5 Reasons Why IT Implementations Fail to Deliver ROI (and How to Avoid Them)

Project-Blog

Large IT implementations, defined as information technology projects with an initial cost of $15 million or more, are often complex, time-consuming, and prone to failure. On average, large IT projects run 45 percent over budget and 7 percent over time, while delivering 56 percent less value than predictedª. A McKinsey-Oxford Study found that for large software-related IT implementation projects, 66 percent are over budget and 33 percent are past deadline. For non-software projects the percentages are 43 and 3.6 respectivelyª. In order to avoid adding your IT implementation project to these stats, it is important to understand why this happens and how to avoid the most common pitfalls.

The Black Swan Of Death

The term “black swan” is a risk management term that refers to high profile, high risk, hard-to-predict eventsº. In this case, it refers to IT projects that go so poorly they can threaten the very existence of a company. An IT project that is considered a black swan is one that runs 200 percent over budget (sometimes even 400 percent).ª A whopping 17 percent of IT Implementation projects are considered “black swans.”

Why IT Projects Fail: Avoiding The Black Swan

There are several reasons IT projects fail. Despite having millions of dollars on the line, theses projects often fail regardless. Case in point, according to a McKinsey & Company article from 2012, “one large retailer started a $1.4 billion effort to modernize its IT systems, but the project was eventually abandoned. As the company fell behind its competitors, it initiated another project—a new system for supply-chain management—to the tune of $600 million dollars. When that effort failed, too, the retailer had to file for bankruptcyª.”

To avoid a large IT implementation failure, look for these five signs that your IT project might be heading toward disaster:

Unclear Business Focus

Not understanding how the project aligns with a company’s overall strategic business goals can often derail a project. Losing sight of what the end goal of the project is and how the goal benefits the company can cause bottlenecks at each stage of the project. Business objectives need to be clear and teams must begin with the end in mind. Perfection isn’t as important as functionality and meeting the overall goals of the company.

Mismanagement of Stakeholders

When stakeholders don’t understand how the project aligns with overall company objectives, chances are they won’t have the most effective management style for guiding the project to successful fruition. In addition, it’s difficult to deliver a top-of-the-line project if key stakeholders are not held accountable.

Technology Snafus

This may seem obvious, but when the implementation team doesn’t fully understand the technology, the project can breakdown. Along with a misunderstanding or lack of knowledge of the company’s overall business objective and how it aligns with the IT implementation, the likelihood for a successful outcome is greatly diminished. Additionally, it is not uncommon for IT teams to focus more on the IT tactical issues than the overall business objectives, which can easily lead to shifting requirements, technical complexity, missed deadlines, and extra costs.

Ineffective teams

Teams that are not aligned in their goals or have a talent deficit can derail a project for obvious reasons. An inexperienced or poor manager, an unmotivated team, and unskilled workers guarantee costly delays.

Poor project management practices
Many companies suffer when it comes to poor project/change management practices: Poor estimates, lack of transparency, poor preparation and planning, and not using proven methodologies will jeopardize these projects.

The Four Factors Required For Successful Implementation

Despite all the issues that can and often do derail IT implementations, here are some guidelines that can lead to implementation success:

Proper Strategy & Stakeholder Management

Company teams should focus on managing strategy and stakeholders instead of budget and scheduling. Hold team members accountable and make sure they have a clear outline of the company’s end business goal[s]. Internal and external (such as vendors) stakeholders must be held accountable for insuring that these business objectives as well as the overall company strategy remain at the forefront of the project. Project leaders must create a detailed description of each team member’s and stakeholder’s responsibilities and hold them accountable for delivering on those responsibilities.

Complete Understanding Of The Technology

Recruit experienced and high-level internal and external talent, especially in critical roles such as project managers and leaders. Project team members must master the technology in use and possess exceptional project management skills. User-testing and input, such as beta-testing, will allow the team to better understand how the technology interacts with its users.

Experienced & Motivated Teams

All large IT implantation projects need experienced project leaders. The project team must also be qualified and motivated. Overall business goals and how they tie into the IT project must not only be common knowledge among team members, but should also have widespread acceptance. Managers should be accessible to other members of the team and encourage the personal growth of their staff. Brainstorming and transparency will help team members take more responsibility in terms of outcomes because they will be active and accountable contributors in achieving the company’s overall business goals.

Excellent Project Management Skills

Successful large IT implementations have the hallmarks of top-notch project management and change management practices, such as discipline, clearly defined goals and milestones, and established procedures and processes for managing requirements, change requests, check points, testing, and incremental short delivery cycles.

You can greatly reduce the chance of black swans and even smaller scale project failures by following these four guidelines. Keeping a watchful eye out for the signs that your project is going down the wrong path, as outlined at the beginning of this article, can save time and money through course-correction before the project hits an insurmountable barrier and sinks.

 

º”Black Swan Theory.” Wikipedia. Wikimedia Foundation, n.d. Web. 30 Mar. 2015.

ªBloch, Michael, Sven Blumberg, and Jurgen Laartz. “Delivering Large-scale IT Projects on Time, on Budget, and on Value.” Insights & Publications. McKinsey & Company, 30 Oct. 2012. Web. 30 Mar. 2015.