Some staggering facts on software failures
According to the Standish report: In the United States, we spend more than $250 billion each year on IT application development of approximately 175,000 projects. The average cost of a development project for a large company is $2,322,000; for a medium company, it is $1,331,000; and for a small company, it is $434,000. The Standish Group research shows a staggering 31.1% of these projects will be cancelled before they ever get completed. Further results indicate 52.7% of projects will cost 189% of their original estimates.
According to a study report done by McKinsey & Company in conjunction with the University of Oxford: 17 percent of large IT projects go so badly that they can threaten the very existence of the company. On average, large IT projects run 45 percent over budget and 7 percent over time, while delivering 56 percent less value than predicted
According to a study by KPMG (New Zealand): Survey shows an incredible 70% of organizations have suffered at least one project failure in the prior 12 months. 50% of respondents also indicated that their project failed to consistently achieve what they set out to achieve!
Ignoring Risk Management: A Recipe for disaster
Software Project failures are the result of the multiplicity of risks inherent in software project environment. Software development projects are collections of larger programs with many interactions and dependencies. It involves a creation of something that has never been done before although the development processes are similar among other projects. As a result, software development projects have a dismal track-record of cost and schedule overruns and quality and usability problems. Time-to-market is the most critical factor for consumer in developing commercial software products. However the project success is difficult to predict because project scope is changed by continuous market requirements and resources are constantly being reallocated to accommodate latest market conditions. Projects for specific customers also have a large degree of uncertainty for requirements due to the customized technical attributes. Many software projects and programs involve multiple entities such as companies, divisions, etc., that may have certain interests. There is often a feeling of disconnection between software developers and their management, each believing that the others are out of touch with reality resulting in misunderstanding and lack of trust. Research shows that 45% of all the causes of delayed software deliverables are related to organizational issues. By looking at the facts and reasons mentioned above, it would be quite obvious that the Risk Management process would be quite an integral part of the Software Development process. Wrong!
According to Kwak and Ibbs (2000) identified risk management as the least practiced discipline among different project management knowledge areas. Boehm and DeMarco (1997) mentioned that “our culture has evolved such that owning up to risks is often confused with defeatism”. In many organizations, the tendency to ‘shoot the messenger’ often discourages people from bringing imminent problems to the attention of management. This attitude is the result of a misunderstanding of risk management. Most software developers and project managers perceive risk management processes and activities as extra work and expense. Risk management processes are the first thing to be removed from the project activities when the project schedule slips.