The Costs of Failed Projects
There are two ways of estimating the costs of failed projects.
- The first, and most frequent method, is to calculate how much has been spent on projects that have failed. This is the then deemed to be the cost of failed projects.
- The Second is to analyse the problem that would have been solved if the project had been successful. The cost of failure would then be the value of solving the problem (which has not been achieved) plus the cost of the failed projects.
The first method underestimates the true cost of failed projects, the second is very hard to do. This is because very few business owners actually assess the value of solving their problem. They may have developed a business case which discusses "benefits", but "benefits" lack the specification of value. The unstated consequence of this situation is that most projects are initiated without a clear statement of the value to the organisation of solving the problem.
Of course, there is the, often invalid,assumption that the problem itself has been properly understood and solved as inputs into the business case.
In support of the first method, above, here is some information on the web. No responsibility is taken for any information on external sites.
This is from Worldwide cost of IT failure (revisited): $3 trillion. written by Michael Krigsman, April 10, 2012:
Nonetheless, the challenge of quantification remains. For this reason, I invited two qualified experts to re-assess the worldwide economic impact of IT failure. Gene Kim was the founder and former CTO of Tripwire, Inc., co-author of The Visible Ops Handbook, and a co-author of an upcoming book called When IT Fails: The Novel ; his colleague, Mike Orzen wrote the book Lean IT and consults on IT operations and business transformation. They are currently co-authoring a new book called The DevOps Cookbook.
The two experts calculated the global impact of IT failure as being $3 trillion annually. They supplied the following text to explain their logic:
Here are some other links, some taken from the same site, others from other places on the web:Worldwide cost of IT failure: $6.2 trillion Michael Krigsman December 22, 2009
Critique: $6.2 trillion global IT failure stats Michael Krigsman December 29, 2009
A study in project failure by Dr John McManus and Dr Trevor Wood-Harper, from the British Computer Society
The Cost of Bad Project Management by Benoit Hardy-Vallee, 2012
Software Project Failure Costs Billions.. Better Estimation & Planning Can Help by Dan Galorath, June 7, 2008
The Real Costs of Failed Projects By Ilya Bogorad, 11 October 2009
I could go on, but the conclusions I draw from such browsing and analysis are: