The era of modernization is upon us. Disruption is omnipresent. Digitization has become imperative for all businesses, small, medium large. Digital transformation is not just about embracing new technology — although advances in cloud, mobile, big-data, IoT, machine learning, A.I., etc. are its indisputable underpinnings. First and foremost, digital transformation is about embracing change. Businesses today must quickly and continuously adapt to dynamic market conditions, shifting business requirements and ever-evolving consumer and user behavior.
Collectively, enterprise applications and the business processes they support make up the target at which modernization initiatives are directed. Against today’s backdrop of constant change, large-scale IT projects and the traditional, rigid, sequential and lengthy ‘waterfall’ model of delivery no longer suffice. It takes too long, costs too much and, crucially, fails too often to deliver the expected benefits.
Agile and DevOps methodologies are reinventing the way IT and business users work together to design and deliver applications. New practices like design thinking and Kanban are elevating speed and time-to-value over lengthy, complex project cycles. Those in charge of enterprise applications must look beyond established practices and accelerate the pace of translating business needs into application opportunities. In today’s faster-paced, highly disruptive, digitally-driven business climate, the need to be more agile and deliver solutions faster with higher quality at a lower cost and with less risk is paramount.
The onus is on IT and the business to work in concert to investigate new technologies and trends, define the specific business opportunities they make possible for the organization, and continuously and quickly deliver iterative releases of multiple applications that delight end users and advance the business.
The woeful failure rate of application projects
No one ever said that IT was easy. When sophisticated technology is applied to complex business processes across global operations where hundreds or thousands of business end-users interact with an application or system, something is bound to go wrong. Implementing a new application is difficult enough. Making a change to a business application or enterprise system in use only increases the degree of difficulty and adds to the chances of failure by orders of magnitude.
Despite the inherent difficulty of enterprise technology initiatives, no one in his or her right mind enters into a project with the aim of going over budget, running beyond deadlines or falling short of expectations. However, any number of factors can derail the best-intended project, including a lapse in leadership, insufficient planning or budgeting, poor communication, unforeseen complexity or changing business requirements.
By in large, a project is deemed unsuccessful if it runs over budget, takes too long to complete, consumes too many resources, fails to deliver the business benefits promised and/or is not embraced by end users.
This roundup of recent survey findings and analyst predictions paints a clear picture of the woeful failure rate (and high costs) of application projects:
- The Project Management Institute’s 2017 Pulse of the Profession report found that 28% of strategic projects were deemed outright failures. Respondents to the PMI survey, more than 3,000 project management professionals, cited a lack of clearly deﬁned and/or achievable milestones and objectives to measure progress as the primary cause of failure (37%), followed by poor communication (19%), lack of communication by senior management (18%), employee resistance (14%) and insufficient funding (9%). On average, according to PMI, organizations wasted $97 million for every $1 billion invested in projects and programs in 2016.
- As reported in CIO Magazine, one leading analyst estimates that 30% to 35% of projects could be counted as failures as they fall short on delivering expected business value and/or take longer than expected and/or cost more than projected.
- Research conducted by McKinsey in collaboration with the University of Oxford, suggests that half of all large IT projects—defined as those with initial price tags exceeding $15 million—massively blow their budgets. On average, according to the research, large projects run 45% over budget and 7% over time, while delivering 56% less value than predicted. In total, according to the McKinsey/Oxford study, these failed projects had a cost over run of $66 billion, with every additional year spent on the project increasing cost overruns by 15%. In worse case scenarios, the study concludes, 17% of projects go so bad that they threaten the very existence of the company.
- According to the Standish Group’s 2016 Chaos report, only 16% of software projects were completed to the original specifications on time and on budget.
- A recent survey conducted by Geneca reveals that 75% of business and IT executives anticipate their software projects will fail.
If we look at failure rates of IT projects focused on digital transformation or enterprise modernization, the picture is particularly bleak.
- The Register reports that one leading market research firm predicts a near 100% failure rate for cloud ERP projects by 2018.
- Another top analyst firm predicts that by 2018, 70% of siloed digital transformation (DX) initiatives will ultimately fail because of insufficient collaboration, integration, sourcing, or project management.
- Network World reports that a leading analyst firm predicts that more than 60% of big data projects will fail in 2017.
The New Way - Customer-centricity, Speed and Demonstrable, Repeatable Value
To be successful today, organizations must immerse themselves in their customer’s world, understand the nuance of their experiences, anticipate future needs and constantly challenge existing business models and value propositions. As Peter Drucker says in The Practice of Management, “The purpose of a business is to create a customer.” Ignoring Drucker’s truism is a recipe for failure, but what does this insight mean for IT?
Historically, IT’s value to a business was measured by how much it lowered costs and/or improved efficiency by applying new technologies to existing business applications and processes. Today, however, IT’s role is more strategic, and its value is measured by how well it serves in identifying and developing new revenue streams, how it helps create competitive differentiation and, most importantly, how it improves the customer experience.
In the context of next-generation enterprise applications, IT’s new role as a value creator requires that wholesale changes be made to the entire development and delivery process.
Large projects that cost millions of dollars and take years to complete are a thing of the past. Applications must be delivered more quickly – in weeks or months, not years. Sure, initial iterations may not have all the bells and whistles. But the goal is to deliver as quickly as possible a viable version of the application for end users to test, validate and provide feedback. Outcomes will be based on continuous modernization, not a multi-year transformation.
Huge risks are no longer acceptable. Enterprise application projects will shift from cascading waterfall to continuous, iterative delivery, with multiple, short, well defined segments focused on specific outcomes running in unison. This new delivery framework will eliminate massive overruns or complete project failures by assuring expected outcomes are met at every stage while concurrently allowing for the inevitable changes in business requirements. Missteps will be identified and corrected early, and a framework for sustainable, measurable value will be established and built upon.
Speed, flexibility, accountability and value are the new guiding principles in re-designing core applications and business processes and leveraging emerging technology. Progressive, customer-obsessed businesses will lead the way.
Listen to NTT DATA’s webinar to learn about our next-generation framework Time to Value for implementing or modernizing enterprise applications within time-boxed sprints of 11 weeks.
Contact NTT DATA today to learn how our Time-to-Value application framework assures the success of your business’ modernization or transformation strategy.