One Expert Pegs Yearly Cost of IT Failure At $6.2 Trillion 242
blognoggle writes "Roger Sessions, a noted author and expert on complexity, developed a model for calculating the total global cost of IT failure. Roger describes his approach in a white paper titled The IT Complexity Crisis: Danger and Opportunity. He concludes that IT failure costs the global economy a staggering $6.2 trillion per year."
Absurd. (Score:3, Insightful)
Re:incompetence (Score:5, Insightful)
I'd look at it differently. I would firstly work out exactly how much money is generated through effective IT services and projects, and then I'd work out how much money is saved through effective IT services and projects, and then work out how much is lost through projects that go wrong. I think this sort of analysis would give a more true picture of the benefits and risks of IT projects.
Something's wrong with adblock (Score:5, Insightful)
There was an ad masquerading as an article by Michael Krigsman the CEO of Asuret, Inc., a software and consulting company dedicated to reducing software implementation failures.
Asleep at the Switch (Score:5, Insightful)
I can easily prove that you personally have lost millions of dollars because there were plenty of things you COULD have done to earn those millions. Why didn't you start a search engine? Why didn't you write the twitter application? Not skilled enough? Heck, you should have bought that winning lottery ticket! And while we're at it, why did you waste your money on fixing your car when it just got wrecked a month later?
My god, you've cost yourself millions of dollars due to your incompetence!
Re:incompetence (Score:5, Insightful)
The amount of time / effort / money I've lost over the years due to buggy and crashing computer software is staggering. And I solely blame this on incompetent software developers. I'm talking of both commercial software (I'm surprised they let some of this crap out the door - do they know what testing is?), and also my own experiences working with development teams.
I've had developers work for me that think they know everything there is to know, refuse to listen to any advice, and basically try to write software only in the way they believe it should be done, completely ignoring the needs and requirements of the system lead and the customer. Throw in to the mix some elitism and a complete lack of ability to communicate without insulting an derogatory statements, and you've got a profile of a large percentage of current software developers. I'm still working to undue to colossal mess of my last ex-software lead that I ended up kicking off the program because he fundamentally didn't know what he was doing (despite thinking he was the best developer on the planet). I've also worked with some amazingly brilliant software developers, but unfortunately they are few and far between. The sheer arrogance of some software developers is astounding.
Re:Does your company lose 10% to IT failure? (Score:5, Insightful)
The credulity problem gets worse when one considers how much more productive people have become when using various applications. Yeah, some of them are probably counter-productive, but others (office apps, line-of-business apps) have transformed how we do business for the better. The number seems terribly grandiose even if you push all of the negatives to one side of the equation.
Re:Does your company lose 10% to IT failure? (Score:3, Insightful)
50% of 0 dollars income is still 0 dollars.
Including "startups" is perhaps counterproductive, as they don't have any real business model to start with, they float "ideas" to dumb VC's, and never generate a real dime in income before they fail.
The only money lost was the venture capital.
To understand the "cost of losses due to IT", you have to have a functioning business in the first place (with no IT infrastructure), and then see what happens once IT is deployed, and then subsequently fails, weighed against gains such as better productivity, cost savings made etc.
BS Rolls downhil (Score:4, Insightful)
What nonsense. One of the foundations of project falure is built from the top down. Executive leaderships say "make this work" what ever "this" may be. Top leadership runs around then looking for a solution. Many times they go to a vendor and of course the vendor says "Why yes, our product will solve "this" problem". So instead of so good due diligence on the part of analysts to truly see what the specific needs are, the company purchases this cost saving solution; perhaps it is a service, perhaps it is a soup to nuts enterprise system, perhaps it is off the shelf, out of the box software.
Soon into implementation or pilot the upper levels managers finally begin to see what their own IT staff and their customers were trying to tell them
1 - We don't need "this"
2 - "This" does not fit our needs
3 - "We have to use "this?", the current system works.
