Novopay #6 : the perils of big IT projects

As I started to look at the Novopay papers, my thoughts turned to a recent article I had read at the McKinsey Quarterly website on delivering large-scale IT projects.

Our research, conducted in collaboration with the University of Oxford, suggests that half of all large IT projects—defined as those with initial price tags exceeding $15 million—massively blow their budgets. On average, large IT projects run 45 percent over budget and 7 percent over time, while delivering 56 percent less value than predicted. Software projects run the highest risk of cost and schedule overruns

These findings—consistent across industries—emerged from research recently conducted on more than 5,400 IT projectsby McKinsey and the BT Centre for Major Programme Management at the University of Oxford. After comparing budgets, schedules, and predicted performance benefits with the actual costs and results, we found that these IT projects, in total, had a cost overrun of $66 billion, more than the GDP of Luxembourg. We also found that the longer a project is scheduled to last, the more likely it is that it will run over time and budget, with every additional year spent on the project increasing cost overruns by 15 percent.

The findings are very interesting and correlate with other studies as well. I found the graph below of especial interest:-


The dollar figures are US dollars. Now MoE seem to indicate no major over run as such but I would infer that internal costs have escalated dramatically, especially when end user impact is factored in, plus costs incurred by Talent 2 as well as the some NZ$5 million so far set aside for resolution of issues.

It would be fascinating to know just how Novopay stacks up against these findings.

More commentary in the near future.


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