Every year, day by day several IT (Information Technology) projects slipped out from the race before reaching its final performance on its targeted date. The figure of the collapsed IT project is rapidly increasing globally. According to a US-based organisation, Project Management Institute (PMI) report, billions of dollars are wasted on the infrastructure projects. The wastage of billion dollars in infrastructure’s foremost cause is inefficient planning, incompetency in maintaining good staff and lack of administration. While having innovation, financial aid, technology, which is progressing with each passing day, still, the failure of such projects in Information Technology (IT) is not easily acceptable. We are going to discuss the major Australian Project Failures and reason behind such failures.
According to PMI, Europe’s wastage is $131 million for every billion dollars investment. While others like Australia has infrastructure waste of $108 million for every billion dollars they spent. A country like India has $73 million rock-bottom wastage followed by China and the Middle East with $82 million wastage per billion dollars. Globally, the average waste is $97 million for every billion dollars investment, in pursuance of 187 project managers, according to PMI.
In past few decades, it is just a mediocre thing in Australia, numerous of Australian project failures in IT sector have been appalled either failed severely or ran out of the budget and deadlines, observed by the IT Market Researchers. Now the question raised is the technology is deficient or there’s any scrape with the innovation, where the performance is lacking in the whole scenario of the failure. Let us go through the whole research and know the unusual facts about the Australian project failures in the IT sector.
It is the very first phase of any project as the process involves of commencing a new project by determining its scope, purpose, objectives and a commitment by the following date the project will be completed. The phase is critical to any project’s success since this is the stage when a project manager takes initial steps to create a solid foundation for success in all the following activities and stages through in-depth research and planning.
About 65% of the projects fail because of various problems at the initiation stage. The various reasons could be included as like the lack in developing the business model, not undertaking a feasibility study for the project, not defined a proper Project Charter, the absence of a better project team, and much more.
Australian Market Condition:
- Consumer confidence remains flat although there are some sporadic activities in the retail sector.
- The stock market is rising and providing a wealth effect.
- Business investment is however not very palatable. Capital expenditure is 20% lower currently.
- Reserve Bank of Australia has cut interest rate by 0.5%.
- The Australian dollar has depreciated by 20% against USD, 3% against Euro and 7% against the Japanese Yen.
- Oil price is 45% below the price it was 12 months ago, benefiting the industry.
- GDP is 2.3%, out of which 1.3% is contributed by mining-related activity and 1% of other businesses and government.
- Economic growth is projected to recover to 3% in 2017.
- Strengthening of non-resource sector investment and exports.
- Improved framework conditions.
- The shift towards indirect taxes, and reforms that enhance inclusiveness, such as improved child care for working families.
Major Australian Project Failures:
According to Chaos report, 18% of the Australian project failures was because of cancellation before its completion, delivered but never used. Following are some of the major Australian project failures:
- Myer’s Online Shopping Disaster
- Queensland Health and Payroll System
- The Australian Cargo System
- Victorian Myki Smart Card
- Link Project by Victoria Police
Reason Behind such Australian Project Failures:
- If the calculation of expenditure of resources is in dollars, then there is no point in that they have the scarcity of resources. Most projects were government and there was no lack of financial resources for the companies.
- Poorly Defined Goals: As happened in almost all the projects, goals were not clearly defined. Had there been strict penalties from the beginning for any delay, there would not have been any need for legal proceedings later on for the losses incurred.
- Over-Optimistic Expectations: The companies which were given tender showcased themselves as having exceptional skills and resources. This created over-optimistic expectations. There was no cross-checking in the beginning. Another good option was to start with a pilot project and if that worked only then give the final tender. It might have cost a little higher in the beginning but that would have saved millions of dollars wasted due to missed deadlines.
- Project is too Complex: In most of the cases, projects were too complex to be handled by a single agency. It is always better to get the project done in bits and pieces. Either one single company can be commissioned or if possible to work concurrently, then multiple agencies should be given the tender. It decreases the failure rate of projects.
- No Cross-checking of Bids: the major problem with all the projects was bidden were not cross-checked to determine whether the bidding party actually has the resources which they are mentioning in the bid.
- Management Tools: Big projects need to be managed with the use of technology from the beginning which from the initial stage helps in supporting the correct estimates of budgets, resources, deadlines etc.
- Lack of Flexibility: Projects need to be flexible with back up plans at every stage. In case something does not work, instead of wasting time and budget on that, the alternative should be used and worked upon.
- Existing Systems: Existing systems need to be determined properly in advance and technical support has to be provided in the initiation period to understand what is actually required to integrate the new system into existing ones. Starting work on the new system without having knowledge of the existing ones will surely lead to chaos while integrating them at the end.
Studies by the Various Group of Researcher Companies:
The Bull survey 1998:
- A total of 203 telephone interviews were taken with IT and project managers in the UK.
- Major IT project failure criteria were:
- Inadequate coordination of resources (29%)
- Mismanagement (17%)
- Supplier skill overstretched (13%)
- Supplier under-resourced (12%)
These were the factors which arise at the initiation period and if the total is considered, 71% of project failure reasons lie at the initiation stage.
KPMG Canada Study – 1997:
Main causes of project failure that were identified were:
- Poor project planning
- Weak business case
- Lack of top management involvement and support.
The first two causes totally fall in the initiation stage category while the last one is also a consequence of poor governing at the initial stage which leads to lack of support later on.
- If a project is in trouble within 15% into the project, then it will never recover.
- Over 90% of project failures are due to poor planning.
KPMG Insights to Project Success:
- Early planning and organizing are highly important along with stakeholder communication and project controls integration.
