Strategic Risk on IT Projects
IS Audit and Control Association, an independent IT governance group, reported not long ago the results of a survey of IT executives, in which they were asked whether and any of their IT projects had failed. Of the companies surveyed, 43% had recently nixed an IT project. Here are the details and some things we can all do to avoid wasting precious IT resources.
#1: Business Needs Changed
30% of companies nixed a project because because business needs had changed. At face value, it’s good to know that at least 30% of companies are leveraging IT to achieve broader business objectives. But how tight is that alignment? For instance, if a company’s strategic positioning is its extraordinary, over-the-top customer service, then IT projects that further improve a competitive lead in Customer Service will more likely be less risky than say, an initiative that redesigns financial reports.
#2: Did Not Deliver as Promised
23% of executives reported an IT project failure because it failed to deliver as promised. Under-analyzed and over-sold to executives very motivated to start seeing those glossy returns, decision-makers can find themselves approving big-budget projects short of full disclosure. At first glance the project can often seem like a slam dunk, but making sure the promise is credible is never time wasted. This means that the project is affordable, achievable within a reasonable amount of time, and that the end state delivers real value to the organization. Above all, how these results are going to be achieved is understood and agreed to by all. Full disclosure of risks and benefits to the executive who will be signing the check not only builds credibility and trust, but is essential to defining just how much value is necessary to make the project worthwhile.
#3: Project No Longer a Priority
14% of executives killed a project because it was no longer a priority. As a category separate from #1 above, we have to ask ourselves how it comes about that a project is no longer a priority. Every reason I come up with points to inconsistencies in how priorities were set. With precious few IT project resources available, it makes sense to focus on those very clearly aligned with the company’s business objectives and whose value can be well articulated.
#4: Project Over Budget
Over budget projects were nixed by 13% of the executives surveyed. How far over budget the project ran before getting nixed wasn’t part of the survey, but wouldn’t that have been interesting? This statistic begs the question: what determines IT project success? Is it on time delivery, to spec and within budget? Or is it value to the organization in increased sales, decreased costs and improved brand reputation? Small cost overruns are not unreasonable, nor is choosing to seek ancillary opportunities while the hood is up. Huge overruns are without a doubt a huge red flag.
#5: Project Didn’t Support the Business Strategy
I’m glad only 7% of the executives surveyed said a project got nixed because it didn’t support the business strategy. Pet projects of key individuals and workarounds that are being replaced by long-term solutions, are two examples I can think of.
So how do you mitigate IT project risk? By ensuring projects are well aligned with corporate goals and prioritizing them based on value to the organization. By building reasonable and truthful business cases that serve the organization above individuals, and through full disclosure to the executive who will sign the checks.
Part II of this blog will discuss IT project risk at the tactical level. Once your IT project is approved and rolling, where are your risks and how do you manage them?