Project failures even worse than we thought

Posted by on Aug 25, 2011 in Blog, News & commentary | 0 comments

The September 2011 issue of the Harvard Business Review has a fascinating article on project failure, “Why Your IT Project May Be Riskier than You Think.”  Bent Flyvbjerg, a professor at Oxford University’s Saïd Business School studied 1,471 IT projects and came up with some interesting conclusions.

The average project ran 27% over budget.  Not a big surprise.

But what was particularly interesting was that a full sixth of projects ran more than 200% over budget.  This is a big surprise.  You’d think that the distribution of project overruns would look like a bell curve, with gargantuan overruns being less common than modest ones.  But no.   A disproportionate number of projects were not just failures, but big time failures, ones that destroy entire companies.

The authors mention several cases of companies incurring major losses, far exceeding the costs of the project.  For example, in 2008 Levi Strauss ran into trouble with their $5 million SAP project.  Problems with the implementation forced three US distribution centers to close for a week, halting product shipments and causing nearly $200 million in losses.  They also cite companies being forced into bankruptcy by IT project failures.

Do you think that executives really understand how risky big projects are for the business?

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