10 min read

Why IT projects fail

Business

Business insights

IT Consulting

Whitepaper

Software project failure is a rather common occurrence. IT projects of any complexity oftentimes exceed budgets and sometimes this leads to fatal business consequences. Innowise breaks down global and common factors influencing the IT project success and shares its vision on risk mitigation and methods to bring value.According to BCG, 70% of digital transformation initiatives fail to meet their objectives. It was estimated in a 2020 CISQ report that US firms lost $260 billion as a result of unsuccessful development projects, and that poor software caused $1.56 trillion in operational failures. According to the Standish Group’s 2020 CHAOS report, 66% of software projects fail.It is more likely for companies to miss deadlines and overspend if they do not have effective project management delivery systems.

The undervaluation of project management leads to 67% of projects failing.
About 44% of surveyed managers do not consider project management software to be important.
Project management is only a high priority for 46% of companies.

Considering how critical IT and software solutions are to how we work and live today, those stats are pretty disturbing. While this may seem obvious, the best way to ensure success in software development is to understand why software projects fail in the first place and ensure risk mitigation is a priority.

When a software project is considered a failure

Ambitious goals often result in software projects failure, even though it is never pleasant.

Information systems development projects fail at a startlingly high rate. It is difficult to define what constitutes a project failure because different organizations have different definitions of success. Projects that do not meet projected ROIs can be considered failures even if they are completed.

Below are some reasons why a project may be considered a failure:

The project did not meet its objective.
Deliverables did not meet stakeholder expectations.
Work wasn’t completed on time.

Even when a project fails to meet a deadline or target, it may still produce significant benefits. Projects must fail for the right reasons, such as a challenging task that accelerates progress, rather than an error that could easily be prevented.

Project success or failure is usually determined by the stakeholders’ judgment and satisfaction with the results.

If you know some project management basics, you can overcome each obstacle and make your next project (and the one after that) successful.

We interviewed our Project Managers and compiled a list of top reasons why software projects fail.

Why is vendor selection important?

What is the number one reason that IT projects fall behind schedule or fail? Choosing the wrong vendor.

Successful companies understand the value of forming relationships with the right vendors. It is common for businesses to select vendors based solely on cost; however, this can lead to more financial losses in the long run. Companies need to choose vendors who share similar goals and align with their operations. Choosing vendors carefully at the beginning can prevent potentially costly hassles later on.

All vendors are not created equal

What’s the problem with just picking the lowest-priced vendor? The quality of the product may vary from one vendor to another. It’s always a good idea to check references and evaluate offerings whenever possible. If you compare bullet points between several vendors, you may find that their offerings are virtually identical. It could be that the quotes are similar or nearly the same, or it could be that there are large variations in price for no obvious reason.

The most notable company may not necessarily be the best option. Sometimes, you might be better off considering the services of another service provider.

When selecting vendors, it’s important to look beyond their marketing and sales techniques to see what they can really offer to their clients. Despite providing the products and services that a business requires, a vendor may lack good customer service, resulting in a poor relationship between the two parties.

Global factors increasing IT project failure rate

IT project snowball

Whether we like it or not, the pandemic continues to affect the IT market. According to some industry experts, COVID-19 has caused a permanent and significant increase in the volume of ongoing and planned projects. Firstly, many companies postponed their medium and large IT projects as soon as the shutdown occurred in 2020. A large number of these projects were launched in 2021 and 2022 along with the projects that were initially planned to start during these years. Secondly, many businesses around the world understood the need for digital transformation and the incontestable benefits it could bring. Some industries have changed a lot since the start of the pandemic, and businesses must evolve to remain competitive in the market. This creates a kind of snowball effect, which significantly raises the risks and increases the percentage of failed software projects.

Talent shortage

This factor is partly related to the IT project snowball effect. The more projects are run, the more highly qualified specialists the market needs. But in such a short time, a large number of experienced specialists cannot appear in the market. This is especially relevant for senior team members, project managers, and digital transformation managers.

Expanding IT complexity

No doubt IT environments are getting more complex and raising the minimum requirements for the expertise of IT professionals at all levels. To keep up with technology changes, software development companies must constantly evolve, spend large resources, and focus on developing top-tier features. At the same time, IT companies have to update their clients’ systems, solve ongoing challenges, and upgrade solution architectures to avoid technical debt.

The race to speed up development

Software development teams are being permanently pressed to do and create more with less time spent. And this is a massive challenge for market players, as ignoring the importance of this factor leads to dire consequences for IT projects: lower-quality products, communication loss, technical debt, etc. To alleviate the effects the factor may cause, vendors and businesses need to find the ideal speed-consistency balance and stick to it during the whole project lifecycle.

Common factors leading to IT project failures

What are the specific reasons why software projects fail, and how can we avoid them? We have selected common reasons leading to the failure of software development projects and share our extensive expertise to answer the major question. What makes software projects successful?

