Category: Politics
September 30th, 2009
Annual cost of IT failure: $6.2 trillion
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'
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:
September 7th, 2009
The taboo of failure
Business transformation initiatives that fail to accomplish key objectives generally suffer from two problems:
- The failed projects do not achieve whatever plans the organization anticipated. This is obvious.
- However, these projects also waste time, money, resources, drain morale, and generally contribute negatively to the organization and its people. Recriminations and lack of consensus come about when an organization does not know how to fail gracefully.
Since failure is a taboo subject of discussion in modern business, it’s no surprise that graceful endings are decidedly uncommon. Since this taboo is a function of human interaction in collaborative environments (ie: business and government), the problem is widespread.
Addressing a London audience in July 2008, then Treasury Secretary, Henry Paulson, spoke directly about this issue. Although his comments refer to financial markets, they are completely applicable to the IT failures we see everywhere. The New York Times quotes Paulson:
June 10th, 2009
Senate IT oversight bill: Detailed analysis
Senator Thomas Carper’s [D-DE] proposed IT oversight legislation (S.920) is a well-intentioned and important step toward reducing wasteful spending on mismanaged IT projects. However, the bill has substantial weaknesses that will likely compromise its effectiveness and perhaps create even more bureaucratic waste.
Following my previous blog post on S.920, a Senate staffer working on the legislation contacted me with a request to comment on the bill. Given the critical nature of this issue, potentially involving billions of dollars, I welcomed the opportunity to do so. This post summarizes my initial comments, and serves as a basis for initial discussion with that Senate staff member.
This post is unusual for several reasons:
- To my knowledge, the Senate does not often ask a blogger to serve as an expert commenter on pending legislation. In this case, my background in IT failure analysis and prevention is the defining factor.
- This post may be confusing without also studying actual full text of the bill. Usually, I attempt to make posts standalone from the original sources. Not so in this case.
- This post includes lots of detail and few overview perspectives, making it hard to read. In a sense, this post is a brain dump that I thought some readers might find interesting. My thoughts on this bill are still in formation, so this post truly remains in progress.
- This post is just not well-written. Although it pains me to publish notes rather than polished text, that’s the best I can do now, given the time constraints of my own busy schedule.
Despite its shortcomings, I support this initiative and do not accept the argument that the bill does nothing except create additional bureaucratic overhead. As my comments below make clear, the bill will not accomplish its objectives without further refinement. However, even in its present state, the legislation raises the profile of important issues around IT project failure and waste.
THE PROJECT FAILURES ANALYSIS
The remainder of this post presents comment on each section of the bill.
May 29th, 2009
IBM's Devil's Triangle: An enterprise software soap opera
IBM faces lawsuits and public embarrassment in the Philippines over a failed government project involving the company’s DB2 database product. The situation offers a textbook example of the Devil’s Triangle, and demonstrates the tensions and conflicts that arise between technology vendors, customers, and system integrators.
Background. The Government Service Insurance System (GSIS), a Philippine agency responsible for managing the pensions of government employees, installed DB2 in 2006. By early 2008, the system began showing signs of weakness. Local newspaper, the Philippine Daily Inquirer, describes what happened:
[GSIS chief legal counsel Estrella Elamparo] explained that the software started showing problems in early 2008, particularly in handling voluminous chunks of data.
“IBM upgraded its database system purportedly to enable it to handle unlimited volumes of data,” Elamparo said. “However, the reported upgrade only worsened the problem because instead of fixing the problem, the database began mishandling data and prevented the simultaneous use of data.”
The government threatened lawsuits in response, according to the paper:
May 18th, 2009
Gov't IT projects: Billions at risk
New Congressional testimony by the General Accountability Office (GAO) reports that “352 [US federal government] projects totaling about $23.4 billion—were poorly planned.”
The report, which is titled, Information Technology: Management and Oversight of Projects Totaling Billions of Dollars Need Attention, adds:
In our analysis of the high-risk projects in June 2008, we found that of the 472 IT projects that were categorized as high risk, at least 87 had performance shortfalls—collectively totaling about $4.8 billion in funding requested for fiscal year 2009. Agencies reported cost and schedule variances that exceeded 10 percent as the most common shortfall.
