October 4th, 2009

Scholarly interest in IT failure and waste

Posted by Michael Krigsman @ 7:44 pm

Categories: CIO issues, Cultural issues, Devil's Triangle, Financial impact, Governance, IT issues, Project failures

Tags: Information Technology, Failure, Strategy, Management, Michael Krigsman

The non-technical academic world has become interested in ethical issues surrounding IT failure and wasted resources. Previously, academics that focused on this set of problems generally came from an IT or project management background.

I’m thrilled the non-technical academic community is examining IT failure. Considering both public- and private-sector IT projects, the scope and magnitude of failure is huge.

On Monday, October 5, 2009, I’m giving a talk on this topic for the Center for Global Business Law & Ethics at Suffolk University’s Sawyer Business School in Boston. Professor Lydia Segal, who coordinated this program, is a top authority on cutting public and private sector waste. She therefore has a natural interest in this subject:

Ethical considerations demand that we turn our attention to areas in business where mismanagement may cause serious waste. Given the importance of IT to both business and society, there is opportunity for researchers to explore the roots of failure and to formulate directions for improvement.

I’ve embedded the presentation below. Please let me know what you think.

September 30th, 2009

Annual cost of IT failure: $6.2 trillion

Posted by Michael Krigsman @ 6:10 am

Categories: Financial impact, IT issues, Politics, Research and statistics

Tags: Gross Domestic Product, Information Technology, Failure, Roger Sessions, Strategy, Management, Michael Krigsman

The total annual cost of worldwide IT failures is $6.2 trillion dollars, according to calculations performed by Roger Sessions, über-expert enterprise architect and CTO of ObjectWatch.

Roger presents his analysis in a blog post:

According to the World Technology and Services Alliance, countries spend, on average, 6.4% of the Gross Domestic Product (GDP) on Information Communications Technology, with 43% of this spent on hardware, software, and services. This means that, on average, 6.4 X .43 = 2.75 % of GDP is spent on hardware, software, and services. I will lump hardware, software, and services together under the banner of IT.

According to the 2009 U.S. Budget, 66% of all Federal IT dollars are invested in projects that are “at risk”. I assume this number is representative of the rest of the world.

A large number of these will eventually fail. I assume the failure rate of an “at risk” project is between 50% and 80%. For this analysis, I’ll take the average: 65%.

Every project failure incurs both direct costs (the cost of the IT investment itself) and indirect costs (the lost “opportunity” costs). I assume that the ratio of indirect to direct costs is between 5:1 and 10:1. For this analysis, I’ll take the average: 7.5:1.

To find the predicted cost of annual IT failure, we then multiply these numbers together: .0275 (fraction of GDP on IT) X .66 (fraction of IT at risk) X .65 (failure rate of at risk) X 7.5 (indirect costs) = .089. To predict the cost of IT failure on any country, multiply its GDP by .089.

Based on this, the following gives the annual cost of IT failure on various regions of the world in billions of USD:

REGION        GDP (B USD)  Cost of IT Failure (B USD)
World         69,800       6,180
USA           13,840       1,225
New Zealand   44           3.90
UK            2,260        200
Texas         1,250        110

THE PROJECT FAILURES ANALYSIS

Quantifying the cost of failure is an exceedingly important step in communicating the scope and breadth of this worldwide problem. Roger Sessions deserves our thanks for doing so.

The calculations are highly dependent on the underlying assumptions. Some of the key variables include:

• Definition of “failure”
• Rates of failure
• Global variation in rates across country

Although Roger’s calculations are not precise, they paint a clear, directional picture suggesting the financial impact of IT failures.

Please share your thoughts on how these calculations can be refined.

[[Image from iStockphoto.]

September 15th, 2009

'How I tweeted my way out of spinal surgery'

Posted by Michael Krigsman @ 9:00 am

Categories: CIO issues, CRM, Collective intelligence, End-user impact, Enterprise 2.0, Financial impact, IT issues, Politics, Project failures

Tags: Patient, Hospital, Twitter Inc., Health Care, Surgery, Sarah Cortes, Packer Hospital, Transparency, Healthcare, E-mail

The post describes a failure that is significant in light of the ongoing national debate surrounding health care reform and economics. Beyond health care, the role of social networking makes this failure a valuable case study for the enterprise.

