Why your IT project may be riskier than you think

Flyvbjerg, Bent and Budzier, Alexander (2011) Why your IT project may be riskier than you think. Harvard Business Review, 89 (9). pp. 601-603.

Abstract

Out-of-control information technology (IT) projects have ended the careers of top managers, such as EADS CEO Noël Forgeard and Levi Strauss’ CIO David Bergen. Moreover, IT projects have brought down whole companies, like Kmart in the US and Auto Windscreen in the UK. Software and other IT is now such an integral part of most business processes and products that CEOs must know their IT risks, which are typically substantial – and overlooked. The analysis of a sample of 1,471 IT projects showed that the average cost overrun was 27% — but that figure masks a far more alarming “fat tail” risk. Fully one in six of the projects in the sample was a Black Swan, with a cost overrun of 200%, on average, and a schedule overrun of almost 70%. This highlights the true pitfall of IT change initiatives: It’s not that they’re particularly prone to high cost overruns on average – it is that there are a disproportionate number of Black Swans. By focusing on averages instead of the more damaging outliers, most managers and consultants have been missing the real risk in doing IT. In conclusion, the article outlines ideas as to what can be done to avoid Black Swans.

Item Type: Article
Additional Information: Selected by HBR as featured lead article for the "Ideas Watch" section, presenting the most important new ideas in business and management.
Uncontrolled Keywords: Cost control, IT management, project management, risk management
Faculty or Centre: BT Centre for Major Programme Management
Related URLs:
Depositing User: Mr Alexander Budzier
Date Deposited: 31 Aug 2011 13:17
Last Modified: 29 Jan 2014 15:39
URI: http://eureka.bodleian.ox.ac.uk/id/eprint/898

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