Cost-cutting

Everybody likes to save money and cut corners. It’s great, as long as your software doesn’t break. Inadequate funding can have serious consequences for a project. Initial underfunding often results in projects being delivered late, over budget, and lacking features.

You must plan, implement, and test a project for it to be successful. Taking shortcuts and saving money won’t always lead to the best outcome, so project managers need to understand this.

Lack of support by executives

There is a tendency for technology projects to be classified as “IT” projects and sent to IT departments, regardless of their true nature. The thing is that some executives mistakenly think that they don’t understand what’s happening, and leave it to the IT department to solve the problem.

To make any project successful, it needs strong leadership at all levels. Without the support of both C-level executives and department heads, it can be difficult to engage employees and determine who is in charge when leadership issues arise. If executives do not drive the project and hold the team accountable, it will easily spiral out of control.

Turning a blind eye to IT outsourcing

It’s meaningless to disregard the benefits of outsourcing models, as it can largely disadvantage your business and deprive you of competitive advantages. Cost-effectiveness, risk mitigation, flexibility, access to the best expertise, accelerated development speed, and more — all these are undeniable benefits that can help successfully implement the software development project. It makes sense to use outsourcing services even if your company has an in-house development team, i.e. to focus on core business operations.

Poor project management

Even a highly skilled development team can fail without proper project management. An uninitiated, disinterested or inexperienced PM may cause unpleasant consequences: uneven workloads, poor role adjustment, non-transparent performance control, ignoring obvious problems, wrong distribution of tasks, terrible customer-vendor communication, and more.

Lack of resource planning

While planning timelines, meetings, structures, themes, and interfaces, sometimes we forget to plan for our resources as well. It’s one of the biggest reasons why projects fail. Resource management is a component of project management that typically takes into account other projects.

The following things should be considered when planning for resources:

The type of human resources needed, as well as how long they will be needed.
Outside vendors who will be involved in the project, their turnaround times, and limitations.
The knowledge resources that might be lacking.

Ignoring a discovery phase

This point can be attributed to the previous one, but it is too important not to mention it separately. Some IT initiatives skip this stage or organize it in a way that is not up to accepted standards. Allocating time and resources to this stage, you gain valuable insights, advanced vision, an understanding of the competitive market, and an additional option to reduce the risk of project failure. The discovery phase is rather good medicine for an unclear scope of work, wrong cost evaluation, and inaccurate time estimates.

Inaccurate goal setting

Unfortunately, this is a fairly common problem in the industry. The more often the goal of the project changes, the more resources are required to rebuild processes and the more time is wasted. Incorrect project goal-setting may be a direct consequence of ignoring the discovery phase and its poor performance. To avoid this, you can also opt for IT consulting services provided by reliable and experienced vendors.

Lack of project visibility

Even the best-planned project can fail if visibility is lacking. Having a project management system that provides visibility is essential, not just for the project manager, but for everyone on the project team. The visibility of a project depends on keeping track of its status, communicating clearly, and managing documents effectively. When everyone is aware of how each project task is progressing, they can assist or adjust as needed. What is more, this promotes proactive problem-solving.

Insufficient communication

Transparent reporting, constant contact with stakeholders, and the involvement of external parties are vital to avoid breaking the chain of communication that can lead to an IT project failure. It would seem that establishing high-quality communication is not so difficult, but the devil is in the details: orderly agenda, soft skills, cultural differences, time zones, preferred communication channels, etc. On the other hand, it is necessary to find a balance so that valuable time is not wasted on endless meetups.

Unqualified team

The development team with weak technical skills causes project failure inevitably. No matter how well you established processes and conducted needed research. People make mistakes, but when this happens too often, decisive and urgent action must be taken. Most often, businesses encounter unscrupulous vendors and freelancers when trying to save as much as possible. The truth is harsh — buy cheap, buy twice.

Scope creep

A simple customer request here or a brilliant idea to expand a service there seems so innocent at first. And before you know it, your project scope has grown out of control and your team is swamped with work. The following conditions lead to scope creep:

Project’s parameters weren’t clearly specified from the beginning.
There might be internal or external pressure to take on tasks that weren’t planned initially.

Scope creep is often the cause of project failure. A project that might have been a smashing success ends up being a frustrating failure if you don’t budget enough time or resources to accomplish the extra tasks.

Unrealistic expectations

Unrealistic expectations have destroyed many projects. Knowing what your team can accomplish and in what timeframe is vital for a project manager. Having aligned customer expectations with reality, project managers must communicate them to the team.

It is much more likely that your team will finish the project successfully if realistic expectations are set and understood by all project stakeholders.

Make your IT project fail-proof with Innowise

Bringing in the 15-year experience, Innowise has indicated several ways to improve project success chances and achieve needed value. Lying beyond the typical and obvious recommendations, these methods are to be applied for mid- and large-scale IT projects. Our methodology is designed to improve top-level project management, avoid overspending, and ensure the successful implementation of the project. The elements described relate to both the customer and the vendor and, when applied, improve mutual understanding of the parties at all levels, provide transparency, and eliminate fatal budget ballooning.

