3 reasons why IT projects fail (with real-world examples)
March 27, 2025
3 reasons why IT projects fail (with real-world examples)
March 27, 2025
In the last two decades, the IT project failure rate has consistently exceeded 50%, with a shocking study in 2024 reporting a staggering 88% failure rate.
While we won't delve into every reason cited in the studies, we will share insights from our 20 years of combined IT delivery experience, focusing on the key factors that contribute to project success.
Insights:
- Lack of Clear Business Outcomes: Often, projects begin with multiple aspirations but lack clear business results that align with the IT initiative. To combat this, we ask stakeholders a crucial question: “What is the bottom-line effect of this tech initiative?”Real-World Examples:
- For a new website redesign: "Will this translate to new sales?"
- Regarding automated tasks: "Do the efficiency gains and reduction in human error outweigh the cost to automate?"
- For integrated systems: "Will this improve data quality for marketing and enhance team collaboration?"
- When modernizing systems: "What value must be delivered to meet the original business case, and how does the business define satisfaction?"
- Overemphasis on Large Digital Transformations: Companies often prefer extensive digital transformations over testing smaller solutions first to validate business results. This is where the concept of MVP (Minimum Viable Product) can falter. We advise asking: “What’s the cheapest and fastest way to verify our assumptions?” This approach helps frame solutions with a focus on cost-effectiveness and timely validation of business impact.
- Stakeholder Misalignment: Over time, stakeholders can lose sight of project goals due to overcustomization, scope creep, and prioritizing edge cases over the majority of use cases. Consequently, cost overruns can escalate by as much as 200%.
Our Solutions and Real-World Activities:
To keep projects on track, we remind stakeholders about the strategy and the reasons behind chosen tech initiatives, ensuring sustained focus on business objectives throughout the project timeline.
Each time a feature or scenario consideration arises, we frame it as a question: “Will this feature meet our business outcome?” For example, in meetings, we ask ourselves and our clients,
“Will including branch emails increase our digital sales?” If the answer is no, we park that feature.
We ensure that projects align with the company’s overarching business strategy while conducting detailed analyses of stakeholder positions. For longer projects, we hold regular business review sessions to assess whether any changes in the landscape warrant pivots in our current scope of delivery.
Regular engagement with all business unit heads is essential for genuine alignment between business needs and IT solutions. We create a RACI matrix for each module or epic to keep necessary stakeholders informed and involved throughout the development process.
Real-World Example: In one instance, we discovered that marketing wanted to retain several fields in a streamlined process. Involving operations revealed that a particular business unit no longer used those fields; they had remained due to a complaint made years ago.
To Summarize:
- Continuously ask questions to define and refine business goals for your IT project throughout its lifecycle.
- Initiate the most cost-effective and timely methods to validate assumptions regarding how a tech initiative will improve specific business results.
- Align closely with business units and functional heads to ensure adherence to factual needs and realities.
Do you need a tech partner for your next successful IT project? Tell us more about it - contact us.
Sources:
Compilation of research about IT project failure: https://sourcinginnovation.com/wordpress/2024/10/25/two-and-a-half-decades-of-project-failure/
Additional Sources for IT Project Failure Papers
https://www.bain.com/about/media-center/press-releases/2024/88-of-business-transformations-fail-to-achieve-their-original-ambitions-those-that-succeed-avoid-overloading-top-talent/
https://www.mckinsey.com/~/media/McKinsey/dotcom/client_service/Corporate%20Finance/MoF/PDF%20issues/PDFs%20Issue%2045/Final/MoF45_LargeScaleIT.ashx
https://medium.com/pwc-front-office-transformation/walking-the-talk-we-prioritize-people-over-technology-and-you-should-too-1743fdc187fb
https://www.information-age.com/projects-continue-fail-alarming-rate-9611/
https://www.cio.com/article/241054/more-than-half-of-it-projects-still-failing.html
https://www.information-age.com/projects-continue-fail-alarming-rate-9611/
The Empirical Reality of IT Project Cost Overruns: Discovering A Power-Law Distribution
https://www.tandfonline.com/doi/epdf/10.1080/07421222.2022.2096544?needAccess=true
In the last two decades, the IT project failure rate has consistently exceeded 50%, with a shocking study in 2024 reporting a staggering 88% failure rate.
