Today's IT groups make too many ROI guesstimates and have too little accountability, says this financial industry IT exec, in his debut column for InformationWeek.
Depending on which consultancy you ask and what they're ultimately trying to sell you, the failure rate for technology projects is anywhere from 37% to 75%. I especially like the 37% -- not 35, but 37 -- because those extra 2 percentage points give the kind of false precision that suggests authenticity.
If managing technology pays your mortgage, you usually explain away those failures by pointing to your gray world: gray requirements, gray resources, gray planning, gray risks. The only vibrant color in your life is the brilliant hue of overly optimistic project scheduling.
But that's not the whole story. Here are five unspoken reasons IT projects fail as often as they do, drawn from my two decades as an IT manager and executive in the financial services industry.
1. Technology ROI numbers are mostly fiction. The most complex variable in the ROI equation -- one that's usually ignored -- is the cost of the business re-architecture required to consume a proposed technology. If you take away nothing else from this article, know that technology demands business transformation, and that's usually the largest hidden cost.
The rule of thumb for calculating the risk of rolling out new technology is this: the higher the buy-or-build price, the larger and more expensive the required redesign of your business processes.
Rethinking your processes is just one disruptive element. Think about all the non-tool-based training your company needs to do before introducing a new tool, and think about all the cultural changes it needs to make to pave the way for new technology adoption.
As soon as you bring culture into the equation, determining the potential cost of an IT engagement becomes exponentially more difficult. ROI analysis will necessarily enter gray country, leaving the comforts of hard science and treading into the imprecision of social science.
It's not impossible to get the calculation right (or close), but here's the kicker: No matter how solid or technically sophisticated an ROI analysis may be…
2. ROI rarely drives the technology investment decision. In most companies, determining the potential costs and benefits of a tech investment is neither art nor science. Rather, it's an elaborate and often dishonest marketing exercise (upward and outward-facing) aimed at persuading senior stakeholders that one HIPPO should win out.
Having worked for both tiny startups and massive multinationals, I've learned that the larger the company, the greater the chance that what drives tech investments isn't what's best for the business, but what's best for the decision-maker's career. And in large companies, those two factors rarely align.
At my previous employer, a large financial institution that has gone belly up, I attended a great many senior management off-sites. One particular exchange with a senior exec has haunted me for more than a decade. During a breakout session, a midlevel manager asked what he should do if he were competing with his internal peers for funding when he knew that their functions and ideas were more important to the bank. The answer from the senior exec: Treat your role as the most important and do everything you can to win that funding fight. In other words, putting yourself first is in the best interests of the company.
The unintended consequence of this kind of thinking was the financial community's spectacular collapse. The unintended consequence in IT -- and this isn't unique to my former employer -- is that project funding more often goes to mildly technical marketers and shameless salespeople, not to hardcore engineers and scientists who let the data drive.
Rare is the executive who puts the company's interests before his or her own (financial stability, career progression, personal brand building). And that kind of behavior isn't exclusive to executives; it's pervasive from the boardroom to the mailroom.
That's not the only unlearned lesson of the banking crisis of 2008….
3. There's rarely any long-term accountability in technology. Multi-year projects are repeatedly green-lit with an implicit understanding that most of the current decision-makers will have moved on or up by the time the project is set to deliver.
The handover of the project's reins to the next-level-downs actually helps the brand of the people moving up. Project failure can conveniently get recast as a failure of execution by the original decision-makers, most of whom are now more senior and no longer directly responsible. If only they hadn't answered management's higher calling. This phenomenon, the dynamic behind "failing up," is endemic to all corporate life, not just technology.
It sounds insidious (and it is), but what's driving the cycle is pretty human. Most people want to see career progression with or without the requisite blood, sweat and tears. In technology, where product lifecycles are usually three to five years max, staying in the same job for more than two or three years signals a lack of drive, ambition, skills.
The message: Change jobs or be considered irrelevant. Upgrade or be upgraded. So there's a structural incentive for career mobility. Long-term projects are consequently damned if you move and damned if you don't.
. We've got a management crisis right now, and we've also got an engagement crisis. Could the two be linked? Tune in for the next installment of IT Life Radio, Wednesday May 20th at 3PM ET to find out.