These are striking numbers, even for the most jaded of project failure observers.
The testimony recommends that federal agencies take a number of steps to improve oversight on high-risk projects. These steps include:
May 6th, 2009
Research: Gov't lacks oversight on services contracts
Rigorous contract management is a basic and crucial element necessary to successfully oversee procurement and execution of complex projects. However, new research from the UK Public Accounts Committee, a monitoring group within Parliament similar to the US Office of Management and Budget (OMB), states the UK government mismanages services contracts on a large scale.
Although based on UK data, the lessons should also be applicable to US government projects. The report, titled Central government’s management of service contracts, offers this summary [edited for length]:
[The] central government makes limited use of financial incentives to encourage suppliers to improve performance. In addition, 38% of contract managers did not always apply financial penalties where suppliers under-performed. The extent to which central government tests the value for money of ongoing services and contract changes is variable. For example, 41% of contract managers had not tested the value for money of new services purchased under an existing contract.
Planning and governance is one of the weaker areas of contract management, although there are examples of good senior level engagement. Less than half the organizations surveyed, however, had an individual with overall responsibility for contract management, and there was no documented plan for managing 28% of contracts. [M]any contracts do not have in place some or all of the elements of good practice risk management; for example, 56% of contracts did not have a contingency plan in case of supplier failure and 30% of contracts where suppliers were dealing with personal or security information did not have a risk register.
May 1st, 2009
Senate introduces important IT watchdog bill
Senator Thomas Carper [D-DE] introduced valuable new legislation designed to increase oversight, transparency, and monitoring of federal government IT projects.
The bill requires agencies to establish public websites showing the status of IT investment projects and mandates creating expert “tiger teams” to help improve troubled projects.
Carper’s introductory statement describes three general goals for this legislation:
- Using a public website to increase transparency around the performance of government IT projects. Carper explicitly calls out VUE-IT, an excellent Office of Management and Budget (OMB) IT status site, as a model.
- Ensuring that agency plans for new IT systems contain a clear business case and provide complete and accurate information before the OMB approves the investments.
- Empowering OMB and agency Chief Information Officers to take action if they realize a project isn’t going as planned, before it spirals out of control including assigning experts to help fix problems.
KEY PROVISIONS
The bill is called S. 920: the Information Technology (IT) Investment Oversight Enhancement and Waste Prevention Act of 2009. It amends section 11317 of title 40, United States Code.
March 14th, 2009
UK prison IT: Massive and 'spectacular' failure
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:
February 25th, 2009
San Diego fires Axon over ERP implementation problems
The city of San Diego, CA terminated its software implementation contract with services provider, Axon, citing “systematically deficient project management practices.” The project is running $11 million (27 percent) over-budget to date, a number which will likely increase.
San Diego’s termination memo highlights key Axon governance and implementation process deficiencies. Tom Fleming, president of San Diego Data Processing Corporation (DPC), a municipal IT contracting agency, wrote the document:
Michael Krigsman is CEO of Asuret, Inc., a software and consulting company dedicated to reducing software implementation failures. Click here to discuss this post with him on Twitter. See his full profile and disclosure of his industry affiliations.
Subscribe to IT Project Failures via Email alerts or RSS.
