January is often a time of reflection; as we begin a new year, it forces us to look at what we achieved in the previous one against what we set out to do, and create plans for the year ahead. For many, this will come with a sense of good achievements, but for others, things have unfortunately not gone so well. 2014 was littered with examples of highly visible project failures…disasters in some cases, costing companies and tax payers millions, the repercussions of which will not only have a knock-on effect for 2015, but potentially years to come. A few high profile examples come to mind:
- The SNCF train fail: In May, French railway operator, SNCF (Société Nationale des Chemins de fer Français) ordered 2,000 new trains that were too large for many of the stations they are due to serve. This failure in the verification process cost the operator in the region of $57 million, as well as making headlines worldwide – only not the kind you want. It demonstrates the huge potential impact that one oversight can have, not just in terms of embarrassment to the organization and the cost of replacement, but in the ripple effect it has across the business and massive reallocation of resources required to remedy the mistake.
- Major Projects Authority Annual Report: In May, the UK government watchdog that oversees IT projects, the Major Project authority, released a report warning that ‘several major IT projects in the UK are at risk of failure and need urgent action’. According to the report, four major IT projects were given a red light rating, which is the rating used by the MPA use to describe projects they consider to be unachievable. These included: the Ministry of Justice’s (MoJ) Shared Services Program (forecasted costs for which have risen from $88.6 million to $191 million); two Ministry of Defense (MoD) projects, including the $7.5 billion Defense Core Network Services program, which will replace the MoD’s computers, telephones, video conferencing equipment and networks; and The $1.5 billion Watchkeeper intelligence project. These failures and delays have largely been caused by a misunderstanding of the original requirements, underestimation of the resources needed, and miscalculations around the technical specifications.
- Obamacare: Last but not least, over the course of 2014 we have seen numerous stories relating to the controversial Obamacare project, with multiple IT failures and rising costs. The computerized sign-up system is said to have quadrupled in cost from $56 million to more than $209 million between September 2011 and February 2014, while costs for the electronic backroom for verifying applicants’ information are said to have jumped from $30 million to almost $85 million. Added to this, a contract for fixes to the website also grew from $91 million in January to $175 million as of July. Overall, according to a Bloomberg report, the Obamacare website costs have exceeded $2 billion. Again, this is largely due to mismanagement.
These headline costs are pretty eye-watering, yet the real-world costs are even worse. Many organizations simply don’t have visibility to the tangible and opportunity costs of project failures as a whole: while they may calculate the immediate cost in terms of lost revenue and productivity, the longer term ripple effect across other business units and projects is rarely accounted for or easily calculable. This domino effect means that as one project fails or over-runs, human capital and other resources are then diverted, meaning other projects are then delayed or halted…thus further extending the ripple.
This is why it is so important to have a centralized, real-time view of the financial health of all of your projects at the portfolio level, as they are running. By looking at projects at a portfolio level, businesses can better foresee, estimate and isolate the fall-out from individual project failures. Visibility is critical to success; organizations have to be in control in order to be agile and make adjustments on the fly.