The recent cancellation of a significant public sector IT initiative in Ontario highlighted how frequently IT projects result in delay, cost overruns and generally unsatisfactory results. The reported percentage of unsatisfactory project outcomes vary widely (ranging from approximately 30% to as high as 60%). (For a survey of various reports on the percentages see: “Why Projects Fail.”) A thought provoking September 2011 Harvard Business Review article, “Why Your IT Project May be Riskier than You Think,” highlighted a number of projects that not only encountered delay and project cost overruns, but destroyed or severely impacted the broader business.

From our vantage point when dealing with IT projects (usually at the procurement and contracting stages), the following steps will help reduce the risk that your next IT project will join the ranks of failed projects:

  • Defining requirements. Take time to gather and properly document business requirements. Allowing sufficient planning lead time before engaging suppliers contributes to better execution.
  • Governance. Establish a state-of-the-art governance structure. This should ensure that the right people in both the customer and supplier organizations are aware of progress and problems. This includes establishing a process to elevate problems from the technical team to the executive team quickly. Proper project management is key – remedies in the contract won’t save a project that is poorly managed.
  • Statements of Work.  Devote the time and resources to write good quality statements of work. SOWs are part of the contract and deserve equal (if not more) attention than the body of the agreement. It is risky to accept vague and broadly stated requirements, assumptions and dependencies that don’t create clear understandable performance obligations for the supplier.
  • Manageable Phases. Consider breaking large risky projects into smaller manageable phases.  It is common to divide a project into technical design phases and implementation phases.
  • Milestones. Clearly define a manageable number of milestones. These milestones should represent material components of the project and are linked to measures that motivate timely performance, including one or more of the following: liquidated damages, fee credits, delayed payment, escalation requirements, mandatory remediation plans and  termination.
  • Teams. Transformative IT projects require dedicated teams at both the supplier and the customer. Identify who these people are and write commitments into the contract to ensure team continuity for the duration of the project.
  • Change Management. Ensure that scope is well described and subject to change through a well thought out change management process. This process should allow the customer to set and manage cost expectations.

Businesses and public enterprises are increasingly reliant on IT resources for their core business functions. Change and large projects dealing with IT are inevitable and necessary. Businesses and government enterprises embarking on such projects must devote the necessary time and resources to planning, procurement and contracting to avoid potentially devastating business outcomes.