Technology consultant and blogger, Sarah Cortes, went by ambulance to Robert Packer Hospital, a facility located in rural Pennsylvania, after she suffered a serious spinal fracture. The story takes an unusual turn because Cortes says Twitter helped her escape from the clutches of hospital staff whom, she claims, tried to intimidate and coerce her into accepting unnecessary spinal surgery.

On her blog, Cortes writes that Packer, “tried numerous maneuvers over 48 hours to hold me there against my will.” She continues [bullet formatting added]:

[The] tactics included:

• Threats that my insurance would not pay any expenses if I did not accept their treatment. My bill was already in the many thousands of dollars, they informed me.
• Intimidation that if I did not stop resisting their treatment I could be paralyzed
• Impeding my communication with Boston doctors by needlessly limiting my phone access. Thank God for Twitter and iphones.

Cortes believes Packer wanted to perform the surgery to help boost its accreditation statistics. From Cortes’ blog:

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July 9th, 2009

Beyond Kumbaya: More on ROI for customer service communities

Posted by Michael Krigsman @ 8:46 am

Categories: CIO issues, Enterprise 2.0, Financial impact, IT issues, Project strategy

Tags: Customer Service, ROI, Enterprise 2.0, Analysis, Forrester Research Inc., Oliver Marks, Roi/Tco, Finance, Managerial Accounting, Michael Krigsman

My recent post against Kumbaya-dominated Enterprise 2.0 cheer leading caused several folks whom I respect to respond critically. Here’s a summary of their thoughts.

ZDNet colleague, Oliver Marks, says that generalizing about customer service communities may be a force fit when talking about Enterprise 2.0 as a whole. In a post titled, Enterprise 2.0 ROI Metrics: One Size Doesn’t Fit All, Oliver remarks:

While customer service communities are an important business process subset - interaction with customers - it is just one facet of the individual complex business infrastructure every company has, each of which are as unique as a snowflake.

Many people this year seem to looking for Enterprise 2.0 frameworks and ways to measure results, but the reality is that like shopping for clothes, one size doesn’t fit all.

While Oliver is someone whose judgment and insight I greatly respect, I think his comments miss the target in this case. Sure, in some respects every business process and all companies are different. However, getting Enterprise 2.0 off the ground efficiently requires finding common methods that will work across processes and companies.

Complain as you like about traditional enterprise software failures, most companies rely on packaged software because it’s cheaper and easier than reinventing the wheel. Oliver does not suggest such an extreme position, but he’s heading too far in that direction for my taste.

Susan Scrupski, whom I have called an Enterprise 2.0 superstar, expressed different concerns than Oliver. She Twittered that a Forrester report I lauded is overly focused on vendors:

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April 14th, 2009

7 (nasty) truths about IT spending

Posted by Michael Krigsman @ 6:55 am

Categories: CIO issues, Financial impact, IT issues, Project strategy, Uncategorized

Tags: Information Technology, IT-spending, Susan Cramm, Projects, Project Failure Rate, Help Desk, Strategy, It Operations, Management, Michael Krigsman

An article in the March issue of Harvard Business Review, written by former CIO Susan Cramm, discusses harsh realities associated with out-of-control IT costs. Although cost containment is integral to reducing failed IT projects, the article suggests a certain Draconian inflexibility that just doesn’t make sense.

The article includes a sidebar called “The Seven Truths,” reflecting Susan’s position that, “companies overspend on IT because they are unwilling to say no to frontline managers.” Here are the seven truths (reformatted from original):

1. Enhancements often don’t deliver results commensurate with their costs. Establish a fixed budget for IT enhancements for each function or division, in line with the goals they are expected to achieve. Do not extend funds. When they run out, they run out.
2. Projects are often too big and take too long, partly because unnecessary functionality is built into applications. Require leaders to commit to delivering measurable value for application functions before granting them project approval and before allowing them to maintain funding at each stage. Tie executive compensation to realization of value.

