IT overruns costing business €375m a year
A quarter run 50% over budget
Posted in Management, 13th September 2007 10:03 GMT
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Budget overruns on IT projects are costing Irish and UK businesses more than €375m(£256m) a year, new research has revealed.
The study, conducted by research firm Loudhouse on behalf of software company CA, found that one-third of IT projects end up over budget each year, due to poor forecasting, project scope creep and a lack of management control over projects.
Almost a quarter of the projects end up more than 50 per cent over budget, with the typical overspend running between 10 per cent and 20 per cent of the original budget.
The CA study found that half of companies surveyed are using spreadsheets to manage IT initiatives, despite having an average of 29 IT projects running simultaneously, contributing to the difficulty in retaining control over them.
The statistics are even more startling given that half of all companies use 'delivery on budget' as a key measure when evaluating project success. The survey found that only a third measured success by how the projects aligned with business objectives, while only a quarter carry out an ROI (return on investment) calculation based on business value delivered.
"The survey reveals that CIOs are still principally being judged on whether they deliver within budget rather than delivering strategic value to the business," said Frank Kennedy, CA's country manager in Ireland.
"To ensure CIOs can focus their attention on the most important projects and the ones that add most value to the business, it's essential that they are presented with a clear and holistic view of their organisation," he continued. "This means that organisations need to take not just a project-by-project view but also a portfolio view of all IT investments."
The survey was conducted among 100 CIOs and IT directors from companies with more than 500 employees and a typical IT budget of between €1.5m(£1m) and €7.5m(£5m) from large firms in the UK and Ireland.
© 2007 ENN
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COMMENTS
This figure actually means nothing, redux
All it really means is that two-thirds of IT projects have no idea of the underlying cost model, and hence have no way of determining whether they're within the budgetted amount or not.
And "half of companies surveyed are using spreadsheets to manage IT initiatives" - based on my experiences down the years, those would be the well-managed ones: the rest use Powerpoint...
This figure acually means nothing
Of course in the vast majority of businesses it is just bad budgeting as opposed to an overrun. However 'Managers fail to budget for all eventualities' wouldn't be such a sensational headline.
Compared to just one UK Government IT project
....such as NPfIT, which has gone from £2.3bn to over £10bn.
I'm surprised the figures are so low...
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