Software project failure is a rather common occurrence. IT projects of any complexity oftentimes exceed budgets and sometimes this leads to fatal business consequences. Innowise Group breaks down global and common factors influencing the IT project success and shares its vision on risk mitigation and methods to bring value.
According to BCG, 70% of digital transformation initiatives fail to meet their objectives. It was estimated in a 2020 CISQ report that US firms lost $260 billion as a result of unsuccessful development projects, and that poor software caused $1.56 trillion in operational failures. According to the Standish Group’s 2020 CHAOS report, 66% of software projects fail.
It is more likely for companies to miss deadlines and overspend if they do not have effective project management delivery systems.
Considering how critical IT and software solutions are to how we work and live today, those stats are pretty disturbing. While this may seem obvious, the best way to ensure success in software development is to understand why software projects fail in the first place and ensure risk mitigation is a priority.
Ambitious goals often result in software projects failure, even though it is never pleasant.
Information systems development projects fail at a startlingly high rate. It is difficult to define what constitutes a project failure because different organizations have different definitions of success. Projects that do not meet projected ROIs can be considered failures even if they are completed.
Below are some reasons why a project may be considered a failure:
Even when a project fails to meet a deadline or target, it may still produce significant benefits. Projects must fail for the right reasons, such as a challenging task that accelerates progress, rather than an error that could easily be prevented.
Project success or failure is usually determined by the stakeholders’ judgment and satisfaction with the results.
If you know some project management basics, you can overcome each obstacle and make your next project (and the one after that) successful.
We interviewed our Project Managers and compiled a list of top reasons why software projects fail.
What is the number one reason that IT projects fall behind schedule or fail? Choosing the wrong vendor.
Successful companies understand the value of forming relationships with the right vendors. It is common for businesses to select vendors based solely on cost; however, this can lead to more financial losses in the long run. Companies need to choose vendors who share similar goals and align with their operations. Choosing vendors carefully at the beginning can prevent potentially costly hassles later on.
What’s the problem with just picking the lowest-priced vendor? The quality of the product may vary from one vendor to another. It’s always a good idea to check references and evaluate offerings whenever possible. If you compare bullet points between several vendors, you may find that their offerings are virtually identical. It could be that the quotes are similar or nearly the same, or it could be that there are large variations in price for no obvious reason.
The most notable company may not necessarily be the best option. Sometimes, you might be better off considering the services of another service provider.
When selecting vendors, it’s important to look beyond their marketing and sales techniques to see what they can really offer to their clients. Despite providing the products and services that a business requires, a vendor may lack good customer service, resulting in a poor relationship between the two parties.
Whether we like it or not, the pandemic continues to affect the IT market. According to some industry experts, COVID-19 has caused a permanent and significant increase in the volume of ongoing and planned projects. Firstly, many companies postponed their medium and large IT projects as soon as the shutdown occurred in 2020. A large number of these projects were launched in 2021 and 2022 along with the projects that were initially planned to start during these years. Secondly, many businesses around the world understood the need for digital transformation and the incontestable benefits it could bring. Some industries have changed a lot since the start of the pandemic, and businesses must evolve to remain competitive in the market. This creates a kind of snowball effect, which significantly raises the risks and increases the percentage of failed software projects.
This factor is partly related to the IT project snowball effect. The more projects are run, the more highly qualified specialists the market needs. But in such a short time, a large number of experienced specialists cannot appear in the market. This is especially relevant for senior team members, project managers, and digital transformation managers.
No doubt IT environments are getting more complex and raising the minimum requirements for the expertise of IT professionals at all levels. To keep up with technology changes, software development companies must constantly evolve, spend large resources, and focus on developing top-tier features. At the same time, IT companies have to update their clients’ systems, solve ongoing challenges, and upgrade solution architectures to avoid technical debt.
