Software Project Failure Costs Billions.. Better Estimation & Planning Can Help
There are so many studies attempting to quantify the cost of software failures. They don’t agree on percentages but they generally agree that the number is at least 50 to 80 billion dollar range annually.
Standish Chaos Reports: Standish is probably the most referenced. They define success as projects on budget, of cost, and with expected functionality. There are several updates to the Standish “Chaos” reports. The current 2004 report shows:
- Failed Projects: 18%
- Challenged Projects: 53%
- Successful Projects: 29%
- Canceled projects cost $55 Billion Annually?
Standish Findings By Year
1994 1996 1998 2000 2002 2004
Succeeded 16% 27% 26% 28% 34% 29%
Failed 31% 40% 28% 23% 15% 18%
Challenged 53% 33% 46% 49% 51% 53%
Most projects cost more than they return, Mercer Consulting:“When the true costs are added up, as many as 80% of technology projects actually cost more than they return. It is not done intentionally but the costs are always underestimated and the benefits are always overestimated.” Dosani, 2001
Oxford University Regarding IT Project Success (Saur & Cuthbertson, 2003)
- Successful: 16%
- Challenged: 74%
- Abandoned: 10%
British Computer Society:The UK public sector spent an estimated £12.4 bn. on software overall spend on IT about 22.6 Billion British Pounds (Jaques, 2004)
- Successful: 16%
- Failure Costs Tens of Billions of British Pounds in the European Union
National Institute of Standards and Technology (NIST)
- Software defects cost nearly $60 Billion Annually
- 80% of development costs involve identifying and correcting defects
Tata Consultancy 2007
62% of organizations experienced IT projects that failed to meet their schedules
49% suffered from budget overruns
47% had higher-than-expected maintenance costs
41% failed to deliver the expected business value and ROI
33% file to perform against expectations
Communications of the ACM Nov 2007: Sauer, Gemino, Reich
Abandoned 9%
Overdeliver 7%
from the paper:
Obviously software estimation is essential to more successful projects… I wonder how many projects would not be started if strong software estimation techniques were employed? And what the true cost is to organizations of challenged projects. Sometimes, a slip with the project being successfully delivered is a minor sin. Other times a slip can be devastating to the organization. What are your experiences or opinions in this regard.
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I’ve worked two large software development programs that were both cancelled after years of development, and one that has survived despite 100% cost and schedule growth. The difference has been the degree of interaction with the user, and the continued need for and understanding of the capability. In no case was the program funded anywhere near the independent cost estimate, but rather at what was perceived to be affordable.
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