Why Do IT Projects Fail?

Sep 26, 2023 | Technology

Why do IT projects fail so often? A few reasons include the illusion of control, conflicts of interest, IT amnesia syndrome, and managing expenses. Below you will learn about these 4 causes and what companies can do about fixing these issues.

As reported by Wall Street Journal on September 7th, 2023, by Joe Peppard.

Why Do Companies’ IT Projects Fail So Often?

Remember that IT project that your company launched and turned out to be a bust?

The answer, of course, is yes: There are likely few organizations that haven’t been touched by some IT project mishap, or worse, disaster. How can that be? Why, despite decades of implementing IT systems, are organizations still struggling with their tech projects?

My colleague, R.M. Bastien, and I have studied hundreds of such projects, and found that the root causes of failing or underachieving tech investments were rarely where executives would ever have thought to look.

The problem: They were focusing on symptoms, not the true causes.

What are those true causes? Here are four we’ve identified—and what organizations can do about them.

No. 1: The illusion of control

Central to a number of these hidden causes is an investment process that begins with someone—usually a manager or budget holder—needing some technology to either solve a problem or take advantage of an opportunity. The IT department will then build or acquire the tech solution, since all requests concerned with technology flow through this single department.

The consequence is that on one side is the “customer” (the business unit) and on the other, the “supplier” (the IT department). The customer wants to be certain it is getting what it paid for, so it will demand some oversight of project progress and visibility of any risks. They may establish a committee for this purpose and determine appropriate reporting metrics—typically time and cost.

Unfortunately, all of this merely gives them the illusion of being in control. What happens in the project, where there can be hundreds of decisions made weekly, is likely to be invisible to the project’s sponsor. And those decisions can undermine the ultimate outcome of the project.

As an analogy, think of hailing an Uber, and tracking the car as it travels to pick you up. This gives you a sense of being in control of the transaction. But it’s an illusion. Yes, the driver turns up on time, but the car has no fuel left, it is dirty, the driver seems under the influence, and it has a small trunk that won’t be able to fit all your luggage.

No. 2: Conflicts of interest

The IT department wants to be seen as a business partner, working closely with colleagues across the organization. Despite this laudable objective, the fact is that IT units are mostly designated as cost centers, while the business unit is a profit center.

That means that the priorities for the business unit aren’t necessarily what’s important to the IT department.

The clearest conflict lies with the practice of IT being responsible for setting the architectural standards for building systems, and then designing, building and certifying that the digital systems conform to these standards. In other fields, such as the construction industry, there is a clear demarcation between those designing, those building what was designed, and the ones owning—and getting the benefits from—the result.

In practice, that means decisions are systematically skewed toward the builder’s priorities—that systems are working, on-time and on budget. The quality of the system, and the value it brings to the business, is far down the list of priorities.

Imagine a scenario where a project is running behind schedule and overbudget. That certainly isn’t uncommon. To get back on track, workarounds can be found. The project team has solved a problem, the schedule or cost hasn’t been compromised, and the business unit is none the wiser. The solution will be some other project’s problem in the future.

When the project ends, the business unit will never be aware that a shortcut was taken; the digital asset will work and there will be celebrations all around. However, this decision might compromise the performance of the application that has been built. Maybe not immediately, but when the volume of transactions ramps up, perhaps a number of months or even years in the future, it will manifest itself, perhaps in response times and dissatisfied users.

Think of it like a contractor who, when building a house, decides to save a little money and not use industry-standard pipes for the plumbing. With this workaround, the shower will still work, as will the washing machine. More important for the contractor, the customer will be happy with the new house. However, problems will emerge if the customers wants to replace the washing machine, install a dishwasher, or perhaps build an extension.

No. 3: IT amnesia syndrome

A project, by definition, is a temporary endeavor. Thus, when a technology project is completed, and it works, it is done. People move on—to new projects or new companies. The past is forgotten.

At some point in the future, a new project is kicked off that depends on integrating with the digital assets created by many projects over the years. But when the new project team members start working, it’s a bit like an archaeological dig, not knowing what will be found until they begin. As the project progresses, unknown-unknowns are likely to emerge that can derail it.