- According to the report, managing a mega project requires the following steps to be undertaken:
- Perform project controls self-assessment
- Identify areas of training and adding skills
- Implement new processes
- Integrate operational readiness personnel into the project team
- Get operational resources familiar with project technology
- Share lessons learned
Key Finds by KPMG:
- 66% CIOs see the digital transformation as disruptive.
- 62% of the companies see disruption now or within 2 years.
- 27% of respondents had an enterprise-wide digital strategy.
- Barriers: 34% say vision, 30% say funding.
- Most organizations are expected to experience digital disruption within the next two years.
Studies by Deloitte:
In one of the reports published by Deloitte, there was great emphasis on proper planning and decision making at the initiation stage. Highlights behind the Australian project failures, in the report, are;
- Decide in the beginning based on analytics-based insights instead of gut feelings.
- Identify and express the true intent of the change in the context of the organization’s wider strategy.
- Take data-driven analysis on whether new organisational models or traditional frameworks are appropriate for your business strategy. Not always new things are the best.
Conclusion: At the initiation stage, take an in-depth data-based analysis which will help you make a strategy and sound decisions to avoid such failures in IT like Australian project failures. Do not go for the shinier options, analyse them before implementing.
The Predictive Analytic Methodology Used by Deloitte:
- A detailed assessment of the project’s risks and complexity to determine the levels of controls and governance required. Interviews with key team members, stakeholders and review of project plans, reports and logs.
- Enter this background information into a predictive analytic tool which produces a correlation between project complexity, controls and success. The assessment of leadership and decision making.
- Identification of specific controls and governance improvements.
- Provide practical recommendations and prioritized action lists.
Government Sector Digital Transformation- Deloitte Studies:
- In Australia, only 35% of respondents said that their organisation has a digital strategy compared to 46% globally.
- 80% considered their IT capabilities to be behind the private sector.
- 27% expressed confidence in their digital trends.
UK Government Guidelines for Project Initiation:
- Project Initiation Document (PID): It provides the information required by senior management and stakeholders to enable them to commit to the resources and timelines. It provides a more detailed understanding of the costs and benefits of the project. PID’s details determine the success of a project as well. PID includes:
- Accountabilities, roles and responsibilities
- An activity plan
- An updated assessment of risks and their impact
- Updated cost/ benefit analysis
- Governance plans
- Communication plans
- Another Tool is Project Planning Workshop: With representatives from involved parts of the organization. This speeds up the process and ensures that all the parties involved are fully aware of the process from the beginning.
- Business Case: It documents the justification of the project based on the costs of development and the anticipated benefits to be gained. The business case should demonstrate that the proposed solution meets the business needs and is totally achievable with the resources committed.
- Stakeholder Management Process: The process involves identifying the stakeholder and their required involvement throughout the project. Analyze their interest in the beginning and their importance at different levels of the project.
- After that careful planning of the project has been given high importance which includes; plan description, pre-requisites, external dependencies, financial budget and resource requirements. These should be designed in different steps according to the business model and the organizational structure.
- Risk Management: Clearly understand what you want to achieve and how, identifying areas of risks and evaluating their potential, risk prioritization and then planning on how to become flexible.
Project Investment in Other Sectors:
Retail Sector Investments:
- 41% report prioritising social media investments.
- 32% are focussed on building online sales via e-commerce over the next 12 months.
- More than 50% of Australians have been described as digital buyers who prefer buying online.
- Myer is expected to spend around $600 million on the transformation agenda.
- In one of the government study, 38% of Australian retailers are classified as digital laggards, 26% as high achievers among which are generally electronic retailers.
- $23 billion-a-month sector and contributes 5% of GDP in Australia.
Project Expenditure in Banking Sector:
- McKinsey stated in one of their report that revenue and profits will migrate at scale towards banks that successfully use digital technologies. Their analysis state that winners may realize a profit of more than 40% while laggards up to 35%.
- By 2018, banks are forecast to have half or more of inflow revenue coming from digital sales.
- Retail banks spent $16.6 billion on digital push in 2015.
- Spending on digital stuff will continue to increase at a compounded annual growth rate of 10.4% through 2019.
- System upgrades by Credit Union Australia took $57 million.
- National Australia Bank has kept aside $754 billion assets for this.
Project Expenditure in Mining:
- IDC energy insights research says that the mining sector needs innovations for various reasons such as safety improvements, automation of assets, mine operations management, control.
- 69% of mining companies globally are looking at remote operations and monitoring centres, 56% of new mine methods, 29% at robotics and 27% of unmanned drones.
Project Expenditure in Infrastructure:
- Westpac Group will increase its investment in the digital transformation to $1.3 billion.
- Infrastructure as a service spending in Australia is forecasted to grow from A$909.2 million in 2014 to over A$1.7 billion in 2018.
- Compound annual growth rate (CAGR) of 17.2% — about 8 times the growth rate of the overall IT services market.
Lessons to be Learned:
The IT project initiation has to be done accurately cause it involves risk management and proper planning which could be a major helpful part of the Australian project failures. According to McKinsey and Oxford study in 2012, the Australian project failures were half of the IT projects failed to deliver their promises. These projects deliver less than half of their forecasts and planned goals. Use of data-driven analytics is must avoid any failure of projects. Over 50% of the large projects run on their actual project costs. Strict rule adherence at this stage can guarantee success later on.
For customised market research reports for any kind of startups and business in any industry, you can contact Craft Driven Market Research team here directly.Tags: Australian Project Failures, Banking Sector, Craft Driven, Craft Driven Market Research, Information Technology IT, Infrastructure, market research, McKinsey, Myer’s Online Shopping Disaster, Project Management Institute (PMI), Reserve Bank of Australia, Retail Sector