects that were deemed to have failed in their organizations over the past two years across six frequently mentioned reasons or causes of project failure:
- Functionality issues
- Substantially late
- Quality issues
- High cost variance
- Canceled after launch
- Rejected or not implemented for other reasons
Figure 2 explores the project failures shown in Figure 1, and illustrates the percentage of failures that respondents allocated to these six typical causes of IT application project failure (see Note 1 for project failure definitions).
Figure 2. Why Projects Fail
It is not entirely surprising to see that the challenges of bringing projects in on time, on budget and with the agreed functionality are mentioned by two-thirds of the respondents as causes of project failure, because this is largely in line with previous observations.4 However, that fact underlines the ongoing nature of these three challenges in the sense that, no matter where you stop and take a snapshot, these three are likely to appear. The key is not to be complacent (we are not the only ones with projects running over), and take steps to understand the particular circumstances in the enterprises so that the right mix of processes, people, tools and skills can be developed or put in place.
Figure 2 also highlights the improvement opportunities that can be achieved simply from improved communications, in the sense that nearly half the projects fial for not doing what they need to do (functionality) or doing it too late to be valuable (late). This hints at project planners not asking the right questions, such as “When is late too late?” or “What scope would you give up to have something delivered sooner?” or reassessing functionality needs with enough regularity that no gap is allowed to develop. Project planners need to be aware of and address changes in the environment, and understand that cost, scope and schedule are not weighted equally. By maintaining close ties to sponsors and stakeholders, and being upfront regarding the trade-offs between functionality scope and schedule, expectations can be recalibrated on an ongoing basis, thus improving success rates.
For organizations at the lower levels of PPM maturity, any effort toward improving scheduling, cost estimation and functionality will yield significant results. For organizations at the higher levels of maturity, we recommend broadening the suite of performance metrics that are used to provide deeper insight into the factors that might be driving the rather persistent greater than 20% failure rate we’ve seen over the years.
Gartner conducted a research study in October 2011 to examine current performance of IT projects in North America (the U.S. and Canada), France, Germany and the United Kingdom (see Figure 3).
Figure 3. Geographic Distribution of Respondents
In all, 154 organizations with at least one PMO or related office were qualified and interviewed via a Web-based survey. All respondents were required to manage or work within their organization’s project management function. The resulting sample consists of organizations across various industry segments (see Figure 4) with $500 million or more (see Figure 5) in annual revenue.
Figure 4. Distribution of Respondents by Industry
These findings and recommendations from the Gartner survey are in line with conventional wisdom.
So what can we do differently to help ensure project success?
The people side of any change programme must be addressed in order to secure success.
In addition, provide regular feedback to the customer, for example by adopting Agile SCRUM principles of iterative development or implementing new Systems of Engagement practices.
One fresh area to be considered is Cloud based Development and Deployment.
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