IT Projects & Black Swans
Have you ever been involved in an IT project that was difficult and resulted in a less than optimal outcome? I still joke about being a survivor of a large-scale IT implementation project. That was more than ten years ago and the memories are still fresh and painful. That is not to say that all IT projects end in disaster and I have seen a number of IT projects succeed in my career. Still the stigma remains and there is ample anecdotal evidence in the workplace that IT projects are particularly prone to failure.
Does this belief hold up under more rigorous scrutiny? According to Oxford University professor Bent Flyvbjerg, who has spent his career studying this subject, IT projects are actually not the worse type of project. He found that globally, across all industries, the percentage of projects that come in over-budget are:
50% of IT projects
60% of Energy projects
70% of Dam projects
90% of Olympic Games
So only half of all IT projects come in over-budget. Hmm... That somewhat mixed news for IT projects is tempered, however, by the obvious fact that IT projects are much more prevalent. IT projects are happening every day in organizations all over the world while large energy projects, dams and Olympic games are much fewer in number and less frequent.
In another study, Flyvbjerg and his colleague Alexander Budzier, focused solely on a sample of almost 1,500 IT projects. The projects in the study included enterprise resource planning, customer relationship management, document management, and other management information systems. Many of the projects looked at were in the US public sector but surprisingly the results showed little difference when compared to projects in the private sector or other locations around the world.
Here is what they found:
Average IT project cost overrun is 27%
While that average might not seem alarming, what they were startled to find, and what that average was hiding, was this reality:
1 out of 6 IT projects had cost overruns of 200%
1 out of 6 IT projects had a schedule overrun of 70%
That means nearly 17% of all IT Projects are nightmare projects or what they call “black swans”. Using a term popularized by best-selling author Nassim Taleb, black swans are “high-impact events that are rare and unpredictable but in retrospect seem not so improbable”.
There are many reasons for this high rate of IT project black swans but Flyvbjerg and Budzier point out a common finding was that sales and product development engineers and managers often have less than adequate skills in implementing the technology itself.
The end result of these IT black swans is usually the same: increased financial pressure, reputational damage, and often loss of jobs, particularly those deemed responsible for the project. If a private sector organization is already weak before the black swan, the black swan IT project can often be fatal to its very survival. In the public sector, the organization survives but the public is left to pay for the mistakes through additional tax burden.
To avoid becoming the next IT black swan case study, Flyvbjerg and Budzier say that we should always assess our organizational readiness through a 2-part stress test before beginning our next large IT project:
Can the organization afford the cost if our largest IT project goes over-budget by 400% or more and if only half the benefits are realized?
Can the organization absorb the impact of having 17% of all our medium sized IT projects coming in over-budget by 200% and missing the project deadline by 70%?
These scenarios seem far-fetched when viewed at the outset of the latest IT project but the records show they happen all too often and no organization or industry is immune.
As I said at the outset, many IT projects do succeed coming in on-budget and on schedule. According to Flyvbjerg and Budzier, the IT projects that are successful all share these common 7 key characteristics:
Stick to the schedule
Avoid scope creep
Break the project down into manageable pieces
Have the right people
Minimize turnover of team members
Align with business needs
Focus on single objective and measure all activity against that target
 “Why do Projects Fail?” https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2722475
 “Why Your IT Project May BE Riskier than You Think” https://www.researchgate.net/publication/225070625_Why_Your_IT_Project_May_Be_Riskier_than_You_Think
 Nassim Taleb, “The Black Swan: The Impact of the Highly Improbable”, Random House, 2007