Software development teams are being permanently pressed to do and create more with less time spent. And this is a massive challenge for market players, as ignoring the importance of this factor leads to dire consequences for IT projects: lower-quality products, communication loss, technical debt, etc. To alleviate the effects the factor may cause, vendors and businesses need to find the ideal speed-consistency balance and stick to it during the whole project lifecycle.
What are the specific reasons why software projects fail, and how can we avoid them? We have selected 6 common reasons leading to the failure of software development projects and share our extensive expertise to answer the major question. What makes software projects successful?
Everybody likes to save money and cut corners. It’s great, as long as your software doesn’t break. Inadequate funding can have serious consequences for a project. Initial underfunding often results in projects being delivered late, over budget, and lacking features.
You must plan, implement, and test a project for it to be successful. Taking shortcuts and saving money won’t always lead to the best outcome, so project managers need to understand this.
There is a tendency for technology projects to be classified as “IT” projects and sent to IT departments, regardless of their true nature. The thing is that some executives mistakenly think that they don’t understand what’s happening, and leave it to the IT department to solve the problem.
To make any project successful, it needs strong leadership at all levels. Without the support of both C-level executives and department heads, it can be difficult to engage employees and determine who is in charge when leadership issues arise. If executives do not drive the project and hold the team accountable, it will easily spiral out of control.
It’s meaningless to disregard the benefits of outsourcing models, as it can largely disadvantage your business and deprive you of competitive advantages. Cost-effectiveness, risk mitigation, flexibility, access to the best expertise, accelerated development speed, and more — all these are undeniable benefits that can help successfully implement the software development project. It makes sense to use outsourcing services even if your company has an in-house development team, i.e. to focus on core business operations.
Even a highly skilled development team can fail without proper project management. An uninitiated, disinterested or inexperienced PM may cause unpleasant consequences: uneven workloads, poor role adjustment, non-transparent performance control, ignoring obvious problems, wrong distribution of tasks, terrible customer-vendor communication, and more.
While planning timelines, meetings, structures, themes, and interfaces, sometimes we forget to plan for our resources as well. It’s one of the biggest reasons why projects fail. Resource management is a component of project management that typically takes into account other projects.
The following things should be considered when planning for resources:
This point can be attributed to the previous one, but it is too important not to mention it separately. Some IT initiatives skip this stage or organize it in a way that is not up to accepted standards. Allocating time and resources to this stage, you gain valuable insights, advanced vision, an understanding of the competitive market, and an additional option to reduce the risk of project failure. The discovery phase is rather good medicine for an unclear scope of work, wrong cost evaluation, and inaccurate time estimates.
Unfortunately, this is a fairly common problem in the industry. The more often the goal of the project changes, the more resources are required to rebuild processes and the more time is wasted. Incorrect project goal-setting may be a direct consequence of ignoring the discovery phase and its poor performance. To avoid this, you can also opt for IT consulting services provided by reliable and experienced vendors.
Even the best-planned project can fail if visibility is lacking. Having a project management system that provides visibility is essential, not just for the project manager, but for everyone on the project team. The visibility of a project depends on keeping track of its status, communicating clearly, and managing documents effectively. When everyone is aware of how each project task is progressing, they can assist or adjust as needed. What is more, this promotes proactive problem-solving.
Transparent reporting, constant contact with stakeholders, and the involvement of external parties are vital to avoid breaking the chain of communication that can lead to an IT project failure. It would seem that establishing high-quality communication is not so difficult, but the devil is in the details: orderly agenda, soft skills, cultural differences, time zones, preferred communication channels, etc. On the other hand, it is necessary to find a balance so that valuable time is not wasted on endless meetups.
The development team with weak technical skills causes project failure inevitably. No matter how well you established processes and conducted needed research. People make mistakes, but when this happens too often, decisive and urgent action must be taken. Most often, businesses encounter unscrupulous vendors and freelancers when trying to save as much as possible. The truth is harsh — buy cheap, buy twice.
