“Black Swans” hitting IT projects

One in six big IT projects go over-budget by an average of 200%, according to new research. The study by Oxford University and McKinsey also found that spending on technology was three times more likely to spiral out of control than construction or other major projects. Researchers said that rare but high-impact problems, dubbed "black swans", were often to blame.

(Incidentally, I'm not convinced actually that this is the correct use of the term "black swan", having read the original 'black swan' book).

It's interesting that the public sector has always been considered the natural home for IT disasters - this report suggests that the private sector may be just as bad, we just don't hear about it as much. As the full article in the Harvard Business Review says,

Fully one in six of the projects we studied was a black swan, with a cost overrun of 200%, on average, and a schedule overrun of almost 70%

There are some quite scary examples - for instance, Auto Windscreens, the second-largest car window replacement company in the UK, with 1,100 employees, "migrated its order management from Oracle to Metrix and started to implement a Microsoft ERP system. In the fourth quarter of 2010, a combination of falling sales, inventory management problems, and spending on the IT project forced it into bankruptcy".

The article suggests that senior managers should take a cautious view of the risks in big projects, and also look at other mitigating actions - such as breaking down large projects into smaller chunks. (That's something that has been talked about a lot in the UK public sector in the last 18 months, but it's not clear yet whether it is working in practice).

So if you've got an interest in IT procurement, keep a look out for those dodgy swans, and when the CIO asks for your help in sourcing a mega-IT project, it may be worth highlighting this research!

First Voice

  1. Herman Fick:

    Peter, they are so right! I have seen more projects going belly up in the private sector than in Governments.

    It is the old story (which I use a lot in bespoke projects!): How do you eat an elephant? …. one small bite at a time! Don’t try and be the hero!

    As a supplier of bespoke solutions I emphasise, nearly daily, to our clients that risks go both ways. I never accept projects where the exposure of a deliverable is more than £75k and actually prefer £50k. Not so much that we might not deliver, but that they might not deliver! Users tend to be too busy to sign off specs, attend workshops (it is not as if IT wants the system!) and then they cannot understand why something slipped a week. A week becomes weeks and suddenly everybody is surprised because you have an over run.

    You refer to the construction industry:

    Can you imagine that the engineer must first wait for the office manager, who will/might one day sit in the building behind his desk, to approve the specification (plan) for the floor ‘build’ before they can continue? …… Who will be in control of the timeline? (and forget project managers – they are not the ‘client’) – client is king …. remember!

    Tongue in the cheek:

    Unfortunately IT is a very ‘young’ industry(very true – less than 100 years) and have not learned from their mistakes since BC. If we only started in the pyramid times, we might get it right round about now.

    That all said, I am a passionate solutions guy and provide it daily to many happy customers who decided they will trust our many years of ‘having the t-shirt’ and luckily new technologies de-risk projects easily and remember: ‘look at how IT people recover from mistakes’ NOT ‘how they do not make mistakes’….they, unfortunately, do not exist! I would have employed them all and I would not have responded to this article as I would have retired many years ago.

    Enjoy your project or speak to us…and then really enjoy it 😉

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