While we won't delve into every reason cited in the studies, we will share insights from our 20 years of combined IT delivery experience, focusing on the key factors that contribute to project success.
Insights:
- Lack of Clear Business Outcomes: Often, projects begin with multiple aspirations but lack clear business results that align with the IT initiative. To combat this, we ask stakeholders a crucial question: “What is the bottom-line effect of this tech initiative?”Real-World Examples:
- For a new website redesign: "Will this translate to new sales?"
- Regarding automated tasks: "Do the efficiency gains and reduction in human error outweigh the cost to automate?"
- For integrated systems: "Will this improve data quality for marketing and enhance team collaboration?"
- When modernizing systems: "What value must be delivered to meet the original business case, and how does the business define satisfaction?"
- Overemphasis on Large Digital Transformations: Companies often prefer extensive digital transformations over testing smaller solutions first to validate business results. This is where the concept of MVP (Minimum Viable Product) can falter. We advise asking: “What’s the cheapest and fastest way to verify our assumptions?” This approach helps frame solutions with a focus on cost-effectiveness and timely validation of business impact.
- Stakeholder Misalignment: Over time, stakeholders can lose sight of project goals due to overcustomization, scope creep, and prioritizing edge cases over the majority of use cases. Consequently, cost overruns can escalate by as much as 200%.
Our Solutions and Real-World Activities:
To keep projects on track, we remind stakeholders about the strategy and the reasons behind chosen tech initiatives, ensuring sustained focus on business objectives throughout the project timeline.
Each time a feature or scenario consideration arises, we frame it as a question: “Will this feature meet our business outcome?” For example, in meetings, we ask ourselves and our clients,
“Will including branch emails increase our digital sales?” If the answer is no, we park that feature.
We ensure that projects align with the company’s overarching business strategy while conducting detailed analyses of stakeholder positions. For longer projects, we hold regular business review sessions to assess whether any changes in the landscape warrant pivots in our current scope of delivery.
Regular engagement with all business unit heads is essential for genuine alignment between business needs and IT solutions. We create a RACI matrix for each module or epic to keep necessary stakeholders informed and involved throughout the development process.
Real-World Example: In one instance, we discovered that marketing wanted to retain several fields in a streamlined process. Involving operations revealed that a particular business unit no longer used those fields; they had remained due to a complaint made years ago.
To Summarize:
- Continuously ask questions to define and refine business goals for your IT project throughout its lifecycle.
- Initiate the most cost-effective and timely methods to validate assumptions regarding how a tech initiative will improve specific business results.
- Align closely with business units and functional heads to ensure adherence to factual needs and realities.
Do you need a tech partner for your next successful IT project? Tell us more about it - contact us.
Sources:
Compilation of research about IT project failure: https://sourcinginnovation.com/wordpress/2024/10/25/two-and-a-half-decades-of-project-failure/
Additional Sources for IT Project Failure Papers
https://www.bain.com/about/media-center/press-releases/2024/88-of-business-transformations-fail-to-achieve-their-original-ambitions-those-that-succeed-avoid-overloading-top-talent/
https://www.mckinsey.com/~/media/McKinsey/dotcom/client_service/Corporate%20Finance/MoF/PDF%20issues/PDFs%20Issue%2045/Final/MoF45_LargeScaleIT.ashx
https://medium.com/pwc-front-office-transformation/walking-the-talk-we-prioritize-people-over-technology-and-you-should-too-1743fdc187fb
https://www.information-age.com/projects-continue-fail-alarming-rate-9611/
https://www.cio.com/article/241054/more-than-half-of-it-projects-still-failing.html
https://www.information-age.com/projects-continue-fail-alarming-rate-9611/
The Empirical Reality of IT Project Cost Overruns: Discovering A Power-Law Distribution
https://www.tandfonline.com/doi/epdf/10.1080/07421222.2022.2096544?needAccess=true