Every day IT projects promising millions of pounds worth of benefits are signed off and yet, according to a recent survey, only two per cent of companies can claim they achieved targeted benefits. So, why are IT projects still failing to realise their anticipated benefits?

The problem arises not because the deliverable lacks quality, but lacks the time, energy or enthusiasm needed to ensure that the product or service is adopted and embedded into the organisation.

Unsurprisingly, this has not changed much over the past 10 years. Depending on the survey, some 60 per cent of IT projects fail to deliver the predicted benefits.

The 2005 KPMG Global Programme Management Survey found that almost 90 per cent of respondents reported losses of up to 25 per cent of targeted benefits across their project portfolio. Organisations are learning the hard way that benefits do not effortlessly drop out of a successful project and management want to know why.

Increased project activity

Compliance, technology refreshes, new products and services, and general business improvements reflect the growth and efficiency initiatives that are a part of many firms’ agenda. The result is an increase in project activity centred on technology.

How firms make decisions and approve projects is changing too – there is now more input from executive and investment committees at the approval stage.

But this interest does not always carry through to the implementation and delivery phases. Once funds are approved and released, most organisations do not employ the same rigour for governance processes, and only a fifth of organisations have any formal criteria for cancelling projects or putting them on hold.

Many firms see projects through to the bitter end, clear that the anticipated benefits will never be realised simply because they have no mechanism for interim evaluation or process for killing unviable projects. It is horrifying to realise exactly how many IT projects will be signed off this month, only to be added to the statistics.

With the spotlight increasingly on governance and accountability, boards and stakeholders are, more than ever, focused on results. Investment funds, boards, management, staff and third parties are expecting and demanding results. With boards now approving up to 40 per cent of business cases, success is increasingly defined as achieving the promised benefits, not the traditional focus, which was on time and budget measures. But it is surprising to find some 60 per cent of firms have no management process to measure benefits, and at best have an informal system.

Business change

The reality is that most IT projects are business-change projects, although a large component of the solution may be IT related. For the past 20 years, the root cause of failure of these IT-focused projects is that the business case and a process to manage and realise the benefits it promises has not been a significant presence. Often, benefits realisation is an additional phase added once the technological side of the project is complete. Benefits do not just happen, they have to be planned and embedded into every project. For a project to be successful, benefits realisation needs to be tackled from the outset. With no clear vision or direction, the delivery of measurable business benefit becomes difficult, if not impossible.

Highly complex projects are more likely to fail than those with medium and low levels of complexity. Short-term projects – those of less than a year – also suffer higher failure rates, usually attributed to a lower level of management interest.

Why projects fail

The three main reasons for IT project failure are: unclear or changing requirements; poor project management processes; and lack of executive sponsorship and management buy-in. Beyond the money spent and the loss of targeted benefits, the most common intangible effect of a project failure is staff cynicism and negative cultural impact. In addition, project failure often directly affects clients resulting in lower customer satisfaction or loss of competitive advantage. The failure of an IT project is also a business failure.

The starting point for any project should be a gathering of the stakeholders, where they are asked to agree exactly what business problem they are trying to solve. This is one of the most challenging questions to ask any organisation – but it can save time and money by preventing wasted or failed projects. A company that believed it had a problem with handling documents and therefore needed to implement a document management system was surprised to find that the business stakeholders did not view the issue as one of document management but more of process and procedure.

As no agreement could be reached in specifying the problem, the huge expense of a document management system, which would deliver dubious benefit, was saved. Killing the project at the outset saved the firm resources and the embarrassment of yet another failed IT project.

Understand the impact

Once a business problem has been clearly identified, solutions can be found and resource requirements examined. While more than 80 per cent of most IT projects will remain technology-focused, there will be a resource requirement from the rest of the organisation, whether for specialist input, training, adoption or simply buy-in for the concept and resulting changes.

Only when the full extent of the impact and requirements for successful completion are understood, can a valid decision be taken on whether or not to go ahead. Some IT projects should never get past this point, if the business cannot commit to providing the necessary change management support to ensure its success.

Today, projects have to be about delivering success, not just deploying technology. There must be complete understanding and acceptance of all of the elements involved and the resource implications.

At this point it is important to have a view of all efforts required. Not just IT costs, but also business costs in terms of time and people. This outlay has historically been overlooked, resulting in poor benefits delivery and project failure. Only when all of these elements are considered can the true value of the project be identified, the benefits assessed and a business case made.

Using benefits realisation processes, the visible cost of projects will increase as the hidden business costs emerge. But this additional cost is negligible when weighed against a successful project delivering measurable benefits against set targets.

The process unearths the true costs of all of the activities that must be done to be successful. If you do not do those activities then the project is never going to deliver the predicted benefits. To be successful, organisations must have a real view of every step that needs to take place.

Applying benefits realisation techniques ensures that every project that goes through to completion is a success in terms of meeting its benefit delivery criteria. Those that fail to match the requirements, during any part of the process are killed, re-evaluated, re-scoped or simply put on hold, allowing the resources released to be efficiently re-allocated to more beneficial opportunities.

Realising the benefits

The real power of benefits realisation is when it is linked to a project portfolio management process. Following a successful pilot implementation, a large global energy company has adopted benefits realisation as an internal standard. Historically, it spent a lot of money on IT without realising the benefits as it did not have the metrics to prove they were meeting the business case.

The findings from the pilot project were that once they understood the complete picture, they were 100 per cent certain of achieving the predicted benefits. From that point, the project started to overachieve in benefit terms. The firm now has up to 20 projects, each worth over $1m, going through this process and is confident that all those that complete will be successful.

Ian de Snoo is a director at consultancy KPMG IT Advisory Services

Summary: Best Practice

Increased project activity is good news and should result in a corresponding rise in value being delivered back to an organisation.

But results indicate that while companies are delivering some value back to the organisation, benefits are also being leaked away. Most businesses have more opportunities than they have available financial and human resources to engage with them.

It is critical that limited resources are only committed to initiatives likely to produce the most advantage for the business. It is essential that organisations adopt a strategy that enables them to identify and put a value on each proposal under consideration.

A benefits-driven measure of project success means greater accountability and raised expectations at every stage of the project lifecycle. It requires increased project governance from scrutiny over the business case, to essential monitoring and measuring during the project and after completion.

Without this rigorous approach to benefits tracking, organisations seriously risk unaccountable benefits leakage and will continue failing to deliver on IT projects.

Six Key Principles for Achieving Value

* Adopt an integrated governance framework, driven by the board, which starts from the business case and ends with measuring the actual value

* Align all initiatives clearly with the business strategy

* Establish an organisation-wide prioritisation process that objectively and continuously evaluates projects to maximise the value of the investment

* Clearly define individual accountability for realising benefits, including integrating benefits with organisational plans and budgets

* Control benefits leakage by clearly defining the anticipated value, how it will be realised and when – monitor and reassess regularly throughout the project

* Recognise the links between strategy and project execution, and develop appropriate capability, capacity and risk models