A simple customer request here or a brilliant idea to expand a service there seems so innocent at first. And before you know it, your project scope has grown out of control and your team is swamped with work. The following conditions lead to scope creep:
Scope creep is often the cause of project failure. A project that might have been a smashing success ends up being a frustrating failure if you don’t budget enough time or resources to accomplish the extra tasks.
Unrealistic expectations have destroyed many projects. Knowing what your team can accomplish and in what timeframe is vital for a project manager. Having aligned customer expectations with reality, project managers must communicate them to the team.
It is much more likely that your team will finish the project successfully if realistic expectations are set and understood by all project stakeholders.
Bringing in the 15-year experience, Innowise Group has indicated several ways to improve project success chances and achieve needed value. Lying beyond the typical and obvious recommendations, these methods are to be applied for mid- and large-scale IT projects. Our methodology is designed to improve top-level project management, avoid overspending, and ensure the successful implementation of the project. The elements described relate to both the customer and the vendor and, when applied, improve mutual understanding of the parties at all levels, provide transparency, and eliminate fatal budget ballooning.
Choosing the most appropriate technology stack is one of the fundamental aspects of successful project execution. It is necessary to understand industry trends, technological improvements, and the technical specifics of the project. Therefore, it is vital to have at least highly experienced 1-2 specialists in the team who fully understand business and technical concerns, find rational solutions, and guide the entire team.
Also, you need to properly build internal processes based on the specifics of the project. For example, to work on a corporate travel management system project for our major client, it was necessary to carry out a lengthy onboarding process that took 3-4 months. The point was that the client had an outdated solution written in legacy code with specific features. Therefore, our developers needed quite a lot of time to dig into the code logic and join the project. Fortunately, both the client and we understood the need for such a lengthy process at the very beginning and thus managed to avoid additional delays and quality problems.
No doubt the project team is the key factor to the success of the project. Don’t form a team based solely on the price and speed of onboarding, as this can lead to unintended consequences. As experience shows, a team consisting of freelancers cannot be efficient and give a stable and high-quality result. The same goes for outsourcing companies with minimal experience and no credible reviews. The team should be staffed appropriately for a particular project and be as transparent as possible to allow you to check the performance at any moment.
Project rescue services are not the kind of services one is glad to opt for, are they? But one of our customers had to. Having initially bought into low rates, the FinTech services provider chose an unscrupulous vendor with a low level of expertise. As a result, they faced poor code quality, constant deadline violations, and ignored heavy tasks. This caused the budget to balloon exponentially. However, the management made the right decision to change the partner in time and contacted Innowise Group. Fortunately, the patient was still alive. We started the project in two weeks and managed to develop and implement the lending platform within the established time frame.
When it comes to project management, there is no point to reinvent the wheel and ignore the industry’s best practices that have already proven themselves in action. We know the main advantages and disadvantages of multiple methods, strategies, and methodologies for establishing project processes. Using the accumulated knowledge and experience of top-level project managers, you can effectively and quickly organize workflows and ensure high-quality project implementation. For example, Agile software development lifecycle methodologies are not effective for all projects, as many people think.
When providing turnkey software engineering and dedicated team services, we always conduct thorough research and offer the most relevant project management services. As an example, we can take our project related to the development of a distance learning platform. The major challenge was to establish strong stage gates to guarantee the top-quality platform and smooth operation and high availability of the system. At the same time, our project managers split the development process into short delivery stages to provide better transparency.
While project failure has been around for ages, there are new approaches and methodologies to help prevent it. Having a project manager who keeps the company’s goals in mind, helps with resource planning, improves visibility, and facilitates communication will prevent projects from failing.
Project managers can help you move past the question of why projects fail and focus on how to successfully complete them.
We have examined failed software projects case studies from the vendor’s perspective. Hopefully, these tips will be helpful to you as you work on your project. There isn’t much science involved, mostly common sense.
You’re never alone in this process; as a vendor, we care just as much about the project’s success as you do.
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