Even worse, while the company has a qualified in house staff that understands the specific needs, they will hire consultants to tell them how "this" can work for them. It could be that certain decision makers were favored by the vendor to "try it out" only to find later that the trail cost more in lost time, money, effort while the vendor pockets the dough.
Cynical? Not really. Over my long time in the business I have seen this time and time again. Even though there is a good staff structure in place to handle company IT needs top corporate leaders will buy from a vendor because the perception is that the goal will come quicker. Never mind that the product may not fit, IT will make it fit. Never mind the internal customers that need retraining, we'll hire new people...and on and on. All to try and save time. The bottom line is that any failure of an IT project begins with the top leadership not doing their job. The first question they should ask and answer before dropping a dime is "Do we really really need "this". The second, "Is it an emergency?". The third, "Do we have staff to create "this"?, the fourth "how will this effect our internal customers?. In a world where the attitude is "We need it yesterday" there will be more failure, but do not fault just IT, fault corporate leadership.
(yes I rtfa and it was fluff, stupid and providing no insight to why)
Re:The Cost of Experience? (Score:3, Insightful)
There's no use praying for failure just so you can gain experience at failing.
Of course not... But perhaps the occasional failure is a necessary component of the price of success?
a small rant... (Score:2, Insightful)
Re:incompetence (Score:5, Insightful)
Which OS is costing this?
Which company just blocked the best efforts of the rest of the world to develop an interoperable set of document formats?
Microsoft has repeatedly prevented progress in computing. the opportunity costs of that alone are incalculable.
Authors Review Due ? (Score:3, Insightful)
blognoggle writes
Now I'm assuming this is the same "blognoggle" who brought us such gems as :-
"Rush Limbaugh is a Big Fat Evil Racebaiter"
"Vampires and Bloodsucking Liberals"
"Time to Impeach Barack Obama"
"Is Your Boss a Vampire? Or, Maybe, a Shapeshifter?"
Really timothy, perhaps it's time to stop the copypasta from reddit bloggers, before our heads explode ?
Weird statistic... (Score:3, Insightful)
So how much value does IT generate in a year?
Re:Does your company lose 10% to IT failure? (Score:5, Insightful)
We see this in our clients relatively frequently. Primarily because small to medium sized businesses are some how allergic to backups. No matter how hard we push for them to actually spend money on a backup system that is appropriate to the size of their business a lot of them end up cheaping out on either no backup, or a backup that isn't the right fit for them.
The resulting failure a year or two down the line can cost then a huge piece of their annual revenue.
Other places we see this are when clients try to put their own (Windows) servers in and screw something up that requires the OS to be reinstalled to undo.
In my experience a lot of these "IT Failures" are actually management/client/accounting failures that happen to overlap the IT spectrum. If you can't get the proper budget to do your job, that's an accounting failure that shows up in your area. If management refuses to abide by their own usage guidelines on the network and constantly are passing around infected files that's going to increase your infection rate. And if a client adamantly refuses to change their tapes then when they have a flood in their server room and it gets toasted that's going to translate into longer recovery times, longer down time, and lost revenue.
Re:incompetence (Score:5, Insightful)
The amount of time / effort / money I've lost over the years due to buggy and crashing computer software is staggering
The amount of time / effort / money lost over the years due to poor management, bad analysis, and improbable times lines is staggering.
There, fixed it for you. You do see that your own statement is about as arrogant and condescending as the programmers you want to insult. Buggy code, crashing software is not just the responsibility of the programmer, it is the responsibility of the leadership as well. Why was it buggy? Bad design specs, no code reviews, tight time lines with large interruptions? Why did it crash? Poor QA and review by business owners? ridiculous deadlines, poor working conditions, low morale?
There is more there then just "bad programming" as if programming exists in some bubble. Developing is not assembly line work, it is a complex art and yet over decades management has viewed it from an industrial age mentality. Work from x to y, produce x lines of code, stop what you are doing and look at something else no matter where you are at. Certainly there are arrogant programmers, just like there are arrogant managers. I challenge you though to see that both need each other to reduce the number of bugs, the minimizing of crashes (really "crashing computer software? Not Abending or exception failures?) When a positive work environment is set that people tend to work better, with less error. That is the job of management and yes, even leads. For the record, I have been in lead and oversight positions. The best role I played was to get out of the way and let my people do their job. Along the way I would just ensure that we maintained a high quality of effort and we kept on focus to the requirements provided.
