Risk Management

The Terrifying Truth of IT

Like discovering a spider the size of your fist in the shower, the statistics on project failure are both amazing and terrifying. According to Michael Bloch, Sven Blumberg, and Jürgen Laartz of McKinsey & Company in conjunction with Oxford University, half of all IT projects with price tags exceeding $15 million “massively” blow their budgets. These projects run 45 percent over budget, 7 percent over time, and deliver 56 percent less value than predicted on average. In fact, 17 percent of projects implode in such spectacular fashion that they threaten to obliterate the whole business. Fortunately, the study goes on to list four ways to improve project performance.

  1. Managing strategy and stakeholders
  2. Mastering technology and content
  3. Building effective teams
  4. Excelling at core project-management practices

About the first item, the authors have to say:

Good stakeholder management involves foresight when it comes to selecting vendors and negotiating contracts with them. Company negotiators should proactively identify potential risks and, for instance, expand their focus beyond unit price and seek to establish “win–win” agreements. Doing so can help ensure that the company has preferential access to the vendor’s best talent for an extended period of time.

Regarding technology, the authors find that project teams are best when they contain a few select experts who understand both business and technical concerns. Balancing both types of concerns is instrumental, and it is estimated that experts can raise by performance by as much as 100 percent. In building the most effective team possible, setting a common goal that the team strives for together rather than individually is key. If they can align technology and finance, risk drops significantly.

Lastly and unsurprisingly, smart project management has to occur if projects are to succeed. Devising healthy models for defining scope, implementing change, and seeing what works for project completion beyond the waterfall approach are a good start. There is always risk inherent in beginning a large-scale IT project, but if there were no risk, the project probably would not be worth implementing. No matter how gigantic the spider, you can work through the tears and persevere.

You can view the original article here: http://www.mckinsey.com/insights/business_technology/delivering_large-scale_it_projects_on_time_on_budget_and_on_value

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