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March 14th, 2009

UK prison IT: Massive and 'spectacular' failure

Posted by Michael Krigsman @ 9:02 pm

Categories: Financial impact, Government projects, IT issues, Politics, Project failures, Uncategorized

Tags: Project, Information Technology, Supplier, Failure, C-NOMIS, NOMS, Offender Database, Strategy, Project Management, Tools & Techniques

The UK National Offender Management Information System project (called C-NOMIS) failed amid scathing attacks, accusations of mismanagement, and vast budget overruns. The project offers an excellent case study relating failure directly to inadequate governance and oversight.

The project was supposed to create a single database allowing UK prison authorities to track and manage offenders while they are in custody and following their release. After a three-year delay and doubling of costs, authorities abandoned the critical, single database concept.

A National Audit Office (NAO) analysis of this project concludes:

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February 19th, 2009

Follow-up: Duration reporting in California's IT strategic plan

Posted by Michael Krigsman @ 6:36 am

Categories: CIO issues, Financial impact, Government projects, IT issues, Politics, Project failures, Uncategorized

Tags: Project, Information Technology, California, Duration, Teri Takai, Strategy, Management, Michael Krigsman

After a lengthy conversation with senior representatives of California’s CIO, Teri Takai, I no longer believe Takai deliberately intended to mislead the public over project duration reporting in California’s 2009 IT Strategic Plan.

• Related: Did California’s CIO mislead public on IT success?

Takai’s representatives, Adrian Farley, Chief Deputy Director for Policy and Program Management, and Bill Maile, Director of Communications, convincingly explained how the duration reporting discrepancies I identified in a previous blog post arose from “unclear language” and “nomenclature.”

To understand why I needed convincing, read Farley’s comments in the Sacramento Bee, where he responded to my earlier post. His responses are indented:

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January 28th, 2009

Oak Park, IL cancels PeopleSoft implementation

Posted by Michael Krigsman @ 2:03 pm

Categories: CIO issues, Financial impact, Government projects, IT issues, Oracle, Project failures

Tags: Software, PeopleSoft Inc., Financial, Requisition Document, Financial Accounting, Tools & Techniques, Personal Finance, Operational Accounting, Finance, Management

The village of Oak Park plans to terminate its under-performing PeopleSoft implementation amid accusations of consultant billing irregularities.

• Related: Angst in Oak Park over failed PeopleSoft project

According to local newspaper OakLeaves:

The village spent $1.65 million in 2004 to purchase PeopleSoft - a computer system which helps large businesses and organizations manage payroll and finances.

But the complex program never took hold in Oak Park, and some employees were still using adding machine tape to calculate things like tax increment financing districts’ fund balances, according to one village document.

The cancellation follows allegations that the village made excessive payments to a consultant brought in to help improve the troubled implementation. The Chicago Tribune reports:

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December 19th, 2008

UK Transportation Department IT failure: 'Stupendous incompetence'

Posted by Michael Krigsman @ 8:37 am

Categories: CIO issues, Cultural issues, Financial impact, Government projects, IT issues, Politics, Project failures, Project management, SAP

Tags: Project, Performance, Information Technology, Mr., IBM Corp., Department For Transport, Shared Service Center, Performance Management, Strategy, Project Management

The UK House of Commons attacked the Department for Transportation (DfT) for gross mismanagement of a shared services IT project. In a rather extraordinary comment, Edward Leigh MP, Chairman of the Committee of Public Accounts for the UK House of Commons, said:

The DfT planned and implemented its shared corporate services project with stupendous incompetence. This is one of the worst cases of project management seen by this Committee.

The DfT initially estimated the program would save £57 million ($85m) over ten years. Current forecasts show that program will result in a net loss £81 million ($121m). A House of Commons analysis concluded:

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December 3rd, 2008

5 steps to cut IT budgets wisely

Posted by Michael Krigsman @ 6:39 am

Categories: CIO issues, Financial impact, IT issues, Project strategy

Tags: IT Budget, CIO, Information Technology, John, Strategy, Management, Michael Krigsman

For many folks, economic planning these days has become synonymous with reduced spending; often, determining cutbacks is even more painful than budgeting. No, the chopping block isn’t a fun place to be.

That said, here are five reasonable things to consider when cutting budgets. The list comes from John Halamka, CIO of  CareGroup Health System and Harvard Medical School:

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