The most vivid example of IT amnesia is with documentation describing what has been built. Pulling this together only serves future projects, while consuming precious time and money in the current one, so is too often neglected.

Yet this documentation will be crucial if anything needs to be amended—perhaps due to a new compliance or regulatory requirement or new business need. The teams charged with accomplishing this will need all this knowledge if they are to tackle this task. Without such documentation, their job is difficult, and they will have to re-create it. And they often can’t, at least not as well as they’d like.

What we observe is that a project-oriented IT will systematically create these shortcomings that boomerang back on future projects. Paradoxically, being focused on project success leads to future project failure.

No. 4: Managing expenses, not assets

Given how much money is spent on technology, it might be expected that these digital systems would be considered assets and managed as such. In other words, one would expect that digital assets would be managed like power plants, cargo ships or any other investment of that magnitude.

This isn’t the case.

The reality is, technology has no inherent value; just deploying technology on time and on budget doesn’t automatically convert into any business value. Much work is required by the business unit to realize expected benefits. While IT closely tracks and monitors the cost of building and maintaining the asset, few organizations actively manage the realization of benefits from using this asset.

Compare it to airlines. Airlines know that if planes don’t fly, they don’t generate revenue, so they look to maximize their time in the sky, carrying passengers. By contrast, most organizations don’t actively manage to ensure that expected benefits from technology are delivered. The technology arrives and it “works.” But is it increasing value for the company? That question is rarely asked.

So, what to do?

Individually, these hidden causes have a significant impact. Collectively their impact can be devastating for the achievement of expected business outcomes.

How can they be tackled? Here are some suggestions:

  • Search for value, not funding.The funding model drives much of the behavior we see in organizations. An entire project is funded and IT goes to work on it. Having a more metered approach to funding, where complete funding for an investment isn’t guaranteed, but contingent on demonstrating progress, reduces risk but also means that the continuation of a project is determined by evaluating the utility of what has been delivered at a point in time, and demonstrating results.

Showing business-related results, however, requires an intimate understanding of the business itself, which can be impeded by the divide that exists between the IT department and the rest of the organization. So organizations need to find ways to eliminate the gap between IT and “the business.” More on that in a moment.

  • Own and manage digital systems as productive assets.Just as an airplane parked on a tarmac isn’t generating any revenue, realizing the value from technology assets has to be actively managed. What helps is having clear ownership of the digital asset. Our suggestion is that it should reside with whoever is paying for it. They, after all, will be getting the benefits and should therefore be responsible for making sure that they are achieved.

The CEO of one company we studied has made it very clear to those seeking funding for IT that he is likely to call them back in front of the investment committee, sometime many years after a project has ended, to demonstrate that the benefits they listed in the business case for the investment have been achieved.

Like all assets, at some point, the asset stops being an asset and becomes a liability and a drag on the organization achieving its strategic ambitions. We are constantly amazed by companies still running applications that are never used.

  • Eliminate conflicts of interest. To achieve this, there are three types of roles that need to be decoupled: 1) Those who establish the design standards for digital assets from those who build and maintain them, 2) Those checking for quality compliance from those who create what is being checked, and 3) Those managing projects from those using the project’s creation.
  • Do IT differently. The genesis of the problem that most organizations have with digital technologies stems from how they currently organize to embrace them; they are designed to manage IT rather than deliver value from IT. As I’ve written before, the answer is to get rid of the single IT department.

That doesn’t mean getting rid of IT. It means integrating IT into every department, so that those creating digital assets are true collaborators with those who will be deriving value from those assets.

No executive sets out with the intention for IT in their organization to fail or underachieve. Yet decisions they make do unfortunately lead to failed projects, negative outcomes and wasted investments. These executives, while holding influential positions, just don’t know what it takes to succeed with technology in today’s digital-first world. Essentially, they don’t know what they don’t know. They are working from a cognitive map that is fundamentally defective, and this leads to flawed decision-making. Unless this is remedied, their organization’s dismal results from IT investments will continue.

Additional IT Resources from IT Executives Council

How CIOs are Driving Operational Efficiency in 2023

From Tech to Strategy: How CIOs Are Leading Business Transformation

From Tech Expert to Business Leader: How the Role of CIOs is Evolving


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