SponsoredWhite Papers, Webcasts, and Downloads
- Five Steps to Determine When to Virtualize YourServers VMware Server virtualization isn't just for big companies. Entry-level ... Download Now
- The Impact of Virtualization Software on Operating Environments VMware Today's use of virtualization technology allows IT professionals to ... Download Now
- Email Security and Archiving - Clearer in the Cloud Google The time is NOW for businesses and organizations of all sizes to implement ... Download Now
Essential Topics 
Recent Entries
- Update on the Enterprise Irregulars
- The ’social enterprise’ comes of age
- Social computing in the enterprise, part two
- Social computing and the enterprise, part one
- Salesforce Chatter: Something to talk about
Blogs From Our Sponsors
Most Popular Posts
- 18 truths: The long fail of complexity
- Resistance to change: The real Enterprise 2.0 barrier
- Dreamforce: Quick first impressions
- Enterprise unplugged: Riffing on failure and performance
- Five definitions toward the maturing of Enterprise 2.0
- Salesforce Chatter: Something to talk about
Top Rated
- 18 truths: The long fail of complexity+17 votes
- Learning from the weak signals of failure+6 votes
- Five definitions toward the maturing of Enterprise 2.0+6 votes
- The 'social enterprise' comes of age+2 votes
- Salesforce Chatter: Something to talk about+2 votes
- Resistance to change: The real Enterprise 2.0 barrier+2 votes
- Enterprise unplugged: Riffing on failure and performance+2 votes
- Social computing and the enterprise, part one+1 vote
Premier Vendor Content Whitepapers, webcasts & resources from our Power Center Sponsors
- Reduce risk. Reduce complexity. Increase reliability.
-
A simplified IT environment isn't just less complex. It's also more reliable. Standardize on a single Linux platform with SUSE Linux Enterprise from Novell, and get the world's most interoperable Linux
- Learn more >>
- The more you simplify, the more you save
-
When you transition from your existing Red Hat environment to SUSE Linux Enterprise from Novell, you can recognize dramatic cost savings, perhaps as much 50%
- Learn more >>
- The best support in the Linux business
-
If Linux is going to power your mission-critical applications, you'd better have the best support known to business. Novell was rated the top provider of Linux technical support.
- Learn more >>
- Keep Up With The Latest In Document Management with The DocuMentor.
-
Doc delivers the scoop on today's enterprise content management, printer maintenance, and all other issues related to document management. It's the DocuMentor Blog.
- Learn more >>
- Save time with automated shipping solutions
-
The Business Essentials Guide provides you useful tools and templates to help grow your business and save you time with automated shipping solutions.
- Visit the UPS Business Essentials Guide
- Microsoft Dynamics CRM Online - Free Six-Month Trial for Eligible Organizations
-
Microsoft Dynamics CRM Online provides fast online access, simple contact management and better sales performance for a low monthly cost - the best value on the market today.
- Learn more about the free, six-month trial offer>>
Archives
ZDNet Blogs
- All About Microsoft
- The Apple Core
- Between the Lines
- BriefingsDirect
- Collaboration 2.0
- Dev Connection
- Digital Cameras & Camcorders
- Ed Bott's Microsoft Report
- Emerging Tech
- Enterprise Web 2.0
- Forrester Research
- Googling Google
- GreenTech Pastures
- Hardware 2.0
- Home Theater
- iGeneration
- Irregular Enterprise
- IT Project Failures
- Laptops & Desktops
- Lawgarithms
- Linux and Open Source
- Managing L'unix
- The Mobile Gadgeteer
- On Sustainability
- Rational Rants
- The Semantic Web
- Service Oriented
- Smartphones and Cell Phones
- Social Business
- Social CRM: The Conversation
- Software & Services Safari
- Software as Services
- Storage Bits
- Team Think
- Tech Broiler
- Technology and the Global Supply Chain
- Tom Foremski: IMHO
- The ToyBox
- Virtually Speaking
- The Web Life
- ZDNet Education
- ZDNet Government
- ZDNet Healthcare
- Zero Day
White Papers, Webcasts, and Downloads
- Reducing Server Total Cost of Ownership with VMware Virtualization Software VMware VMware virtualization enables customers to reduce their server TCO and ... Download Now
- The True Costs of Virtual Server Solutions VMware In an economic environment that is repeatedly heralding the message "do ... Download Now
- Three Steps You Need to Know to Stop Data Loss Varonis Sensitive data exposed to misuse or loss... it is the stuff of nightmares ... Download Now
Enterprise Applications
- Check out some of the easiest and most powerful ways to boost productivity while saving money on your application infrastructure. See ZDNet's comprehensive Enterprise Application resource center, now!
- New Online Dashboard
-
- Read about top issues IT decision-makers face every day, plus get cost effective solutions to real life IT problems. Oracle Topline
-
