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IT’s Record of Failure Is Worse Than You Think

The record revealed by investigations into IT performance is bad. Unfortunately, according to author and former Guardian Life CIO Frank Wander, the truth is even worse.

Frank_Wander_IT_Excellence_Institute
Frank Wander, IT Excellence Institute

The headline of our recent review of Frank Wander’s new book assumed a “record of failure” on the part of IT. It’s only fair that such a claim be substantiated, and Wander, former Guardian Life CIO and founder of the IT Excellence Institute, does substantiate it in his book. The statistics are pretty damning, but Wander insists that the truth is even worse. In a moment we’ll share his argument, but first a look at his substantiation of the claim of IT failure.

[Read our review of Wander's book: What’s Driving IT’s Record of Failure — And What Can Fix It?.]

Wander’s indictment reaches back to the dawn of the Information Age, with a look at the unforeseen limitations and costs of IBM’s OS 360 in 1964. However, he carries the reader up to the present with a 2012 McKinsey study of 5400 projects across all industries valued at over $15 million. McKinsey found that 45% of these projects were over budget while delivering 56% less value than planned. The aggregate cost overrun was about $66 billion dollars, and 17% of the projects actually put the company at risk.

Wander ruefully concludes from his research that IT doesn’t perform well, that large projects fail or underperform regularly and that often the only debate is not whether they will be a success or a failure, but to what degree they will fail. The record revealed by investigations into IT performance, such as the McKinsey study, is bad. Unfortunately, Wander says, the truth is even worse. He asserts that neither corporations nor academics has an accurate picture of the financial magnitude of IT failure and cites five factors, which I quote here from “Transforming IT Culture: How to Use Social Intelligence, Human Factors, and Collaboration to Create an IT Department that Outperforms”:

1. The internal numbers are understated. The executives who initiated and sold many of the largest failures also shaped the perception of the outcome and the cost. Anyone in IT will tell you how many times he or she has seen a collective declaration of victory, when by any measure a development effort was a complete bust. Ultimately, reputations are at stake, and managing perception is critical. More important, if data are provided to external sources, they are collected, massaged, and then circulated for further correction and approval. Corporations always put their best foot forward, so lipstick is put on the pig before it is paraded in front of the viewing stand. Unquestionably, statistics are appropriately massaged prior to release. Otherwise, they are not provided at all.

2. Corporations broadcast successes, not failures. Companies are reluctant to share true failure numbers with anyone and do not collect numbers if they are bad. Why take the reputation risk, when the marketing machines run so well, and many industry awards go to efforts that ultimately turn out to be functional failures? Case in point: Two years in a row, the application winners of the Windows World Open went on to become legendary disasters. Both of these had required huge investments. When each of these solutions was selected, IT personnel within the respective companies broadly understood these systems to be the legendary failures they would become. “Successes” like these never get accurately classified—in fact, they remain successes because a retraction is never published. Last, every company has a corporate communications function that ensures that whatever is reported by the company paints the right picture.

3. Beauty is in the eye of the beholder. Expectations are so low that delivery is often construed as success. Not surprisingly, just completing a project creates a sigh of relief and a bright halo around the development team. Gauging success or failure through this distorted lens causes our industry to understate the magnitude of the problem. Do you think many of today’s projects would be classified as a success if expectations were high and success well understood? My experience leads me to a simple conclusion: Our collective potential is significantly higher than our results, so our relative success rate is therefore significantly lower than any number reported.

4. We cannot measure knowledge worker productivity. The software development industry cannot measure productivity, and every software development project is unique. Consequently, we cannot establish a performance benchmark at the beginning of a project and then compare actual performance to it at the end. So, what is a success? Everybody was extremely busy, and an end product was created? Very simply, the barometer of success and failure is engineered through expectation management and reporting. What remains is the comparative success of one effort versus another. You know the outcome was successful, but you don’t know if another group could have done it in half the time or twice the time. The evaluation is totally perceptual.

5. The opportunity cost of ignoring human potential is colossal. In terms of unproductive capital, we are conservatively talking in the range of a $100 billion dollars. So, when speaking of “success,” you have to put it in quotes. Unhappiness is a common result, perhaps even an expectation. It is only with great trepidation and uncertainty that a large initiative is funded by a business.

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio

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PeteDashwood
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PeteDashwood,
User Rank: Apprentice
3/27/2013 | 1:08:40 AM
re: IT’s Record of Failure Is Worse Than You Think
Really excellent points, Frank, and I think you covered it well.
Certainly, there has to be ongoing communication and buy-in by both IT and the end users. I completely agree with all of your above but the problem is implementing it technically. Having used both Waterfall and Agile style Project Management I am fully persuaded that the iterative, interactive approach is far better. Joint Application Development workshops allow Use Cases to be prototyped and discussed, and, as you pointed out, tech guys and users get to know each other. Like you, I firmly believe that the greatest asset any company has is its people and yet, so often we see them treated as cannon fodder and the "intangible" factors you covered are not part of the personnel valuation.
Corporate culture and how to build it might be subject matter for another book... :-) I have worked all around the world in different cultures and companies and the ones with the best management create a "culture" where people are happy to go to work (absenteeism is minimal), feel like their contribution is valued, and morale is high. This reflects in the interactions they have with other workers, and in the overall results they achieve, and yet you can't put a price on it.
I'll look for your book on Amazon and wish you every success with it.
Pete.
Frank Wander
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Frank Wander,
User Rank: Apprentice
3/27/2013 | 12:36:16 AM
re: IT’s Record of Failure Is Worse Than You Think
Kathy, the McKinsey study was across industries. Big went poorly. Until companies embrace their professionals, nurture deep institutional experience, create cultures that unlock innovation and creativity, design projects wisely, and create collaborative social systems where socially corrosive behaviors are the exception, not the norm, failure will continue.
Frank Wander
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Frank Wander,
User Rank: Apprentice
3/27/2013 | 12:30:44 AM
re: IT’s Record of Failure Is Worse Than You Think
Pete,

