US $6.2 trillion = annual cost of IT failure

Michael Krigsman cites US$6.2 trillion, as the annual cost of IT failure. The estimate was sourced from Roger Sessions who blogged his estimate. Clearly the amount one comes up with in a calculation of this sort is greatly affected by the assumptions made. Yet given the fact that most agree that there is a high ‘failure’ rate to projects the presumption must be that we are looking at very large numbers of $ in terms of waste.

Anyway, admit it, the number got your attention.

Back in June I presented to the ISACA Wellington Chapter on Learning From ‘Failure ‘or ‘A Tale Of Three Projects’. The discussion was based on 3 projects I had personal experience and knowledge of and my comments were set against the back drop of the ISO 38500 standard on IT Governance.

Recently, I presented at the ISACA Wellington – Governance Day on the topic Key Issues in Success/Failure in the context of programmes/projects, on one slide I highlighted a number of common factors found in projects/programmes:-

Defining Factors in Project/Programme Success/Failure

Defining Factors in Project/Programme Success/Failure

I went on to map these against the 6 Principles set out in ISO 38500, which are:-

6.Human Behavior

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The mapping which I agree is subjective, indeed I would probably add to the mapping if doing it again, came out as follows:-

ISO 38500 Principles and Defining Factors mapped

ISO 38500 Principles and Defining Factors mapped

However, the objective of demonstrating how these common defining factors fall within ISO 38500 is achieved.

Both presentations discussed the importance of ensuring that an appropriate IT governance framework is in place, as illustrated by the problems issues which emerge when such a framework is not. In the discussion around the presentations I stressed my strong personal belief that successful governance is underpinned by strong personal and organizational values and culture. Indeed without such values I consider the prospects of failure are very substantially increased.

So it was with considerable interest that I read a recent post by Michael Krigsman at his IT Project Failure Blog concerning a presentation he made on the waste incurred through failed IT Projects.

Krigsman makes some interesting points.

Looking at the cases cited and the comments made I was struck by how familar it all seemed. Much, if not all of the commentary jelled with the factors noted above. For example,it would seem to be the case that in many instances people prefer ‘happy talk’ as I noted above or as Krigsman illustrated with his Dilbert cartoon.

The thought that kept recurring, as I read Kriegsman’s presentation was what had happened to Governance in the cases cited?  Where were the the over-arching concepts of Direction, Evaluation and Control as envisaged within the ISO38500 standard.

It highlighted as well the global nature of the problem in this area.

Given what appears to be waste on a massive scale, why do we keep pouring money into projects in this way? What stops us from achieving improvement?

Clearly there is a need for action. To my mind ISO 38500 is a good starting point, especially when allied with supporting frameworks such as CoBit and ValIT.

Furthermore, there needs to be a much better understanding that IT of itself will not solve business problems, we need strong organizational change and process management as well. This must be coupled with a determination to identify, evaluate and monitor benefits on a continuing basis.

When we look at this issue we need to look past the dollars and think about the fact that failure on this scale imposes considerable impact on the economies of countries, the performance of public and private entities and on the performance and motivation of the people involved, all of which translates into a huge value diminution, which I suggest we cannot afford on an ongoing basis. It is this impact as much, if not more than the $ as such which is the real burden that this problem imposes – the waste of effort and physical resource.

Consequently there is to my mind an ethical and cultural dimension to this whole issue. It behoves all of us to to look to our personal values and be prepared to stand up for what is right and make the case against a project or the case for stopping one should that be appropriate.

This is particularly the case for those of us who act as consultants. Many regard consultants as conflicted in this area. We are seen, by many, as wishing to prolong our engagements, when we should be seen as trusted advisers with our client’s interests at heart.


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