A few reasons ( in my opinion) (Score:5, Insightful)
Note: these are composite examples from many sources I have gotten over the years. They are not against any one company. But I think they are indicative of the industry as a whole. And that is sad.
Can't argue with the math (Score:3, Insightful)
"According to the 2009 U.S. Budget [02], 66% of all Federal IT dollars are invested in projects that are "at risk". I assume this number is representative of the rest of the world."
"A large number of these will eventually fail. I assume the failure rate of an "at risk" project is between 50% and 80%. For this analysis, I'll use the average: 65%."
"You can see that indirect costs add up quickly. I will assume that the ratio of indirect to direct costs is between 5:1 and 10:1. For this analysis, I'll take the average: 7.5:1."
In summary, if you assume Federal IT expenditures have the same rate of being "at risk" (whatever that means) as every business in the world, and multiply it by the average or two numbers I just made up, then further multiply it by the average of two other numbers I also made up and wouldn't even make sense to use if they were real, then multiply that by a semi-legitimate percentage and the GDP, you get A Large SCARY Number!
You did notice that he's claiming that IT failures cost over 3 times as much as the total spent on IT, right?
"2.75 % of GDP is spent on hardware, software, and services." OK, so that's $1.92 trillion for the world total spent on IT.
"To predict the cost of IT failure on any country, multiply its GDP by .089" Wait, 8.9%? $6.21 trillion in costs on $1.92 trillion spent? Is this the accounting from "the Producers"?
I expected someone would have checked the math before posting this kind of story on Slashdot
Many causes of failure (Score:4, Insightful)
"IT failure" is a very broad term and can happen for a lot of reasons:
My take on this is that the main cause of failure is the fact that IT still hasn't settled on a set of engineering principles to deliver projects. Things change way too fast still -- over the life of a 2-year project, your hardware platform may be changed out from under you, for example. PHP, .NET or Java may be swapped out for YetAnotherCoolLanguage0.1alpha4. This is made worse by unscrupulous vendors, poorly-trained consultants, and lack of acceptance by the user base of the software.
I think the author is referring to the direct cost of a failure. Every few months, the technical publications run an article or two about a large company or government agency writing off millions of dollars for a failed SAP/Oracle Financials/similar package deployment. Whenever I see one of these, it's interesting to see what happened. Usually it has something to do with one or more of the causes I listed above. Generally, the more expensive, tranformational and long a project is, the worse the results are. It's not just vendors either - I've seen in-house projects spiral down the same way. The other thing that comes to my mind when I read articles like this is why they didn't see it coming. Don't IT executives talk to each other over golf or something and say, "Yeah, SAP screwed us out of $100M in consulting fees. I'd watch them if I were you..."?
Other branches of engineering aren't immune to this though. Construction and infrastructure projects often run over time and budget. The difference is that a construction project gets finished one way or another. A software project failure means throwing away two years of work and putting the hardware on eBay.
Re:incompetence (Score:3, Insightful)
A large number of these will eventually fail. I assume the failure rate of an "at risk" project is between 50% and 80%. For this analysis, I'll use the average: 65%.
Using the same kind of bullshit reasoning here is what I found: A large number of human beings will eventually die. I assume that human beings live between 0 and 100 years. For this analysis, I'll use the average: 50 years. Except that the average life expectancy is not 50 years but actually much higher. Taking the mean of the minimum and the maximum is not at all the same as taking an average, you may as well be pulling the numbers right out of your ass.
To find the predicted cost of annual IT failure, we then multiply these numbers together: .0275 (fraction of GDP on IT) X .66 (fraction of IT at risk) X .65 (failure rate of at risk projects) X 7.5 (indirect costs) = .089. To predict the cost of IT failure on any country, multiply its GDP by .089.