Your points are excellent, so your understanding of some of the root causes is high. I suspect you deliver your projects very well. Given that I agree with your comments, let me add some additional color that is also covered in my book. There are many studies of IT outcomes, covering projects of all sizes, and the results are not flattering. The problem is not limited to size, but most visible here. In all cases, the larger the project, the greater the chance of failure. Why is this the case? Not to repeat what you said, let's explore other drivers of underperformance, and outright failure.

1. Professionals aren't interchangeable parts. Yet, many companies manage them using an industrial paradigm that treats them that way. Nothing could be further from the truth. Replacing a professional with 10 years of institutional experience, extensive acquired social capital, and proven high aptitude, with an offshore resource with none of the above is very risky. Basing this decision on one variable, cost per hour, is highly misguided. Sure, the bottom line initially looks better, but the true cost of underperformance, overhead and failure is only understood after the human capital is decimated. Talent and experience matter, as do relationships. They are highly productive.

2. The human factors that drive IT success and failure are not well understood. We are intimately familiar with our computers and networks, we monitor them, certify the operators, performance tune them, and work diligently to make sure they are "high performing"; in contrast, most leaders understand very little about the "human resources". There is no user manual for the people (my book is designed as a good start), so unwise decisions often result. Case in point: over-scoping a project. Humans can mange 5 to 7 variables in working memory (in the prefrontal cortex), so when tasked to consider more, work slows to a crawl. I've seen it many times. Therefore, chunking is very important. Also, the larger the number of relationships required to work on a domain, the higher the communication overhead. That slows the project and increases the likelihood of broken connections (weak relationships) leading to gaps in understanding and therefore defects. There are many of these.

3. Many people run "IT" projects. There really isn't such a thing. Even if what you are doing is totally technology centric, like building a new data center, there is an explicit business reason (operational risk, business growth, etc.) Pushing that example aside, let's consider a project requested by the business. In my experience, business automation requires true joint ownership over the outcome. There must be a business sponsor, and the cost/benefit must be owned by them. Moreover, the separation between IT and business is completely artificial. IT owns the automated part of a business process, and operations own the unautomated part - how could the separation be anything but artificial. A business process is a cohesive set of steps, not two independent things. The walls and cubicles that separate people must come down. True, meaningful collaboration drives success; separation drives failure. It is all about IT/Business fusion. Build great working relationships - get to know one another.

Lastly, some efforts are very large, no matter what you do. There are old, legacy solutions where the roots have penetrated deeply into the enterprise, with data literally shared across hundreds of systems. In these cases, you must limit the technical complexity using architectures to simplify the integration, however you are still left with a complex human infrastructure. That is where culture becomes a key driver of success or failure. Few managers know how to design one. Ergo, the failure.

Thanks for your insights.
PeteDashwood
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PeteDashwood,
User Rank: Apprentice
3/16/2013 | 11:01:49 PM
re: IT’s Record of Failure Is Worse Than You Think
A very interesting insight. I expect the book will be well worth reading.
After a lifetime in IT I have seen disasters and successes; it isn't ALWAYS a disaster, and lessons have been learned over the years. The key point here was "systems over $15 million". Many of us learned years ago to break IT projects into manageable "chunks" that can be implemented in a more controlled way, that minimize the risk, and that can be developed concurrently using smaller teams. With a smaller team, an interactive, iterative, approach with end users (Agile type of project) becomes viable and everyone can work together to ensure that what is delivered is useful and timely. My experience has been that projects managed in this way are invariably successful and the only one I ever saw fail was cancelled due to politics and not for any good technical or management reason.
Unfortunately, the lesson that "small is beautiful" has not been universally learned and Government in particular seems to think there is an "economy of scale" in implementing IT. (There isn't...) If you work in an "industry" (Government is a perfect example) where money is no object you have to expect it to be wasted.
Very large projects tend to use "Waterfall" style management approaches and this means that even if you DO deliver, what you are delivering is hopelessly out of date (because once requirements are "signed off" it is very hard to get them reviewed or changed) and this was what led to the famous: "Thanks, it's very nice, but can we just have this one small change..." from users, and the general perception that IT were difficult to work with, didn't deliver what was actually needed, worked in ivory towers separate from the real world, and so on.
The points raised in the article are fair and accurate. I'm just glad it doesn't apply to my own career where most of the projects I managed were under $20 million.
KBurger
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KBurger,
User Rank: Author
3/14/2013 | 11:58:08 PM
re: IT’s Record of Failure Is Worse Than You Think
Are the disasters equally spread across industries, or are there any businesses where IT failure is particularly bad/frequent? That is, is there more likelihood of, say, government IT projects failing and less for, say, healthcare IT projects? Are any industries somewhat better at managing IT? If there are industry differences Frank found, why are some better than others? I guess any business could be as prone as another to these 5 factors.
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