The True Cost of Project Failure

Industry studies show that the ability to establish a viable Project Management Office is challenging and that even for large, well established firms the deployment of IT projects often proves to be more difficult and costly than previously thought.

Statistics:

  • 25% PMOs closed within the first year
  • 50% PMOs closed by second year
  • 75% PMOs closed by the fourth year
  • Only 33% of projects are successful
  • 66% of projects fail or fail to meet expectations

Studies:

A McKinsey & Company study[1] of 5,400 large scale IT projects (initial budgets greater than $15M) showed:

  • 17% of large IT projects go so badly that they can threaten the very existence of the company
  • On average, large IT projects run 45% over budget and 7% over time, while delivering 56% less value than expected or planned

A study published in the Harvard Business Review, which analyzed 1,471 IT projects, found:

  • The average overrun was 27%
  • One in six projects had a cost overrun of 200% on average and a schedule overrun of approximately 70%
  • Worldwide, $500B USD per month is lost due to IT failure and the problem is getting worse

Logica Management Consulting and the Economist Intelligence Unit studied success rates for business process change projects findings showed:

  • 35% of organizations abandoned a major project in the last three years
  • 37% of business process change projects fail to deliver benefits
  • 86% of organizations reported a shortfall of at least 25% of targeted benefits across their portfolio of projects

According to an IBM study [2], only 40% of projects meet schedule, budget and quality goals – furthermore, they found that the biggest barriers to success are people factors.

KPMG research shows that only one-third of the IT Project spend for any given organization is delivering the desired outcome.[3]

In 2009 the worldwide cost of failed IT projects was estimated to be as high as $6 Trillion USD.[4]

The latest CHAOS study results show a major increase in project success rates, with 37% of all projects succeeding, 42% missing expectations, and 21% failing completely (Standish Group).

The Project Management Institute estimates that approximately $125,000 is at risk for every $1M spent on projects.