You're trying to introduce a global economic indicator using only 1st grade calculus, that's certainly an interesting approach. So the basic reasoning is that 65% of all IT projects fail, and when they fail, not only do we lose everything that was invested in this particular project, but because of the indirect costs, we are actually going to lose 7.5 times more money ! There is so much bullshit in this sentence I don't even know where to start ! First of all, is the project a failure because it was delivered late, because it is not completely satisfactory, because there are bugs ? In any case, there is almost no chance that the project is such a failure that we can't get anything out of it. What's more there is no way it is going to cost 7.5 times more money than that, which leads me to all the stupid assumptions.
=> It's not. The US is not even remotely representative of the rest of the world
=> Maybe you could have looked up the real number included in the definition of an "at risk" project. For all we know it could be 10% of 90%, assuming you know the number when you actually don't doesn't make it right.
=> It's not, come back when you understand basic statistics.
=> Same thing as above, you don't actually know the number, it could be anything. Plus you make an average on minimum and maximum values which makes no sense at all.
Now the worst part is that Michael Krigsman seems to find the study interesting:
Although not precise, the numbers demonstrate the seriousness of IT failure around the world.
No, they don't ! We don't have a clue how precise they are, which means we don't have a clue how far they are from the truth. All the assumptions are completely wrong, and not just a little.
Michael Krigsman is CEO of Asuret, Inc., a software and consulting company dedicated to reducing software implementation failures.
I propose we make a study on how much money is lost to software and consulting companies dedicated to reducing software implementation failures. Assuming one fifth are incompetent frauds like Krigsman, and the number of projects involving consulting companies is between 20% and 70% (we take the "average" 45%), and making the same du
Re:incompetence (Score:5, Insightful)
Also, this happens too often:
Manager: We need to add Feature Y.
Coder: But that builds on Feature X, which is still buggy.
Manager: I don't care. The customer wants it.
---
(A month later)
Coder: Can we take some time to fix the bugs in Feature X and Y?
Manager: No, we have to make Feature Z, which builds on X and Y. We can fix them later.
Coder: If we'd known you wanted Feature Z, we would have done X and Y completely differently.
Manager: Hmmm. Well, it needs to work by next Tuesday.
Coder: (very quiet expletive)
Re:incompetence (Score:3, Insightful)
1) Yes :D
2) Yes
3) Maybe
To be blunt, I have noticed a MASSIVE decline in the quality, intelligence, and desire to do a 'good' job in the companies I've been at over the last 5 years. The outsourcing boom chronicled so nicely in Office Space and the like has not done anything to improve the quality of tech work.
I would say good IT people are probably 1 in 100 or less - the rest are either grossly incompetent, lazy, or completely burned out by carrying 2-3 times the workload that should be expected of them.
Always-on, always-on-call lifestyles and mentalities have driven many of the good rank and file (those not totally into IT for whatever reason, but still competent and savvy) out into pretty much ANY other field.
Heck, I know 8 amazing IT people who left last year when they became the 'last one standing' after massive outsourcing or layoffs. They decided that they would rather open barbershops, bookstores, coffeeshops, or go to the business side.
The people left are just ghastly. (I'm generalizing - there are still some amazing people, it's just that the *ratio* is so bad)
Re:incompetence (Score:3, Insightful)
Re:BS Rolls downhil (Score:3, Insightful)
Either that or you are expected to train your outsourcing replacement in India with everything you know because you are being laid off.
Re:BS Rolls downhil (Score:5, Insightful)
with the top leadership not doing their job
As much as I hate to say it, you are dead wrong about this. Many people think the job of top leadership is to make the company run smoothly. It's not. Their job, specifically, is to:
I found it much easier to get along in Corporate America once I discovered the quality of the job is less important than the careers of management. Nobody got fired for shipping a buggy product, but people have been fired for not meeting deadlines.
Re:A few reasons ( in my opinion) (Score:3, Insightful)