Project strategy management

Clients might focus solely on budget and deadlines, ignoring the overall project strategy. But the digital solution not only has to be developed but also effectively implemented so that it brings the planned value. The project strategy should be created in cooperation with the vendor and with the mandatory participation of those who will work with the solution after the rollout. This is necessary to avoid misconstructions at the later stages of the project and, accordingly, overspending.The truck fleet management platform development project is a great example of leveraging decent strategy management. From the very beginning, our team collaborated with the customer’s employees. This allowed us to create the most convenient and transparent system and help our client smoothly go through a digital transformation. Thanks to close cooperation, our IT professionals had valuable insights into the industry’s and company’s specific processes. It required additional costs at the start of the project but then paid off in the final stages.

Mastering technology

Choosing the most appropriate technology stack is one of the fundamental aspects of successful project execution. It is necessary to understand industry trends, technological improvements, and the technical specifics of the project. Therefore, it is vital to have at least highly experienced 1-2 specialists in the team who fully understand business and technical concerns, find rational solutions, and guide the entire team.

Also, you need to properly build internal processes based on the specifics of the project. For example, to work on a corporate travel management system project for our major client, it was necessary to carry out a lengthy onboarding process that took 3-4 months. The point was that the client had an outdated solution written in legacy code with specific features. Therefore, our developers needed quite a lot of time to dig into the code logic and join the project. Fortunately, both the client and we understood the need for such a lengthy process at the very beginning and thus managed to avoid additional delays and quality problems.

Building an effective team

No doubt the project team is the key factor to the success of the project. Don’t form a team based solely on the price and speed of onboarding, as this can lead to unintended consequences. As experience shows, a team consisting of freelancers cannot be efficient and give a stable and high-quality result. The same goes for outsourcing companies with minimal experience and no credible reviews. The team should be staffed appropriately for a particular project and be as transparent as possible to allow you to check the performance at any moment.

Project rescue services are not the kind of services one is glad to opt for, are they? But one of our customers had to. Having initially bought into low rates, the FinTech services provider chose an unscrupulous vendor with a low level of expertise. As a result, they faced poor code quality, constant deadline violations, and ignored heavy tasks. This caused the budget to balloon exponentially. However, the management made the right decision to change the partner in time and contacted Innowise. Fortunately, the patient was still alive. We started the project in two weeks and managed to develop and implement the lending platform within the established time frame.

Leveraging best management practices

When it comes to project management, there is no point to reinvent the wheel and ignore the industry’s best practices that have already proven themselves in action. We know the main advantages and disadvantages of multiple methods, strategies, and methodologies for establishing project processes. Using the accumulated knowledge and experience of top-level project managers, you can effectively and quickly organize workflows and ensure high-quality project implementation. For example, Agile software development lifecycle methodologies are not effective for all projects, as many people think.

When providing turnkey software engineering and dedicated team services, we always conduct thorough research and offer the most relevant project management services. As an example, we can take our project related to the development of a distance learning platform. The major challenge was to establish strong stage gates to guarantee the top-quality platform and smooth operation and high availability of the system. At the same time, our project managers split the development process into short delivery stages to provide better transparency.

How Innowise can help you avoid project failure

While project failure has been around for ages, there are new approaches and methodologies to help prevent it. Having a project manager who keeps the company’s goals in mind, helps with resource planning, improves visibility, and facilitates communication will prevent projects from failing.

Project managers can help you move past the question of why projects fail and focus on how to successfully complete them.

The road to project success with Innowise

We have examined failed software projects case studies from the vendor’s perspective. Hopefully, these tips will be helpful to you as you work on your project. There isn’t much science involved, mostly common sense.

You’re never alone in this process; as a vendor, we care just as much about the project’s success as you do.

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What is the most common reason for IT project failure?

The most common reason for IT project failure is a lack of clear objectives and proper planning. Without a clear roadmap, projects can quickly lose direction and purpose.

How can I prevent scope creep in my IT project?

To prevent scope creep, it’s essential to define project requirements clearly and obtain approval from stakeholders. Any changes to the scope should go through a formal change control process.

What role does effective project management play in IT project success?

Effective project management is critical to IT project success as it ensures that resources are allocated correctly, timelines are met, and risks are managed effectively.

How can I ensure that my IT project is compliant with regulations?

To ensure regulatory compliance, it’s crucial to conduct thorough research on relevant regulations, involve compliance experts, and integrate compliance checks into the project plan.

What steps can I take to address cultural misalignment within my project team?

Addressing cultural misalignment requires open communication, cultural sensitivity training, and efforts to create a collaborative and inclusive team environment.

Why is post-implementation support important for IT projects?

Post-implementation support is important to address any issues that may arise after the project is live. It ensures a smooth transition and minimizes disruptions for end-users.

Dmitry Nazarevich CTO

Date: Nov 16, 2022

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